Britt Whitfield, our executive managing director, recently spoke with Barron’s on how we handle what we see as their greatest fear nowaways, a resurgence of inflation.
If you get a resurgence of inflation, and the Fed has to really start raising interest rates, there’s a real fear that the economy is going to slow in a material way. A lot of the clients I work with are also business owners, so there’s some concern around how that might impact operating businesses. The idea with stagflation is, what if you see a rise in consumer prices while the economy is slowing at the same time? If the Fed cuts rates too quickly and deeply, there could be inflationary impacts. If the Fed has waited too long, combined with other forces such as tariffs, the economy could continue slowing while prices are rising. Those are the conversations clients are having with us.
In an inflationary environment, risk assets such as equities, and hard assets such as diversified real estate and diversified commodities, have historically been good hedges. You don’t want to own a lot of long-term bonds, that’s for sure. You want shorter-term bonds. For the stagflation concern, diversification with tax-exempt bonds with attractive tax-equivalent yields is wise. Hard assets, value-priced equities, private equity, and hedge funds are helpful.