Why is Inflation Important to Investors? | AWM Insights #28

You might be familiar with the terms “inflation” and “deflation,” but do you know how they positively and negatively impact us as investors? About 2 weeks ago, the Federal Reserve held a virtual conference where they said they would be willing to let inflation run higher over a certain period of time to make up for lower inflation we’ve experienced in the recent past. So, over the next 10 years they could target a higher inflation rate than has previously been seen.

To understand how this might impact us as investors, Brandon Averill, managing partner of AWM Capital, is joined again by Justin Dyer, AWM’s Chief Investment Officer, to discuss inflation and the implications it has on investments.

Key Topics:

• What exactly is inflation?
• What does a quart of milk have to do with how inflation is measured?
• Why is inflation important to investors?
• What happens with slow inflation?
• What is typically considered the ideal inflation rate for the U.S. economy?
• What is the Consumer Price Index (CPI) and what does it impact?
• What is the Personal Consumption Expenditure (PCE) and what does it impact?
• Why has inflation been in the news recently?

Resources:

• Investopedia has some great resources on Price Level, Basket of Goods, and Purchasing Power
• Also, be sure to read Dimensional Fund Advisors great article on Inflation’s Impact on Investors