InflationanditsImpactonInvestments-PIMCOETFs.pdfVIP

Inflation and its Impact on Investments Your Global Investment Authority PIMCO ETFs Understanding inflation is crucial to investing because inflation can reduce the value of investment returns. Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs, tax policies, and interest rates. What is inflation? Inflation is a sustained rise in overall price levels. Moderate inflation is associated with economic growth, while high inflation can signal an overheated economy. As an economy grows, businesses and consumers spend more money on goods and services. In the growth stage of an economic cycle, demand typically outstrips the supply of goods, and producers can raise their prices. As a result, the rate of inflation increases. If economic growth accelerates very rapidly, demand grows even faster and producers raise prices continually. An upward price spiral, sometimes called “runaway Investment Basics inflation” or “hyperinflation,” can result. In the U.S., the inflation syndrome is often described as “too many dollars chasing too few goods;” in other words