Inflation and Your Portfolio

As the Federal Government attempts to put the brakes on historically high inflation, the markets continue to be volatile. Unfortunately for the Fed, their inflation fighting tactics are one-sided in that they have absolutely no control of what is happening on the supply side of the equation. Raising interest rates can certainly reign in demand but it is not going to increase the necessary supply of goods to meet consumer demand which has been severely constrained since the 2020 Covid-19 outbreak. Having a limited supply of goods in the face of increasing demand puts a damper on the Fed’s ability to ultimately stop the rise in prices on goods and services. So, will the Fed be successful at halting inflation, many pundits think not?

So then, what does this mean for investors and their portfolios in light of current volatility induced by inflation fears? Depending on an investor’s investment philosophy they could either try to determine which industries are most defensive in light of current market volatility or pick quality stocks with characteristics that are indicative of future market outperformance regardless of market conditions. These two approaches are generally described as being top-down or bottom-up, respectively. Regarding which approach is best really depends on investor preference, skill set, and resources. Our approach is bottom-up with efforts focused solely on research in support of finding stocks with the best combination of quality, value, and financial strength. Also, our technique does not rely on costly resources but rather common sense and fundamental stock picking.

The more investors rely on resource heavy approaches they will ultimately pay higher fees for often mediocre returns. Finding the right investment approach that works in all markets is incredibly challenging but possible if an investor’s focus is on developing a fundamentally sound investment strategy. Investors will always be challenged in their attempt to navigate difficult market conditions which are always on the horizon as we see currently with the market volatility created by fears of rising inflation.

Keeping your portfolio afloat during challenging times requires more than an existing strategy but also the confidence that your investment strategy will work. Confidence has to be more than the belief that something might work but is best supported when based on research and evidence that an approach works. As market volatility continues, do you have confidence in your investment process? Here at Investoristics, our strategy is grounded in research and has been tried and evaluated in the most difficult market environments. Our strategy provides significantly higher returns with lower risks versus any of the major market indices. Ready to get started? Consider joining the “Collective.”