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Our Expectations

Inflation in 2022 is set to peak at its highest level in four decades, but we think there’s less cause for concern in 2023 and beyond. High demand during a period of easy-money policy combined with supply chain constraints led to a drastic and rapid rise in prices between 2021 and 2022. As the issues related to supply chain begin to resolve and the Fed’s rate hikes slow the pace of the economy, we believe inflation will come down significantly. Morningstar predicts that the average annual inflation rate over the next 4 years will be 1.7%. This would bring long-term inflation rates closer to the Fed’s 2% annual goal, rather than the ~6.1% price increase we’ve seen this year.


Bar/line chart showing PCE Inflation and Forecast

Significant Sectors

Shelter, energy, vehicles, and core goods are some of the largest contributors to the recent spike in prices. There are signs in each of these categories that prices are coming down. For example, in the second half of 2022, rent prices began to fall for the first time in nearly two years. Because shelter accounts for 32.8% of the Consumer Price Index, CPI levels are likely headed significantly lower in the near future. Below is a chart depicting the effects each sector has had on inflation over the past three years.


Stacked bar chart disaggregating inflation's deviation from trend into various components.

Moving Forward

As we approach the holiday season and new year, we remain positive about the future of our resilient market, and we continue to believe that sticking to a personalized long-term strategy is one of the best decisions an investor can make. If you have any questions about how inflation has affected your portfolio, or if you’d like to know more about our approach, do not hesitate to reach out.





Past performance is no guarantee of future results.