The building of the Marriner S. Eccles Federal Reserve in Washington.
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“None of this will really affect what people will do over the next six months,” said Lee Baker, a certified financial planner and owner of Apex Financial Services in Atlanta, of his clients’ financial plans.
“Honestly, it’s not that big of a deal for most customers,” he said.
Some advisers contested the Fed’s notion that inflation is a passing feature of the economy.
Even ahead of Wednesday’s Fed meeting, Ivory Johnson was positioning long-term clients’ portfolios with larger allocations in commodities, real estate funds, materials and energy stocks, which generally do well with rising consumer prices.
“When we have inflation, I buy things that do well with inflation,” said Johnson, CFP, founder of Delancey Wealth Management, based in Washington. “I’m not emotionally involved.
“[Just like] When it’s 80 degrees outside I put on flip flops and a t-shirt, “he added.” If inflation is indeed temporary, the market will let us know and I’ll rotate. “
Federal Reserve Chairman Jerome Powell during a House Financial Services Committee hearing in Washington on December 2, 2020.
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However, other advisors agreed with the Fed that rising prices are short-lived rather than a mainstay.
Cost pressures like supply chain issues and backlog from consumers who have spent much of the past 15 months indoors are likely to ease, Baker said.
“There are things that we pay significantly more for,” he said. “But I just don’t see persistent broad-based inflation.”
Any inflationary effect should be at least somewhat mitigated for seniors collecting social security payments, Baker said. Rising consumer costs helped push the latest estimate for the Social Security Cost of Living Adjustment above 5% for the next year.
Of course, depending on how the US economy develops, the Fed could orientate itself on interest rates.
Investors shouldn’t bet on inflation bets like commodities, REITs and inflation-linked treasury securities in the face of uncertainty, according to Douglas Boneparth, CFP, president and founder of Bone Fide Wealth in New York.
You would be better suited with a more measured approach, he said.
“Understand that one wrong trade will affect your portfolio,” said Boneparth.
“It’s just so uncertain,” he added to the Fed’s forecast. “I can’t turn my head in a year, let alone two years.
“Anything could happen.”