Fed inflation, interest rate forecasts not a big deal, financial advisers say

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The Marriner S. Eccles Federal Reserve Building in Washington.

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“None of this really has an impact on what people are going to do over the next six months,” said Lee Baker, certified financial planner and owner of Apex Financial Services in Atlanta, of Client Financial Plans. .

“For most customers, frankly, it’s not that big of a deal,” he said.

Interest rate

Inflation

Some advisers have challenged the Fed’s notion that inflation is a temporary feature of the economy.

Even before Wednesday’s Fed meeting, Ivory Johnson was positioning her clients’ long-term portfolios with larger allocations to commodities, real estate investment trusts, basic materials and energy stocks, which are generally doing well. with rising consumer prices.

“If we have inflation, I buy things that work well when there is inflation,” said Johnson, CFP, founder of Washington-based Delancey Wealth Management. “I’m not emotional about it.

“[Just like] if it’s 80 degrees outside, I’ll put on flip flops and a t-shirt, “he added.” If inflation is indeed transient, the market will let us know and I will rotate. “

Federal Reserve Chairman Jerome Powell during a House Financial Services Committee hearing on December 2, 2020 in Washington.

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Other advisers, however, agreed with the Fed’s notion that the price hike would be short-lived rather than a mainstay.

Cost pressures, such as supply chain issues and pent-up consumer demand who have spent much of the past 15 months indoors, are expected to ease, Baker said.

“There are things we pay a lot more for,” he said. “But persistent large-scale inflation, I just don’t see it.”

Any impact on inflation should be at least somewhat blunted for seniors receiving Social Security payments, Baker said. Rising consumer costs have helped push the latest estimate of next year’s Social Security cost-of-living adjustment to over 5%.

Of course, the Fed could pivot on interest rates, depending on the trajectory of the US economy.

Investors should not bet on inflation like commodities, REITs and inflation-protected Treasury securities given the uncertainty, according to Douglas Boneparth, CFP, chairman and founder of Bone Fide Wealth in New York.

They would be better suited with a more measured approach, he said.

“Understand that if you get it wrong, it will impact your wallet,” Bonparth said.

“It’s so uncertain,” he added of the Fed’s forecast. “I can’t figure out a year from now, let alone two years from now.

“Everything can happen.”



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