and providing ongoing support for consumers and businesses. If I was to go a step further, we’re probably at or near what I would call “peak inflation” right now. While inflation is likely to stay high, we may be witnessing the peak now. One thing I want to emphasize, though, is that I definitely don’t think this is a return to the 1980s and doubled-digit inflation. The California economy is much less reliant on energy and oil than it was back then. Additionally, globalization and aging demographics trends remain largely in place and put downward pressure on prices. From an investment standpoint, what is CB&T doing to help combat the inflationary conditions right now? Broadly, in terms of how we invest, we’re adding to stocks and reducing bonds. That’s because inflation really does erode the value of fixed-interest payments and therefore we expect lower returns from conservative investments such as bonds. If we look out five years, we think our clients will be better served with stocks. With the current rate of inflation, how does it bode for California’s economic future? The question is, how do you expand resources, hire more people, add more equipment, etc, to handle strong demand? But it’s a double-edged sword because you have to wonder how long does that demand remain strong? It’s a tough one for companies to manage through and is a multi-year dilemma. For now, most companies are simply passing higher prices along to consumers and preserving profit margins. Along with low interest rates that fueled housing market strength, a higher cost of living is going to persist. This has been good for employment and the economy but may end up a longer-term challenge if it erodes consumers’ purchasing power. While 2022 is likely to witness above average growth, how the above gets resolved will determine the degree of any economic slowdown in late 2022 and 2023.
“My advice to investors is that they shouldn’t panic. They should be patient and remain committed to an investment program.” Anthony Valeri Director of Investment Management, Zions Bancorporation
Is there any light ahead — any positive trends that you can point to? We all have to remember that the inflation rate is the result of strong demand, which in turn has fueled a strong economy. That bodes well for people’s wages, home values and their overall financial wellbeing. There’s that benefit to consumers and it’s a definite bright spot. One aspect people haven’t considered is that interest rates are still low on a historical basis
Hear more about the market and the state of the economy at calbanktrust.com/economy .
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