Inflation protection strategiesmatter more right now than they have in years. The annual inflation rate hit*4.2%*for the 12 months ending May 2026, up from 3.8% the month before, according to theU. S. Bureau of Labor Statistics. In 33 years advising business owners and pre-retirees, I have watched inflation quietly destroy more wealth than almost any market crash. If you own a business, hold concentrated stock, or are approaching a liquidity event, this is the moment to act.
Key Takeaways
- Inflation is at 4.2%as of May 2026, the highest reading in recent months.
- Energy costsare leading the surge, up 23.5% over the past year, according to the Bureau of Labor Statistics.
- Cash sitting idle loses valueevery single month in a 4%+ inflation environment.
- Real assets, I Bonds, and diversified portfoliosare the core tools for purchasing power protection.
- Business owners face a double threat:rising input costs AND eroding personal wealth simultaneously.
What Is Actually Happening With Inflation Right Now
Inflation is not a single number. It is a collection of price pressures hitting different parts of your life and your business at different speeds.
According to the Bureau of Labor Statistics, headline inflation was*4.2%in May 2026, while core inflation (which strips out food and energy) was2.9%. That gap tells you something important. The pain you feel at the gas pump and the grocery store is real and severe. It is not just a statistical blip.
Energy was the single biggest driver. The energy index rose3.9%in May alone and23.5%*over the prior 12 months, as disruptions to oil supply pushed prices at the pump sharply higher. As theMay 2026 inflation breakdownshows, energy alone accounted for more than 60% of the monthly increase. These are not abstract percentages. They are real costs hitting your household and your business every week.
The 4 Things Business Owners Must Know About Inflation and Wealth
1. Cash Is a Losing Position Right Now
Holding large amounts of cash feels safe. It is not. At 4.2% inflation, every dollar sitting in a low-yield account loses purchasing power every single month. This is the silent tax that most owners ignore.
That said, cash is not worthless. Competitive high-yield savings and money market accounts have recently offered APYs in the range of roughly*3.50% to 4.10%*. That is still below the 4.2% inflation rate, but it narrows the gap significantly. If you have cash reserves, they should be working harder than a standard checking account.
2. I Bonds Offer a Government-Backed Inflation Hedge
Series I Savings Bonds (I Bonds) are issued by the U. S. Treasury and adjust their yield based on inflation. According to theU. S. Treasury, I Bonds issued from November 2025 through April 2026 carry a fixed rate of*0.90%and an inflation component of3.12%, for a composite yield of4.03%*for the first six months.
I Bonds have purchase limits per person per year, so they are not a complete solution. But for the conservative portion of a portfolio, they are one of the few instruments that directly tracks inflation. They are worth understanding as part of a broaderwealth managementstrategy.
3. Real Assets Protect Purchasing Power Over Time
Real assets include real estate, commodities, infrastructure, and businesses with pricing power. These tend to rise in value alongside inflation because their underlying worth is tied to physical things, not paper promises.
Hypothetical example: a business owner with $5M in liquid proceeds from a partial sale might allocate a portion to real estate investment trusts (REITs) or commodity-linked funds as an inflation hedge. This is illustrative only; actual allocations depend on individual tax situation, time horizon, and risk tolerance. Results vary based on individual circumstances. Specific figures are illustrative, not guarantees of outcomes.
The key is diversification. No single asset class wins in every inflation environment. A well-structured portfolio spreads risk across multiple inflation-sensitive categories.
4. Your Business Itself Is Both Exposed and Protected
Here is the tension most owners miss. Your business faces rising input costs, from energy to labor to raw materials. That is the exposure side. But if your business has genuine pricing power, meaning customers will pay more without walking away, it is also an inflation hedge.
Businesses with recurring revenue, strong brand loyalty, or essential services tend to pass inflation through to customers more easily. Businesses with thin margins and commodity inputs get squeezed. Understanding which category you are in shapes both your operating decisions and yourexit planningtimeline.
A Texas-Friendly Way to Think About This
Think of your wealth like a ranch in a drought. The land is still there. The cattle are still there. But if you are not actively managing the water supply, the whole operation suffers quietly over time. Inflation is the drought. You do not always see it coming fast. But if you ignore it long enough, the damage is real and hard to reverse.
The rancher who survives a drought is the one who diversified water sources before the dry spell hit. The same logic applies to your portfolio. Diversifying across asset classes, adjusting cash positions, and building inflation-sensitive holdings before you need them is the move.
What You Can Do Right Now
- Move idle cashinto high-yield savings or money market accounts offering 3.50% to 4.10% APY.
- Consider I Bondsfor the conservative portion of your portfolio, up to annual purchase limits.
- Review your asset allocationfor real asset exposure, including real estate and commodities.
- Assess your business's pricing powerand whether your margins can absorb continued input cost increases.
- Revisit your tax strategywith an advisor, because inflation changes the real value of deferred tax liabilities and installment sale proceeds.
- Do not let a liquidity event sit in cashfor months without a deployment plan. At 4.2% inflation, time costs money.
The Bottom Line on Purchasing Power Protection
Inflation at 4.2% is not a crisis. But it is a slow leak. And slow leaks sink ships if you do not patch them. The owners who protect their purchasing power are not the ones who panic. They are the ones who have a plan before the numbers get worse.
In 33 years of advising owners through multiple inflation cycles, the pattern is consistent. The owners who act early, diversify thoughtfully, and coordinate their investment strategy with their tax situation come out ahead. The ones who wait for certainty often wait too long.
If you are sitting on business proceeds, concentrated stock, or a portfolio that has not been reviewed in the last 12 months, now is the time to look at it through an inflation lens. Learn more about howtax strategyintersects with inflation planning for business owners.
Frequently Asked Questions
What is the current inflation rate in the United States?According to U. S. Labor Department data released June 10, 2026, the annual inflation rate was 4.2% for the 12 months ending May 2026, up from 3.8% the prior month. Core inflation, which excludes food and energy, was 2.9% in May 2026, per the Bureau of Labor Statistics.How do I Bonds protect against inflation?Series I Savings Bonds are issued by the U. S. Treasury and include an inflation adjustment component that resets every six months based on CPI data. I Bonds issued from November 2025 through April 2026 had a composite yield of 4.03%, combining a 0.90% fixed rate and a 3.12% inflation adjustment, according to the U. S. Treasury. There are annual purchase limits per person, so they work best as one piece of a broader inflation protection strategy.What are the best inflation hedge investments for business owners?Inflation hedge investments for business owners typically include real assets such as real estate and commodities, Treasury Inflation-Protected Securities (TIPS), I Bonds, and equities in businesses with strong pricing power. High-yield savings and money market accounts offering 3.50% to 4.10% APY can also reduce the drag of holding cash. The right mix depends on your tax situation, time horizon, and liquidity needs.How does inflation affect a business sale or exit?Inflation affects exit planning in several ways. Rising input costs can compress margins and reduce EBITDA, which directly lowers valuation multiples. Inflation also erodes the real value of installment sale proceeds received over time. If you are planning an exit, it is worth reviewing your deal structure with an advisor to understand how inflation interacts with your after-tax proceeds.Should I move cash out of a checking account during high inflation?Yes, in most cases. At 4.2% inflation, cash in a standard checking account loses purchasing power every month. Competitive high-yield savings and money market accounts have recently offered APYs of roughly 3.50% to 4.10%. That does not fully offset inflation, but it significantly narrows the gap. For larger cash positions, a broader review of your asset allocation is warranted.How does inflation affect purchasing power for pre-retirees?For pre-retirees, inflation is one of the most serious long-term risks. A 4.2% annual inflation rate means that the purchasing power of a fixed dollar amount roughly halves over 17 years. Pre-retirees need portfolios that include inflation-sensitive assets, not just bonds and cash. Working with a fee-only advisor to stress-test your retirement income against various inflation scenarios is a prudent step.
Work with Pinnacle Wealth Advisory
If the 4.2% inflation rate has you rethinking your portfolio, your cash position, or your exit timeline, it might be worth a conversation. At Pinnacle Wealth Advisory, we work with business owners and pre-retirees on the full picture: investment strategy, tax planning, and wealth protection. If this would be useful for your situation, here is where to start:pnwadvisory.com/exit-planning.
This blog post is for informational purposes only and does not constitute legal, tax, or financial advice. Past performance does not guarantee future results. Consult with qualified professionals for guidance tailored to your specific situation. Results vary based on individual circumstances. Specific figures are illustrative, not guarantees of outcomes. Doug Greenberg is an investment adviser representative of SB Advisory LLC, a registered investment adviser. Doug may provide services and conduct business as Pinnacle Wealth Advisory with advisory services offered through SB Advisory, LLC.
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