Bond Yields and Inflation Projections
Inflation has a significant impact on financial planning because it can meaningfully lower the value of a future investment portfolio. In fact, inflation is one of several reasons that holding excess cash can be disadvantageous; in modern times, cash has overwhelmingly lost value in terms of purchasing power. In order to simply maintain value and purchasing power, investors generally need to have investments allocated to stocks, bonds, and other assets that have positive expected returns.
When a government significantly increases spending through fiscal policy, which the incoming U.S. administration has signaled it may support doing, economists generally expect increased levels of inflation.
Investors can prepare for such an occurrence with appropriate portfolio allocation and inflation-hedged investments.
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
