Ask an advisor: If inflation keeps falling, how should I change my investments?


Welcome back to “Ask an Advisor,” the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

For the past three years, inflation has been a difficult fact of American life. In 2021, as the economy recovered from the pandemic recession, rising prices began picking up speed and then suddenly skyrocketed. In June 2022, the consumer price index (CPI) jumped at a yearly rate of 9.1% — a level not seen since the early 1980s.

For investors, the cure has in some ways been worse than the illness. To get inflation under control, the Federal Reserve has raised interest rates 11 times since March 2022, battering an already wobbly stock market. 

Fortunately, the medicine appears to be working. By June 2023, the rise in the CPI had sunk to 3%. Then it ticked back up to 3.7% in August and September, raising fears of another upward spiral. But on Tuesday, the Bureau of Labor Statistics released some good news: The rate settled back down to 3.2% in October.

So at least for now, inflation seems to be on a downward, if uneven, trajectory. The question for investors is, how should they react — or should they?

READ MORE: Ask an advisor: How should I invest if interest rates come down?

As we do every so often at “Ask an Advisor,” this week’s question comes from yours truly, retirement reporter Nathan Place. As inflation cools, I’m wondering how average investors like myself can use this trend to our advantage. Here’s what I wrote:

Dear advisors,

It’s been a long, tough road, but the Fed seems to be slowly winning its battle against inflation. How should investors adjust?

In particular, I’m wondering what to change about my own investments — or if I should stay the course. Are there assets I should allocate more to, because they’ll benefit from lower inflation? And on the other hand, what assets will be negatively affected?

In terms of my own portfolio, I have both a 401(k) and a Roth IRA, and my wife and I have an investment account with Schwab. That account is invested 50% in the S&P 500, 30% in foreign stocks and 20% in bonds. If inflation continues to cool, is there anything you’d recommend changing about that ratio? Or should I leave it alone?

Thanks for your help!


Inquiring in Inwood

And here’s what financial advisors wrote back:


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