Famed economist Larry Summers issues dire inflation warning after Trump win — 3 ways to help protect yourself
Famed economist Larry Summers issues dire inflation warning after Trump win — 3 ways to help protect yourself
Jing Pan
4 min read
Headline inflation has eased in the U.S., but according to economist and former Treasury Secretary Larry Summers, soaring prices may not be over — especially in light of Donald Trump’s recent presidential election victory.
Speaking at a New York Economic Club, Summers cautioned that Trump’s proposed policies could drive inflation even higher than the levels triggered by his predecessor’s actions.
Don't miss
Accredited investors can become the landlord of Walmart, Whole Foods or Kroger — and benefit from regular distributions without lifting a finger. Here’s how
Car insurance premiums in America are through the roof — and only getting worse. But less than 2 minutes can save you more than $600/year
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
“There is a very substantial risk that the president will attempt to implement what he talked about. If he does, the consequences are likely to be substantially greater inflation than what was set off by the excessive Biden stimulus,” Summers suggested, according to a CNN report.
He also looked to the U.S. Federal Reserve, which recently announced a second consecutive cut to its benchmark interest rates.
“My own judgment is that the Fed and markets are still underestimating the overheating risk,” he wrote in a post on X. “I ask myself: Why is cutting rates a priority into that environment?”
In October, the U.S. Consumer Price Index recorded a 2.6% annual increase, a significant drop from its recent peak of 9.1% in June 2022.
Still, Summers remains vigilant, warning, “I am fearful that the Fed is going to be more like once burned, twice burned, rather than once burned, twice shy, on inflationary risks.”
Inflation impacts everyone by eroding the purchasing power of money. If you share Summers’s concerns, here are three strategies to guard against its impact.
Real estate
Real estate has long been considered a reliable hedge against inflation, thanks to its intrinsic value and income-generating potential.
When inflation rises, property values often increase as well, reflecting the higher costs of materials, labor and land. At the same time, rental income tends to go up, providing landlords with a revenue stream that adjusts for inflation. This combination makes real estate an attractive option for preserving and growing wealth during periods of escalating price levels.
Over the last five years, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index has surged by more than 50%.
Of course, that also means properties don’t come cheap these days, especially when you factor in today’s elevated mortgage rates.
Gold is another popular hedge against inflation. The reason is straightforward: the yellow metal can’t be printed in unlimited quantities by central banks like fiat money. And because its value isn’t tied to any one currency or economy, gold could provide protection during periods of economic uncertainty. This unique characteristic has earned it the reputation of being a “safe haven” asset.
When inflation erodes the purchasing power of fiat currencies, gold's appeal as a stable store of value often grows, driving up demand.
Investors have already taken note of its resilience. So far in 2024, gold prices have surged by 27%, surpassing $2,600 per ounce. These days, there are many ways to gain exposure to gold. You can own bullion, buy shares of gold mining companies or ETFs, or even tap into potential tax advantages with a gold IRA.
Equities
In January 2024, the non-profit Oxfam reported that the world’s billionaires have become $3.3 trillion wealthier than they were in 2020, with their wealth increasing at a rate three times faster than that of inflation.
For some of the most famous billionaires, a substantial portion of their wealth is linked to the companies they founded or currently manage. As inflation drives up costs, businesses that can successfully pass these costs onto consumers through higher prices can maintain or even grow their profit margins. This, in turn, can lead to increased earnings and potentially higher stock prices.
While stocks are also volatile, the market has performed remarkably well during the recent inflationary period. The S&P 500, for instance, has seen a 90% increase over the last five years.
Oxfam also observed that share ownership “overwhelmingly benefits the richest,” with the top 1% owning 43% of all global financial assets.
But you don’t have to be in the billionaires’ club to access the stock market. These days, many platforms enable you to buy and sell stocks with minimal initial investment requirements. Some apps can even help you invest in index funds like the S&P 500 automatically using your spare change, making it easier than ever to grow your wealth alongside the world’s financial elite.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
