TAMPA, Fla. — The inflation rate is causing pain to the wallets of millions of hard-working Americans. But, the recent hike in rates could be turned into a positive if you make sound investments.
The inflation fight has turned the S&P 500 into a nightmare roller coaster ride sending stocks rising and falling with each interest rate increase. But, Jon Wax, the President, and CEO of Waller and Wax Advisors, said long-term investors shouldn't worry.
"Pointing out the retirement part is important because for a lot of people who work, they have the ability to put money into a corporate retirement plan like a 401 K, and you're making that deferral with every paycheck," Wax said. "And if you continue to do that, or even elevate the amount of money you're putting in now, you're buying at lower prices, and you will consistently be buying."
ABC Action News reporter Michael Paluska talked to Wax via Zoom.
"We've been doing many of these stories on inflation, and people can't afford fuel and food or buy a home. Is there good news for our viewers that are middle class or lower middle class? Is there something that you can tell them about where we're headed?
"The good news in this is that the Federal Reserve is very aggressive in dealing with this inflation problem. And it's not something being overlooked, or ignored in a way that it really can run off like crazy," Wax said. "We are probably going to have to deal with some pain in different areas as we deal with this."
He continued, "But this is the fallout for how much stimulus and how loose the money flows have been for the last two-plus years and even longer. So the upside is that people can focus in the areas where they need to be spending money, and maybe delay the things that were excess luxuries that they really don't need to be doing right now."
According to the Bureau of Labor Statistics, the consumer price index rose 8.3% over the past year as of August, a slight slowdown from 8.5% in July.
Some prices have already fallen significantly, though. For example, gas prices dropped 10.6% in August, the bureau said.
Meanwhile, rate increases appear to have slowed critical sectors of the economy, sending mortgage rates higher and slowing the construction of new homes.
Wax said the increased rate is necessary to normalize the market and urges people to remain calm and weather the storm.
"In the world of investing, you think about retail markets. And if you walk into a retail store, you want to look for a sale. Yet, whenever the stock market falls or goes on sale, it's as if people think their instinct is to run out the door and wait for things to be higher," Wax said. "These are the kinds of times we rely on the wisdom of someone like Warren Buffett, who says to be fearful when others are greedy, or be greedy when others are fearful. And he has a second one; you make the most money in a bear market; you just don't know it at the time."
