By David Vincent, investment products specialist, Cadre Inflation is here to stay. November’s 6.8 percent jump in year-over-year consumer prices confirmed fears that rates would remain higher. Now, as investors seek out opportunities for sustained value and long-term growth under changing conditions, hard assets like real estate may become even more appealing. After all, commercial real estate has proven to be an attractive hedge against inflation over the last 40 years. Most experienced investors understand that holding on to your money with the old cash-under-the-mattress technique sadly offers no protection in inflationary periods. Prolonged price increases ultimately erode the value of consumers’ purchasing power. The money you’re sleeping on (or, more realistically, keeping in a low-rate bank account) is steadily losing its real value. As prices rise over time, the amount of goods and services you’re able to purchase with that money is decreasing. Higher-than-expected inflation can also have negative consequences for stocks and bonds. A historical study by economists Fama and Schwert demonstrated that a 1 percent increase in the rate of inflation typically causes bond prices to drop by approximately 1.5 percent and stock prices by 4.2 percent. In contrast, inflation may have a positive impact on physical …
