The American economy is beginning to recover from the recent reopening of the country after a years-long pandemic. This, however, has brought upon a looming presence that many economists worry may signal a change for the worse in the economy. This threat is inflation and the recent spike it has seen in the last few months.

On Tuesday, June 22nd, Federal Reserve Chairman Jerome Powell acknowledged that inflation was on the rise in America. With the recent reopening and rekindling of the American economy, many had predicted this sudden spike in inflation. But, with inflation being at its highest in 13 years, according to the PCE index, many worry about the damage such a rise could pose to the American people.

Rising prices for simple commodities like food and gasoline have the potential to jeopardize many American families in these economically stressful times. Here is some background on the inflation spike and some ways you can protect your assets.

Background on Inflation

Inflation is a fall in the purchasing power of money. What this boils down to is that the American dollar becomes worth less and it usually occurs incrementally with a rate of about 2-3% in inflation every year.

This was no different with the year of the pandemic, which saw some benefits come to consumers. Many products have become more visible on the online space and became easier to find like CBD rich hemp oil for sale, which has seen growth due to its medicinal and therapeutic uses as well.

Ultimately, though, the benefits were overshadowed by the immense increase in the rate of inflation to around 5%. This may not sound like a lot, but it marks the difference between a 100 dollar bill losing 2$ of its face value compared to 5$. This adds up very quickly when considering billions or trillions of dollars. This issue is relevant for every American, as the wealth of anyone could lose significant value over this recent event.

This sort of inflation can occur for many different reasons, but many have claimed that the increase in production costs in light of the pandemic has led to a dramatic markup in prices. Many industries like the timber industry, for example, have seen almost a 120% jump in cost in 2021 due to a demand for more building materials.

A Few Ways to Protect Assets From Inflation

This rise in inflation spells bad news for the average American. The price of goods and services shooting up could have serious effects on the market and could leave many in a tough spot. But, there are many proposed methods by economists and financial advisors alike to protect your wealth in this time of instability. Here are just a few of those methods.

Ultimately, the goal of any investor trying to combat inflation is to get a rate of return higher than that of inflation. With this, we begin with a classic method which is investing in stocks. Investing a portion of your wealth into stocks ensures a holding of a portion of a publicly owned company. For example, if a person bought a share of Microsoft they would own a piece of the company and its value would either go up or down with time.

If invested in the right companies or invested into an index fund like the S&P 500 (which tracks the top 500 traded companies) you could gain some serious rates of return. Better yet, it would keep part of your wealth protected from this rise in inflation. Talking to a financial advisor about which companies to look at would ensure your money is going to grow and not lose value.

Another method that many use to gain value from their money is real estate. The real estate industry in America is notoriously expensive and wrought with many hassles for the average buyer. But, the average American stands to earn money from their property holdings due to the housing market increasing over time. This is especially true in states like California where houses can see up to and around 8% growth every year.

While it is true that a correction in the housing market can depreciate the value of a home up to more than half its initial cost. Still, on average, the price of homes has been shown to increase over the years. This growth counteracts the loss of value with inflation. Plus, if you don’t want to bother with the home buying process, you can look into investing in REITs (Real Estate Investment Trusts).

Overall, the general advice for countering inflation is investing in things that give a higher rate of return than the loss that inflation creates. Leaving all of your wealth in a savings account that gives a return of 0.1% every year is not recommended. Whether you invest in stocks, real estate, or any other method it is important to talk with a financial advisor before dedicating a significant portion of your assets.

Nobody likes to see their hard-earned money lose value, but it is a fact of life around the world. With the coronavirus pandemic fading more and more into the background one can hope that the economic effects of it will be left behind as well. Many predict that the economy is looking to return to a rate of around 3% and eventually balance back to its normal range, completely.