Inflation Tops Concerns for Investors

6/1/2022

The United States has experienced more than 20 years of low inflation levels, with the highest rate being just over five percent in 1990. Baby Boomers and WWII investors remember this time, as well as the double-digit interest rates. Inflation is currently over eight percent, raising concerns for investors of all ages. While investors are worried about rising costs, are they doing anything about it?

According to recent research from Spectrem Group, inflation is the top concern for investors. Inflation is a concern to more wealthy investors than global tensions, the war in Ukraine, or the political environment. When investors were asked to name their number one concern, overwhelmingly the most selected answer was inflation. There can be many reasons for inflation, and investors do not all agree on what the primary cause might be.

Over a quarter of investors feel that supply chain problems are the primary reason for inflation, while a quarter of investors feel that the primary cause of the inflation we are experiencing is due to government policies and practices. Seventeen percent feel that government spending is to blame. Then there are a variety of other causes that investors identify as the primary reason for inflation, but less than 10 percent of investors identified any of those reasons.

Regardless of the cause of inflation, what are investors

doing about it? That answer varies significantly by age of investor. Over half of WWII investors have not taken any personal action as a result of inflation, and 39 percent of Baby Boomers have not taken any action. This is in stark contrast to only 22 percent of Millennials who have not made any changes to their life as a result of inflation. Millennials and Gen X are the most likely to have made changes to their spending as a result of inflation.

Over a third of Millennials are spending more time looking

for discounts and bargains, while around 30 percent of Millennials and Gen X are buying less or buying cheaper brands than they did before as a result of inflation. Millennials are also delaying the purchase of high-cost items. Interestingly, changing investment portfolios is not something many investors have done as a result of inflation, with only 11 percent of investors making any change to their investments.

Given how investors are modifying their spending it is not a

surprise that the biggest inflation issue impacting their household is higher grocery prices. The second highest area of impact is in gasoline prices. Inflation has an impact on households regardless of wealth as well, with investors at the highest levels of wealth identifying the same issues, although 18 percent feel that higher home improvement costs has the biggest impact on their household finances.

While investors agree that inflation is the greatest concern to investors, it is clear that the causes of inflation, the area of greatest impact, and what actions should be taken vary significantly. Investors of all types are impacted by inflation to varying degrees and may continue to make changes to their lives and their investments the longer inflation lasts.