Navigating Inflation

Each month, the U.S. Bureau of Labor Statistics (BLS) tracks the price of consumer goods and services in the United States. Recently the BLS reported that the cost of this “basket” of goods increased by 1.2% in March — bringing the 12-month change to 8.5%, the highest in more than 40 years.[1]

In this article, we want to share our perspective on what is driving inflation and, most importantly, how your SWP team is navigating this period of increasing prices. As always, we invite you to connect with our team to discuss any of the perspectives shared.

What’s driving inflation?

Over the last several months, you have likely heard several of the prevailing theories: government spending, stimulus measures, the war in Ukraine, supply-chain disruptions, and an expanded monetary supply.

While all these factors have likely contributed to rising consumer prices, in our view, an expanded monetary supply is the most likely culprit. And while “monetary supply” sounds a bit jargony, in actuality, it’s just what the Federal Reserve defines as “the total amount of money — cash, coins, and balances in bank accounts — in circulation.”[2]

One common measure of the monetary supply is referred to as “M2,” and the Fed has increased M2 during periods of economic unrest to spur economic activity. In more recent times, we have seen this tactic deployed in response to the 2008 financial crisis and the COVID-19 pandemic.[3]

Increasing the monetary supply has been a potent tool for driving economic activity when needed, but the side effect of this tactic has long been understood… more money circulating in the economy can also drive inflation. And in response to the COVID-19 pandemic, M2 increased dramatically, rising over 40% between January 2020 and January 2022.[4]

More simply put: there’s a lot more money floating around the U.S. economy today than there was in February 2020. And when you add in other contributing factors like lingering supply-chain disruptions from Covid-19 and the war in Ukraine (which has driven grain and energy prices higher on supply concerns), it’s not surprising that we are experiencing a period of rising prices.

How we are navigating this inflationary period

From a wealth management perspective, the “why” of inflation is likely less important than the “what” … what your team is doing to navigate this challenging environment.

First and foremost, we do not view the current inflationary environment as a reason to deviate from your asset allocation strategy or your customized financial plan.

Regarding equities, data shows that markets have performed well during periods when inflation starts below its long-run average and moves higher (like we are seeing today). And while some are concerned about the prospect of rising interest rates (which will very likely be needed to combat inflation), the data also shows that rising rates doesn’t mean poor performance from the stock market.[5]

These two data points, combined with the fact that companies can raise prices to offset inflationary pressures, mean a diversified equity portfolio may act as a “hedge” against inflation.

Additionally, we continue to explore and employ alternative investments, when appropriate, that can excel during inflationary environments. A couple of examples are private real estate and floating-rate private credit.

From a financial planning perspective, the biggest question is: how long will this inflationary pressure last? At the present moment, we are still comfortable using long-term history as a guide anticipating that inflation will find its equilibrium. Accordingly, we don’t feel that most of our clients should adjust their long-term cost of living expectations.

Many observers expect the inflation rate to peak near 9% in the coming months before receding.[6] And while we are clearly experiencing a period above the long-run average, we don’t feel that it is time to adjust our thinking around the long-term average itself. As such, we continue to model 3% annual inflation, as a base case, in our cash flow projections.

Closing thoughts

As with all economic and market factors, we will continue to monitor the inflationary environment very closely and keep you updated. If you have any questions about the perspectives in this article, we invite you to connect with the team at SWP.


[1] U.S. Bureau of Labor Statistics, Consumer Price Index Summary (Link)

[2] Board of Governors of The Federal Reserve System, What is the money supply? Is it important? (Link)

[3] St. Louis Fed, M2 (Link)

[4]  St. Louis Fed, M2 (Link)

[5] Goldman Sachs, Market Monitor, March 18th, 2022

[6] First Trust, What The Fed “Should” Do



This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Strategic Wealth Partners (‘SWP’) is an SEC registered investment advisor with its principal place of business in the State of Illinois. The brochure is limited to the dissemination of general information pertaining to its investment advisory services, views on the market, and investment philosophy. Any subsequent, direct communication by SWP with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of SWP, please contact SWP or refer to the Investment Advisor Public Disclosure website (

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