For decades, we’ve enjoyed a period of low and stable inflation. Globalization, a system that encouraged free trade and international competition, helped keep prices in check. Companies could choose the most efficient locations, often overseas, to make products. This meant lower production costs and cheaper goods for consumers like you and me.

But here’s the thing: that trend might be reversing.

The tide is turning away from globalization, and a new movement towards de-globalization is gaining traction. This means bringing production back home, even if it means sacrificing some efficiency.

While this shift might bolster domestic economies and national security, it comes at a potential cost: inflation, or rising prices.

Why de-globalization might mean higher prices

Think of de-globalization as a trade-off.  We’re moving away from the most efficient production model towards a more secure, but potentially less efficient, one. Here’s how it can lead to inflation:

• Higher production costs: Manufacturing closer to home often means higher labor costs and stricter regulations compared to some developing economies. These factors can make producing goods more expensive.
• Supply chain disruptions: Shifting production back home takes time and resources. Rebuilding domestic manufacturing capabilities and establishing new supply chains can lead to temporary shortages and price hikes as we adjust.
• Reduced competition: When companies have fewer options for making goods, competition lessens. This could allow domestic producers to raise prices without fearing they’ll lose business to overseas competitors.

The bottom line: Inflation on the horizon

The de-globalization trend is likely to put upward pressure on prices over the next decade. While there may be long-term benefits to a more secure domestic supply chain, consumers need to brace themselves for potential inflation.

What can you do?

• Stay informed: Keep yourself updated on economic trends and inflation forecasts.
• Plan for higher costs: Adjust your budget to accommodate potential price increases for goods.
• Explore inflation-resistant investments: Consider investing in things like commodities, real estate, treasury inflation protected securities, or certain stocks that have historically performed well during periods of inflation.

De-globalization is a complex issue with both advantages and potential drawbacks, including inflation. By understanding these factors, you can make informed decisions about your finances and navigate the changing economic landscape.

Remember, you’re not alone!

Signet financial advisors can help you understand these trends and adjust your investment strategy for the future.

IMPORTANT DISCLOSURE

This is a publication of Signet Financial Management, LLC.

The information presented is believed to be factual, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Information in this presentation does not involve the rendering of personalized investment advice. It is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented.

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