How will inflation, taxes and the economic recovery impact your investment strategy in the months ahead?

What a difference a year makes. Today’s social and economic landscape paints a vastly different picture from where we were last summer, coping with an uncertain economy and job market amidst and unrelenting health crisis, rising social unrest and a highly charged political landscape.
 
As we enter the second half of the year, three transformational themes continue to influence personal, business, planning and investment decisions in the months ahead. These include the Great COVID Evolution, an extended period of relatively low interest rates (despite current inflation concerns) and continued volatility.
 
The mass vaccination rollout in the U.S. has made significant inroads toward putting the COVID-19 pandemic behind us. However, as we noted earlier this year, the uneven adoption of the vaccine across states and communities, coupled with the spread of new and more virulent variants, will likely result in continued pockets of increased hospitalizations and/or deaths. The virus also continues to hold sway over economies around the world, forcing lockdowns and disrupting trade as countries and regions race to procure and administer vaccines.
 
Here in the United States, government support for households and businesses in the form of stimulus measures has given way to less support and the potential for higher taxes. As we transition from the early cycle of the economic recovery to the mid cycle, we’ve gone from too few jobs to too few workers; worries about too little inflation to concerns about growing inflation,  supply constraints and rising prices for materials. The post-election drop in volatility that we experienced across the financial markets quickly gave way to periodic bouts of volatility driven by concerns about inflation, Federal Reserve (the Fed) policy, and the potential for higher taxes.
 
Below the Investment Management Group (IMG) looks at how these and other factors may impact the financial markets, economy and your planning during the second half of the year.
 

Equity market

COVID-19 continues to influence U.S. and international equities

Taxable fixed income

Conditions remain supportive

Tax-exempt bonds

An unusually hospitable environment
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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.
 
The views expressed in this material may change in response to changing economic and market conditions. Past performance is not indicative of future returns.
 
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.
 
Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details.
 
Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.
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