Table of Contents

• Inflation, Inflation, Inflation…how do we win?

• The State of Inflation

• Stretch Your Dollar: Where are Prices Rising?

• The case for investing in Real Estate Investment T …

Inflation, Inflation, Inflation…how do we win?

We asked, and you answered - inflation is hitting hard right now.

Two weeks ago, nearly 40% of over 5000 respondents told us that inflation is hitting hard right now. And everyone needs ideas.you said that cost of living increases are causing you the most financial stress. Another 31% blamed healthcare costs – which inflation certainly hasn’t made any easier to deal with.

Today, we’re dishing out some inflation-beating advice, taking a look at a few top strategies to manage cost of living increases. In this issue, you’ll learn:

• What the current (and future) state of inflation looks like,

• Categories where you can stretch your dollar farthest,

• And the surprising asset class that seems to go up with inflation…

The State of Inflation

Earlier this month, we got some good news on the inflation front. Prices in May were 3.3% higher than they were a year before, slightly below expectations and down from 3.4% at the last reading.

At this point, it looks like the worst of inflation is behind us – but we’re definitely not out of the woods yet. Inflation is still running more than 1 point above the Fed’s 2% target.

1 point might not sound like a huge gap, but small differences can make a big impact. At 2% inflation, prices only double once every 35 years. At 3.5% inflation, that shrinks to once every 20 years.

Unfortunately, prices are unlikely to fall from here on out. Declining inflation means that prices are rising slower, but it certainly doesn’t mean they’re going down. A higher price level looks here to stay. 

Will the Fed succeed in getting inflation back down to their 2% target? If you ask the market, the answer seems to be yes. Right now, traders expect the next 12 months of inflation to be 2.03%.

That’s a figure calculated from the current pricing of financial assets, not just a survey. In other words, financial professionals have real money at stake betting on that 2.03% figure. Sure, market forecasts like this aren’t perfect – but they’re probably the best we’ve got.

Stretch Your Dollar: Where are Prices Rising?

When we say inflation is up 3.3% over the past year, we don’t mean prices have risen by 3.3% across the board. That figure is just an average, with specific price categories running higher or lower.

Since individual categories vary, that means we might be able to stretch our money further by avoiding the hardest-hit sectors of the economy. And sure, I don’t like having to change the way I spend my money any more than you do – but I’d rather make lemons out of lemonade than complain about the price of fruit. 

Below, you’ll find price changes for the last year for some major categories. Want to dive deeper into the data? The BLS has you covered.  

Here’s the bottom line: if you’re worried about inflation, your investment portfolio is one of the best tools to protect your money. But not all asset classes are created equal, and real assets are worth considering as an inflation hedge.

Want to learn more about any alternatives in particular? Email us at [email protected] and let us know.

The case for investing in Real Estate Investment Trusts (REITS) to beat Inflation

Your first instinct might be to look at high-return investments to beat inflation. After all, if your portfolio rises 10% while inflation jumps 5%, you still come out ahead.

But here’s the problem – a lot of traditional high-return asset classes actually struggle when inflation comes around. Stocks, for instance, have a surprisingly poor track record as an inflation hedge, despite their upside potential.

A better strategy might be to look for investments that are directly tied to the price level. After all, if the price of stuff is rising, and you own stuff, then you should be well-protected.

In financial markets, asset classes that comprise actual stuff are called real assets. And out of all real assets, two stand out for their close connection to the price level: infrastructure and real estate.

• When prices rise, leases and rents tend to go up, reflected in infra & RE.

• But when prices rise, land values also go up – which is also reflected in infrastructure & Real Estate

REITs: A Historical Hedge Against Inflation

REITs have a proven track record of performing well in inflationary environments. Their ability to increase revenue through rent repricing and inflation-linked portfolio value growth makes them unique. Additionally, REITs offer high dividend yields, stable cash flow growth, and long-term price appreciation. These fundamentals, combined with currently discounted valuations, position REITs as a valuable investment in today's economic climate.

Performance in Inflationary and Rising Rate Periods

Historically, REITs have generated positive total returns during periods of medium-to-high inflation and rising interest rates. They have often outperformed broader equities, such as the S&P 500 and the MSCI AC World Index. For instance, during various inflation regimes over the past three decades, REITs consistently delivered attractive returns.

Moreover, REITs have shown little correlation with interest rates, dispelling the common perception that they perform poorly in rising rate environments. In fact, REITs have demonstrated positive returns in 80% of rising rate periods, highlighting their resilience and potential for stable performance.

Strategic Advantages of REITs in Inflationary Times

REITs offer several strategic advantages that make them an excellent investment during inflationary times:

1. Rent Repricing: Landlords can frequently reprice leases, transferring inflation costs to tenants. This is particularly advantageous in sectors with short-term leases, such as lodging, apartments, and self-storage.

2. Inflation Adjustments: Long-term lease sectors often include inflation adjustments, ensuring rent increases align with rising costs.

3. Diverse Property Sectors: REITs encompass a wide range of property sectors with varying lease durations and economic sensitivities, allowing investors to tailor their portfolios to their risk tolerance and investment goals.

Strong Fundamentals and Market Opportunities

Despite broader market uncertainties, REIT fundamentals remain robust. Balance sheets are stronger than ever, and leverage ratios are stable. This financial strength suggests that REITs can weather potential recessions better than many other investment options.

Currently, U.S. REITs trade at a significant discount to their net asset value (NAV), presenting a compelling value investment opportunity. Historically, REITs have provided positive returns following periods of substantial NAV discounts, making now an attractive time to consider REIT investments.

Where to turn…

For Millennials and Millennial HENRYs navigating the challenges of an inflationary economy, REITs offer a path to stability and growth. Their historical performance during inflationary and rising rate periods, combined with strong fundamentals and strategic advantages, make REITs a compelling investment choice. By incorporating REITs into your long-term investment strategy, you can potentially safeguard your wealth and achieve steady returns amidst economic uncertainty.

For more information on REIT investments and how they can fit into your financial strategy, Noyack Logistics Income Trust ( NREIT1 ) is here for you.

📺 WHAT WE'RE WATCHING

The video explains why governments and central banks aim for a small, consistent level of inflation rather than zero inflation, as a little inflation can encourage spending and economic growth.

Watch the full video here

👂 WHAT WE’RE LISTENING TO

This podcast explores modern pricing strategies, including personalized data and algorithms, and how companies maximize profits in today's inflationary economy Corporations learned the maximum amount they can charge for a product – Bloomberg

📖WHAT WE’RE READING

Despite recent cooling, inflation remains a top concern for Americans. Rising prices strain budgets significantly, with some preferring a recession over persistent inflation due to its widespread impact

Americans REALLY Hate Inflation from Marketwatch

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