Stacey Bush: Investing amid sticky but declining inflation
Published Friday, March 27, 2026 at 7:53 am
Inflation remains a decisive variable for investors as early as 2026. While price pressures have cooled from the 2022-2023 peak, most forecasters expect inflation to remain above the central bank’s target, especially in services and wage-driven categories. The consensus estimate is that US inflation will range between 2% and 3% in the coming year, rather than a clear return of 2%.
For investors with a long horizon, this environment presents a dual reality. On the one hand, cash and nominal bonds now offer the potential for positive real returns if inflation continues to moderate. On the other hand, the portfolio still requires intentional inflation-aware components to protect purchasing power should inflation prove more persistent.
Why does “low” inflation still matter?
Inflation near 3% may seem manageable compared to recent extremes, but its long-term impact should not be underestimated. Even modest inflation, over decades, can materially destroy the real value of retirement income, college funding, or inheritance goals.
Outlook for 2026 suggests that goods inflation may moderate as supply chains normalize, with services and housing costs likely to remain stable. These categories dominate household budgets, meaning lifestyle expenses may rise faster than investors expect in real terms. As a result, the plan should focus on generating returns that exceed inflation by a substantial margin – not just preserving nominal capital.
Building a real-return-oriented portfolio
In a sticky inflation environment, advisors may want to think about building a layered “real return” framework.
Inflation-linked bonds like TIPS can provide explicit inflation protection for essential spending needs, while real assets including infrastructure and real estate provide indirect sensitivity through pricing power and asset appreciation.
Quality equities remain a cornerstone, as companies with sustainable margins and pricing flexibility are better positioned to sustain real earnings growth.
With real yields expected to remain positive and inflation expectations relatively stable, TIPS and high-quality bonds may play a more meaningful role than in previous cycles. Also, sectors related to infrastructure investment, energy transition, and data and AI infrastructure may benefit from the combination of structural demand and pricing power.
Formulating inflation strategy for HNW and Henry clients
For affluent families, inflation-aware investing is most effective when aligned with specific goals. Where appropriate, necessary expenses can be supported through TIPS ladders, high-quality bond ladders, or annuity structures. Growth assets can be tilted towards sectors and business models with demonstrated pricing power, while opportunistic capital can be allocated to real assets or private strategies to benefit from inflation volatility or regime change.
Global diversification can further increase flexibility. Different regions face different inflation dynamics, currency movements and policy responses, which can help reduce reliance on a single economic outcome.
Tax, cash flow, and transactional considerations
Persistent inflation also affects tax and cash-flow planning.
Nominal income growth can push clients into a higher tax bracket even if actual gains are modest, increasing the importance of strategies such as Roth conversions, tax-loss harvesting and asset placement. For retirees, if actual returns fall short of expectations, especially early in retirement, withdrawal assumptions may need adjustment.
In practice, inflation can trigger reactive decisions – holding excess cash, pursuing inflation-biased investments after the fact, or abandoning long-term plans. Advisors add value by reframing the conversation around long-term real outcomes, modeling multiple inflation scenarios, and demonstrating that modest, thoughtful adjustments are often sufficient.
Stacey Bush is with Bush Wealth Management. This information should not be construed as the rendering of personalized investment advice by any client or prospective client. For more information, please visit bushwealth.com for full disclosure.