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Largest 1H decline since 1970: How to secure our portfolios?
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Does high inflation make you a winner or loser?

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Moomoo Learn joined discussion · Sep 2, 2022 03:20
This year in 2022 has witnessed a level of inflation unseen in the United States for over 40 years.
In July, the US consumer price index (CPI) rose by 8.5% year on year, the clearest manifestation of the sharp rise in the cost of living across the board.
Inflation means the sustained and broad rise in the prices of goods and services over time. The Consumer Price Index (CPI), a monthly measure by the Bureau of Labor Statistics (BLS), is the best-known inflation indicator.
Click to learn more about INFLATION
Inflation is not an economic term in the textbook. It's closely related to ordinary people's lives. We all experience it and feel its effects.
Generally speaking, inflation will increase your cost of living as the cost of goods and services rises and the purchasing power of the dollar falls.
People in different economic situations, however, may feel the impact differently. So who are the winners and losers from inflation?
Winners from inflation
Business/household with fixed-rate debt
The devaluing of money caused by inflation applies not only to savings but also to debt. So, if you've borrowed money at a fixed-rate, inflation will cause the real value of the outstanding debt to decrease and hence easier to pay back.
Owners of physical assets
During inflation, there is usually increased demand for physical assets such as land, gold, machines, and real estate. Physical assets will retain their value compared with paper money amid rising inflation and act as hedging tools or inflation-proof investments.
Losers from inflation
Savers
Savers typically lose from inflation. That's because their money has stayed the same, but everything has a higher price, so they can't buy as much. Inflation could cause the real value of money falls.
People receive fixed income
Other losers from inflation are workers or retirees who are stuck on fixed incomes. Suppose a worker has a wage freeze, and then inflation is 5%. It means at the end of the year, his wage purchase 5% less than at the start of the year.
In fact, as long as the income stays the same or hasn't increased at the same rate as prices increases, the real value of the income decline.
Borrowers on variable mortgage rates
A rise in inflation can cause the central bank to increase interest rates, leading to a higher borrowing rate.
A mortgage owner with variable mortgage rates typically sees significant rises in mortgage payments with the broader inflation in the economy.


Inflation is like any other economic event: some people will benefit, and others will be hurt but still can cope.
How could investors survive or even capitalize on inflation?
Come to moomoo Learn and you could learn some practical investing strategies amid an inflation environment.
Hedging inflation: ETF strategies for chasing market swings
What is Merrill Lynch's Investment Clock?
Does high inflation make you a winner or loser?
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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