4 mins
July 5, 2022

FGCP Quarterly Considerations: Investing in a High Interest, High Inflation Environment

FGCP Quarterly Considerations: Investing in a High Interest, High Inflation Environment

Four factors we're keeping an eye on as we head into the third quarter of 2022.

With interest rates on the rise, high inflation, and complicated global politics, our economy is in a very different place now than it was even 6 months ago, at the start of 2022.

While there’s no need for investors to panic, with Q2 now in the books, now is a great time to take a look at your current investment strategies and make sure the strategies that have worked for you in the past still make sense for the coming months. 

Here are four things we’ve seen so far this year that we’re continuing to keep our eye on as we head into the third quarter. 

Inflation Reaches New Heights

In May, the annual inflation rate increased once again to 8.6%, the highest it’s been since 1981. Most of that increase is due to rising energy and food costs.

We’ve discussed previously how these inflation rates are outpacing average real estate investment returns, which typically fall around 7-8%. 

If your goal is to generate income for yourself in the short term, then real estate investing will likely not deliver the results you’re hoping for. At FGCP, we still believe that investing in real assets like real estate can serve a purpose, but as with any investment, it’s important to know where you’re trying to go and then choose the right vehicle for your destination

Interest Rates Continue to Rise

Midway through June, the Federal Reserve increased interest rates for the third time in 2022. This 0.75% increase is the largest rate hike we’ve seen since 1994. The Fed also announced that they plan to continue raising the rates in an effort to slow down inflation. 

If you’re planning to take out a loan or a mortgage to fund an investment in the near future, you may want to act now, as today’s interest rates are most likely the lowest we’ll see for the remainder of the year. But keep in mind that these rates are still significantly higher than they were even three months ago. 

Tax Efficiency is a Top Priority

In our current high inflation, high interest environment, it’s more important than ever to make sure your investment strategy is delivering reliable returns and is tax efficient. If you haven’t taken the time yet to think through your 2022 tax strategy, what are you waiting for?

It may feel too early to think about next year’s tax season; after all, April feels like it happened yesterday. But in reality, making a plan today and investing accordingly over the next six months can help you significantly reduce your tax bill for the year. 

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American Oil and Gas are in High Demand

Because of the war in Ukraine and a complicated variety of other geopolitical and economic factors, gas and oil have had their largest price increase in over 15 years

And while this places a strain on the American consumer — you’ve likely noticed it on your monthly utility bills and your gas station receipts — it does also present an opportunity for Accredited Investors.

The same factors that are causing prices to rise are also leading to an increased demand for American oil and gas. When you pair that with the tax incentives tied to investing in oil and gas production, there’s a significant opportunity for the savvy investor to generate passive income by investing in assets like carbon capture technology. 

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Find a Partner You Can Trust

Trying to keep up with all of these changing economic conditions would be a full time job, and you’re not going to become an expert overnight. That’s why it’s so important to know your specific goals and build a team of people who can help you reach them.

At First Generation Capital Partners, we’re committed to helping our clients access the direct investments that make the most sense for their unique needs, allowing you to build your wealth without working harder. If you’re interested in learning more, fill out this brief form to get in touch. 

date
July 5, 2022
author
Billy Keels