Strategies to help build wealth amid inflation and recession worries

As the U.S. economy attempts to find its footing as it emerges from the Covid-19 pandemic, two looming uncertainties have emerged: persistent high inflation and a possible recession.

So it’s no surprise that financial advisors who landed on the CNBC FA 100 list for 2022 are hearing about those two concerns from their clients.

“Clients are getting bombarded with recession headlines and inflation headlines, and they don’t know what to do about them,” said Brian Spinelli, senior wealth advisor and investment committee chair at Long Beach, California-based Halbert Hargrove, which ranked No. 8 on this year’s FA 100 list.

Halbert Hargrove’s clients include high net worth individuals and families, who range from young investors still accumulating wealth to retirees who rely on their portfolios for income.

For the bulk of those clients, this isn’t the first time they’ve seen big market pullbacks or recessions, Spinelli said.

But what tends to scare people is knowing that this time will be different than the last, he said.

“We’ve never had something like this in 40 years,” Spinelli said he tells clients of the combination of record-high inflation and recession fears.

“But you’ve gone through something 10 times worse about 14 years ago,” he said he adds as a reminder of the financial crisis.

“It may be painful, but there’s nothing here that’s non-fixable,” said Bruce Kardon, president and chief investment officer at Conservest Capital Advisors in Wynnewood, Pennsylvania, which placed No. 82 on the FA 100 list.

“We need to go back to an equilibrium,” he said.

While the question is whether it will take either a soft landing or hard landing to get there, “it is not Armageddon,” Kardon said.

More than half of Conservest’s clients are business executives at middle market and public companies in various industries.

Kardon says he assures those investors that they can position themselves well by making decisions based on lessons from past downturns and what current data shows. Now may be the time to add some risk, he said.

“History rewards those take some of the emotion out of it,” Kardon said.

David Rea, president of Salem Investment Counselors, a Winston-Salem, North Carolina-based firm that ranks No. 6 on this year’s FA 100 list, said his message is “hang in there, with good companies.”

That checklist for attractive stocks includes good management, high-quality balance sheets, low debt, pricing power and a long-term history of earnings increases. Strong worldwide sales and dividend increases are also ideal, when possible, Rea said.

For the first time in 10 years, higher interest rates are starting to make some alternatives to equities like bonds more attractive, he said.

The key thing Rea said he reminds Salem’s clients, 90% of whom are high net worth individuals, is that just as you can’t call when the market will hit bottom, you can’t tell when it’s going to turn up either.

“Look for some things that have really gotten to be cheap and exciting to you when you do your homework, and maybe begin nibbling,” Rea said.