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Humility might be the best medicine in times of economic hardship. Economist and former Pacific Investment Management Company (PIMCO) CEO Mohamed A. El-Erian published an admonition about the American economy amidst the Iran war in Project Syndicate (1).<\/p>\n
\u201cWhile much of the world braces for the fallout of the Iran war, the U.S. might be tempted to tout its relative economic strengths, not least its energy independence,\u201d El-Erian wrote in a recent article for Project Syndicate. \u201cAgainst this backdrop, what the U.S. needs from its policymakers is not hubris, but humility and decisive action aimed at protecting those who need it most.\u201d<\/p>\n
Historically, the U.S. has managed to rebound from the toughest of economic trials. According to data from the International Monetary Fund (IMF), despite the economy contracting during the Great Recession, it still averaged an annual GDP growth of 1.48% from 2007 to 2020, when compared to only 0.59% for the eurozone.<\/p>\n
The IMF also found that the COVID-19 pandemic\u2019s economic disruption did not derail the U.S. for long, as \u201ca robust recovery meant that growth averaged 3.27% in 2021-25,\u201d which, again, outpaced the eurozone\u2019s 2.63%, El-Erian reported.<\/p>\n
While American energy independence helps the country avoid the supply shortages that are afflicting Asia and Europe, while weathering the higher energy and borrowing costs spilling over from the Iran war, that doesn\u2019t mean the economy is immune to war.<\/p>\n
\u201cEven if the US economy continues outperforming its peers, it will not necessarily remain insulated from the war\u2019s adverse effects,\u201d El-Erian wrote, citing higher energy and borrowing costs as added pressures to the cost-of-living rise Americans are already facing.<\/p>\n
According to the Bureau of Labour Statistics, the Consumer Price Index (CPI) increased by 3.3% for the past year, ending in March (2). This makes it the sixth consecutive year of the Fed missing its 2% target.<\/p>\n
Mark Zandi, chief economist at Moody\u2019s, told CNBC he doesn\u2019t expect inflation to decelerate, saying that inflation is \u201cstubbornly high, especially for necessities,\u201d adding that \u201cof course, this is all before the fallout from events in the Middle East\u201d (3).<\/p>\n
With higher energy prices likely to lead to increased price hikes, it\u2019s clear that the U.S. isn\u2019t guaranteed to stay ahead in terms of its economy during the war.<\/p>\n
What began as a surge in gas prices in the first three weeks of the war \u201cwill soon be translated into higher costs for a wide range of goods, from semiconductors and fertilizers to airplane tickets,\u201d El-Erian said.<\/p>\n
Read More: Taxes are changing under Trump\u2019s \u2018big beautiful bill\u2019 \u2014 4 reasons why retirees can\u2019t afford to waste time<\/a><\/p>\n As inflation increases alongside the risk of financial instability, Americans are seeing the impact in their daily lives.<\/p>\n As the conflict in the Middle East shifts, it\u2019s important to evaluate your finances accordingly and make lifestyle changes to adapt \u2014 even in the short term \u2014 to the higher cost of living. And with the U.S. currently blockading the Strait of Hormuz, the impact on inflation might be stickier than expected.<\/p>\n One way to shield yourself from the adverse effects of inflation is to invest in assets that tend to hold up their value during such times. Gold, for instance, has long been considered an asset that acts as a hedge against inflation. And during times of tumultuous economic conditions, the precious metal often outperforms relatively higher-risk assets like equities.<\/p>\n This has played out in real time over the past year. Gold spot prices surged by more than 54% over the past year, while the benchmark S&P 500 price return was about 28% over the same period (4, 5).<\/p>\n If you wish to add gold to your portfolio, but don\u2019t want to deal with the hassles of storing the precious metals, consider opening a gold IRA with the help of Priority Gold<\/a>.<\/p>\n Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA<\/a> with the protective benefits of investing in gold.<\/p>\n If you opt for Priority Gold\u2019s platinum package, you can get free account setup and insured shipping and storage for up to five years. Plus, you can also rollover your existing IRA or 401(k) into a precious metals IRA with Priority Gold \u2014 tax and penalty free.<\/p>\n What\u2019s more, when you make a qualifying purchase with Priority Gold, you can receive up to $10,000 in precious metals<\/a> for free. Just keep in mind that gold is often best used as one part of a well-diversified portfolio.<\/p>\n Real estate has long been viewed as a classic hedge against inflation. As the cost of materials, labor and land rises, property values often climb as well. That means homeowners may see the value of their properties increase even as the purchasing power of cash declines.<\/p>\n Rental income can also help keep pace with rising prices. When inflation pushes up everyday costs, landlords often adjust rents over time to reflect higher expenses.<\/p>\n But becoming a landlord comes with added responsibilities \u2014 a hefty down payment, monthly insurance and maintenance expenses, and the burden of property management.<\/p>\n For those who want to invest in real estate but don\u2019t want the added headaches, platforms like Arrived<\/a> make it easier to slice yourself a piece of that pie.<\/p>\n Backed by world-class investors like Jeff Bezos, Arrived allows you to invest in shares of rental homes with as little as $100<\/a>, all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants. No midnight maintenance calls here.<\/p>\n Once you find a property you like, select the number of shares you\u2019d like to purchase, and then sit back as you start receiving any positive rental income distributions<\/a> from your investment.<\/p>\n Even better, for a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match<\/a>. This can give you a boost right out of the gate.<\/p>\n But there are plenty of real estate investment opportunities out there, so long as you know where to look. Many opportunities are marketed to accredited investors, but not all opportunities are created equal.<\/p>\n For instance, if you want to move beyond single-family properties, you could instead leverage multifamily real estate investing. At least for those with capital on hand.<\/p>\n In a report prepared by JPMorgan, Al Brooks \u2014 the firm\u2019s vice chair of Commercial Banking \u2014 noted that, “multifamily housing is absolutely where you want to be as an investor\u201d (6).<\/p>\n Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT<\/a>, which gives accredited investors access to single-asset multifamily and industrial deals.<\/p>\n Lightstone DIRECT\u2019s direct-to-investor model<\/a> ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator \u2014 a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.<\/p>\n With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets<\/a> Lightstone pursues with its own capital, with minimum investments starting at $100,000.<\/p>\n Beyond the typical slate of alternative investments, there are other options for those who want to get truly creative with their portfolio mix. In particular, there\u2019s one globally recognized asset class that has low correlation with the S&P 500 and tends to hold value well while appreciating over time.<\/p>\n Even better, due to its worldwide renown, there\u2019s some in-built resilience to fluctuations in American markets.<\/p>\n The choice asset in question? Post-war and contemporary art.<\/p>\n Until recently, this world was off limits to most retail investors. But now, Masterworks<\/a> has opened the door to investing in art for retail investors \u2014 with more than 70,000 users following suit since 2019. Now, it\u2019s possible to own fractional shares of works by Banksy, Basquiat, Picasso and more \u2014 depending on availability.<\/p>\n Masterworks has sold 27 artworks so far, yielding net annualized returns like 14.6%, 17.6% and 17.8% among assets held for longer than a year.<\/p>\n Even better, Moneywise readers can get priority access to diversify with art and skip the waitlist<\/a> to see what\u2019s on offer.<\/p>\n Note that Past performance is not indicative of future returns. Investing involves risk. You can see important Regulation A disclosures at Masterworks.com\/cd<\/a><\/p>\n Even if the war ends tomorrow, consumers shouldn\u2019t expect prices to fall overnight.<\/p>\n \u201cI don\u2019t think we\u2019re going back to the pre-war prices for the foreseeable future. Certainly won\u2019t be this year, won\u2019t even be next year,\u201d said Mark Zandi, chief economist at Moody\u2019s Analytics, adding, \u201cMight not be ever.\u201d (7)<\/p>\n That\u2019s why taking a closer look at your finances now could pay off. A financial advisor can help you adjust your strategy, find ways to stretch your dollars further and stay on track toward your long-term goals even as costs remain elevated.<\/p>\n Research from Envestnet suggests households that work with a financial expert could see returns up to 3% higher. Over decades, that extra boost can compound into significant gains. After all, time in the market often beats out timing the market.<\/p>\n You can find a vetted FINRA\/SEC-registered advisor near you for free through Advisor.com<\/a>.<\/p>\n Just enter a few details about your finances and goals, and Advisor.com\u2019s AI-powered matching tool will connect you with a qualified expert<\/a> suited to your unique financial needs and goals. The platform\u2019s advisors are fiduciaries, meaning they are legally obligated to act in your best interest.<\/p>\n Hiring a financial advisor can be a lifelong commitment. That\u2019s why Advisor.com lets you set up a free, no-obligation consultation<\/a> with your match to see if you\u2019re on the same page.<\/p>\n \u2014 With files from Em Norton<\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n Project Syndicate (1<\/a>); Bureau of Labor Statistics (2<\/a>); CNBC (3<\/a>); APMEX (4<\/a>); S&P 500 Global (5<\/a>); JP Morgan (6<\/a>); Politico (7<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. 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