Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time 4 Your Money. We’re joined by Nate Kreinbrink, Financial Planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks again for having me, Brandy.
Brandy Auterson-Hurst:
So inflation has cooled quite a bit from the highs we saw just a few years ago, but many people still feel like they’re falling behind. What do you see as the reason for this?
Nate Kreinbrink:
Well, when we look at the actual data, we see that the rate of inflation has come down. However, the impact that inflation has had on pricing is still lingering. And this is what’s actually weighing on household budgets. Now, we typically measure this by adjusting income for inflation, which is what we call real disposable income. And I think we’ve got a chart here that illustrates this just a little bit.
So the blue line on this chart is showing just how much spending power households have after accounting for taxes and inflation. While the red line at the bottom of this chart is tracking inflation or the year-over-year change in CPI. Now you can see that after the peak in ’21, that real incomes took a massive dip, right as inflation started to surge in 2022. While since then, inflation has come down to around 3%. But real disposable income still haven’t quite gotten back to their prior highs. So simply put, we’re seeing an environment where wages have been rising, but the massive bout of inflation that we had has incomes haven’t really completely recovered. And that’s why families still feel like their budgets are tighter than ever.
Brandy Auterson-Hurst:
Okay. So what’s the takeaway here for consumers and investors?
Nate Kreinbrink:
Well, this is something that policymakers, including the Fed, are well aware of. And they know that for households to feel like they’re getting ahead, inflation is going to need to continue to come down, while incomes rise. So as we move forward, we’ll keep a close eye on what the Fed may do with interest rates and what impact that may have on the markets.
Brandy Auterson-Hurst:
All right, well you’re keeping a close eye on that. Nate, as always, thanks for joining us.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.