Cash considerations when inflation is up
SPEAKER: Welcome to Market Minutes, an audiocast to help you stay informed on key topics likely to impact markets, the economy, and investors. Today's topic is cash considerations when inflation is up. Here is Chief Investment Officer Eric Freedman. 
ERIC FREEDMAN: Typically if you sit in cash for a prolonged period of time, it's generally not productive for you. In fact, cash is long considered to be amongst the lower of productive assets. And the reason for that is because there is no inherent inflation protection within cash. It tends to actually mimic, if you will, and actually be a slight discount to current inflationary levels. 
So if you think about even the environment right now, the Federal Reserve is trying to catch up, if you will, to where an inflation is. If you're sitting in cash and not earning a lot of interest on that cash and trying to keep up with inflation, there's a massive gap there. And so over time, it's really recognizing that there are periods of time when stocks and bonds can lose value, like now. If you can stay involved and if you can keep a mix of diversifying stocks across sectors, geographies, as well as bonds across credit quality and what's called duration or just the maturity of those bonds, that tends to be a great inflation fighter over time. 
Certainly over any very, very short period of time, which one could argue is three, six, even 12 months, that there can be a disconnect between a portfolio and levels of inflation. But over time, that more diversified mix of assets tends to really outrun inflation. Some of that is because corporate earnings, which are directly reflected in equity prices and stock prices, do take into account levels of inflation. 
If I'm a telephone company and I'm thinking of how I want to charge customers, I'm going to keep in mind inflationary levels that I'm digesting as a company. Same thing with a grocery store. Same thing with other producers. 
So there's an inherent level of an inflation hedge over time within certain sectors. And I think that you're actually going to capture that. The past doesn't always portend, but we do think that that will be a durable theme over the investment future as well. 
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