THIS WEEK’S FOCUS

How Inflation and Interest Rates Shape Your Investment Journey

This week, we're diving into a topic that’s been buzzing around every investor’s mind – especially as it takes center stage with the upcoming U.S. presidential election: inflation and interest rates. These two factors might sound like boring economic buzzwords, but they have a massive influence on your investment performance, whether you’re a stock buff, crypto believer, or real estate enthusiast. The election brings these issues to the forefront as voters are focused on the economic future and how inflation and rate changes will impact their wallets.

Today, we’ll break down how these big-picture economic forces play a role in your money moves and uncover smart strategies to hedge or even profit when they’re in play. Whether inflation is soaring or rates are rising, here’s how you can stay ahead and keep your portfolio in check.

INVESTMENT OPPORTUNITY

Strategy Spotlight: Magnificent 7 Insider Trading Follower

Imagine investing with the insight of an insider. Our Magnificent 7 Insider Trading Follower strategy was built to bring you closer to the heart of decision-making within the largest tech giants—the "Magnificent 7." With this strategy, you can sync your investments with the moves of those who know these companies best: key executives and major shareholders of companies like Apple, Microsoft, and Google.

📊 How It Works

This strategy quietly monitors SEC filings, detecting pivotal insider trades that signal real confidence or caution. When top executives or key stakeholders make a move, the portfolio adjusts in response, reflecting their knowledge and vision for the future of these tech giants.

💼 Strategy Performance

• Current Value: $30,842.37

• Growth: 208.42% since inception—well beyond the SPY benchmark's 93.09% increase.

• Benchmark Comparison: While the SPY gained +$9,309.16 (93.09%), our strategy soared with an additional +$20,842.37 (208.42%).

📈 Why Follow the Magnificent 7?

This strategy has consistently delivered strong returns by staying in tune with insider sentiment, providing a robust alternative to simply following market trends. With historical performance reflecting over double the benchmark returns, it’s ideal for investors seeking growth in the tech sector with an edge.

INFLATION…

What It Really Means for Your Dollars

Inflation isn’t just that thing that makes your favorite iced latte more expensive each year. At its core, inflation means prices are rising, and it eats away at the purchasing power of every dollar you hold.

For example:

• Low inflation (about 2% per year) usually helps the economy grow steadily, creating more jobs and opportunities.

• High inflation (think 5% or more) makes everything from groceries to gas more expensive, squeezing your budget and making it harder to save.

But inflation isn’t just about spending more on everyday items; it also impacts how your investments perform. The higher the inflation, the harder your investments have to work to maintain and grow your wealth.

INTEREST RATES

The Economy’s Brake & Gas Pedal

Interest rates are essentially the cost of borrowing money. When rates are low, it’s cheap to take out loans, so people and businesses borrow more, spending and investing more into the economy. When rates are high, the opposite happens – borrowing becomes expensive, and spending slows down.

Here’s how the Federal Reserve uses rates:

1. Raising Rates to cool down high inflation by discouraging borrowing and spending.

2. Lowering Rates to boost a sluggish economy by encouraging borrowing and investing.

Understanding this rate dance is key because it ripples through every investment asset, including stocks, bonds, real estate, and even crypto. Higher interest rates can impact your mortgage, stock prices, and more, so knowing how to react can save you major headaches.

INFLATION, INTEREST RATES & ASSET CLASSES

What’s Affected the Most?

1. Stocks: The Rollercoaster

• High inflation? Companies face higher costs, which can hurt profits and stock prices

• High-interest rates? Stocks generally take a hit since borrowing becomes costly for companies, limiting growth

• Strategy: Look for sectors like energy, utilities, and consumer goods. These industries tend to hold up better during high inflation since people still need gas, power, and food

2. Bonds: Safety but with Strings Attached

• Bonds, especially long-term bonds, can lose value in a high-interest rate environment. If rates go up, newer bonds offer better returns, making your old ones less attractive

• Strategy: Short-term bonds or Treasury Inflation-Protected Securities (TIPS) can offer some protection by adjusting with inflation

3. Real Estate: Friend or Foe?

• High inflation can boost property values because they’re tangible assets and often rise in value over time

• High-interest rates, though, can make mortgages pricier, cooling the market

• If you’re invested in real estate, inflation can be an ally. But, if rates are high, consider renting out properties instead of flipping them, as buyers may be deterred

4. Commodities: Inflation’s Best Friend

• Things like oil, gold, and silver tend to shine when inflation’s high because they’re physical assets with real-world value

  • Adding a small amount of commodities to your portfolio can act as an inflation hedge

5. Crypto: The Wild Card

• Crypto has no clear track record against inflation and interest rates (it’s too new!), but many believe it behaves like “digital gold,” offering an alternative store of value

• Be cautious – crypto is volatile, so don’t bet the farm. But if you’re looking for potential growth and can handle some risk, it’s worth exploring

HOW TO PLAY THE LONG GAME

Smart Strategies to Hedge Against Inflation & Rising Rates

Inflation and rising interest rates don’t have to be a buzzkill for your portfolio. With the right moves, you can use these shifts to your advantage. Here’s a breakdown of some smart strategies to keep your money resilient—even when the economy throws a curveball.

1. Diversify Your Portfolio—Think Beyond Stocks

We know, everyone says "diversify," but here’s what it really means. It’s not just about holding some stocks and bonds; it’s about owning a mix of assets that don’t all react the same way. If stocks take a hit, you want other parts of your portfolio (like real estate or commodities) holding strong to balance things out. Sectors like energy, utilities, and healthcare are good examples—people still need them, no matter what the economy’s doing.

2. Consider Inflation-Protected Investments—Shield Your Wealth

Some investments are actually built to stand up to inflation. Treasury Inflation-Protected Securities (TIPS), for example, are U.S. government bonds that adjust their value to keep pace with inflation. Real estate investment trusts (REITs) can be another solid choice, as property values and rents usually rise when inflation goes up, making them a natural hedge.

Also, don’t overlook “real assets” like commodities-based ETFs or funds tied to infrastructure projects. A little exposure here can really boost your portfolio’s resilience when inflation heats up.

3. Stay in Tune with Economic Trends—Knowledge is Power

The Federal Reserve’s every move impacts mortgage rates, stock prices, and bond yields, so staying in the loop on Fed announcements and inflation data can give you a serious advantage. When the Fed hints at a rate hike, markets often react quickly. Keeping an eye on these changes means you can stay ahead of big swings—or at least avoid getting blindsided. Spending just a few minutes each month tracking Fed updates and economic trends can go a long way. And we’ve got you covered with Surmount’s regular updates, which break down the Fed’s financial speak into insights you can actually use.

4. Focus on Quality Stocks—Brands with Real Staying Power

When inflation rises or rates go up, companies with strong fundamentals and “pricing power” tend to weather the storm better. These are the brands people stick with, even if prices rise a bit. Think of brands like Apple or Coca-Cola—people are willing to pay a little extra for them. High-quality companies in essential sectors like utilities, healthcare, and consumer staples are often good places to focus in tougher times because they provide services people don’t want to cut back on.

FINAL THOUGHTS

Be Ready, Not Reactive

It’s easy to feel spooked when inflation rises or interest rates change, but these factors are just part of the investing landscape. By understanding how they work and taking small, strategic steps, you can turn these economic shifts into opportunities rather than setbacks.

Remember, investing is a marathon, not a sprint – and we’re here to help you navigate each step. Whether inflation is making headlines or rates are rising, we’ll help to keep you equipped with strategies to keep your wealth on track.