Inflation is impacting everyone, even affluent households.  According to the latest report from the Bureau of Labor Statistics, the annual inflation rate at the end of May 2022 was 8.6%, the highest level since 1981, as measured by the consumer price index.  The common belief is that inflation impacts the middle and lower class more dramatically, but even wealthier households are feeling the pinch….and some of their reactions could even hurt the economy more.

Spectrem Group’s recent research with households with $100,000 to $25 million of net worth indicated that these households are spending more time looking for discounts and bargains, buying less or buying cheaper brands, delaying the purchase of high expense items and spending less for basic household items.

 

Millennial and Gen X households are changing their habits due to inflation more than older households.  Older households, while potentially on fixed incomes, may be drawing more on their assets, which are substantial enough to assist them during this stressful time.  Note that only 11% of investors are changing their portfolios while 21% are saving more money.

Investors are primarily relying upon television news (29%) and cable news (21%) for information regarding inflation while 24% are reviewing online sources.  Financial advisors need to proactively reach out to investors and become an additional source of information regarding inflation and how to effectively deal with this issue in the long and short term.

What do investors believe is the best solution for bringing down inflation?  Twenty percent of investors believe the answer is a new administration in the White House.  This is especially true for older investors who may have lived through inflation in the 1970s.

 

Financial advisors need to discuss inflation with their clients.  While advisors may not be able to change the economy, they can make sure that their investors feel confident that their financial advisor is looking out for their best interests.