Finance Bonds and fixed-income investments – Rising inflation has the most serious effect on bonds and other fixed-income investments, because inflation erodes the purchasing power of a bond’s interest payments, which are usually set at the time of purchase. The longer the term of the bond, the more it is affected. Stocks – As a whole, stocks tend to hold up fairly well against inflation, largely because a company’s revenues and earnings should (in theory) increase at a similar pace as the price of the goods and services which other companies sell. Of course, that’s only a general rule; the performance of individual stocks during inflationary times can vary widely, as some businesses are affected by the forces of inflation more than others. “Hard assets” – Broadly speaking, the value of real assets (industrial metals, agricultural inputs, gold, real estate, etc.) usually rises with inflation. The companies associated with the production of these hard assets (miners, fertilizer stocks, infrastructure owners and real estate businesses, etc.) will tend to do the same. If current high inflation levels drop quickly and return to the Bank of Canada’s target level of about 2.0% per year, then none of these need be a disaster for your portfolio. But most economists currently expect that, over the next several years, we’re likely to experience continuing inflation pressures, with the average rate of inflation higher than what we’ve been used to over the past decade. Clinically proven to help prevent UTIs All-natural & locally made Doctor recommended Utiva Cranberry PACs Looking to relax without worrying about UTIs? Take Utiva. 40% OFF Use code SNOWBIRD40 at checkout Use your phone's camera to scan this code or go to utivahealth.com to use the CSA members discount on Utiva Cranberry PACs Based on 3,834 reviews 4.9 Also available at Rexall, London Drugs, Jean Coutu, Familiprix, Well.ca, Amazon and Whole Foods 1-888-622-3613 How inflation affects your portfolio If inflationary pressures are present for a short time, markets and the economy can usually adjust without too much trouble. But when inflation persists for months or years, it can significantly erode purchasing power. And that’s not only a problem for your weekly grocery bill, but for your investment portfolio as well. Here’s how: CSANews | SPRING 2023 | 27
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