Inflation has been almost non-existent for over a decade. It looks like that is all poised to change. Consumer goods prices ticked up last month as gas prices jumped (you might have noticed). Coupling the vaccine-led recovery with the $1.9T stimulus package that passed on Wednesday, some economic observers project a jump in inflation above a 2% annual rate as we welcome spring. In February, the consumer-price index rose 0.4% on a seasonally adjusted basis on top of a 0.3% increase in January, according to the U.S. Labor Department. Over the past 12 months, the CPI index rose 1.7% on a non-seasonally adjusted basis, increasing 21% over the same period that ended in January. Core inflation, which excludes food and energy, rose 0.1% in February. Core prices rose 1.3% over the past 12 months, down marginally for the same period a year ago. So, if we include food and energy, prices are on the rise.
It is essential that investors pay attention to CPI because inflation can eat away at the principal value of investment portfolios. Please contact us with our thoughts on how we can design portfolios to protect against inflation.