This one chart shows how inflation has doomed U.S. savers

Inflation has dominated the headlines since the pandemic, but zooming out, the typical American has seen their purchasing power cut in half over the past three decades.

According to Charlie Bilello, chief market strategist at Creative Planning, inflation has made it almost impossible for Americans to save because the value of their future dollars is worth much less each year.

“Over the last 30 years, the purchasing power of the U.S. consumer dollar has been cut in half due to inflation,” Bilello wrote.

“At the same time, the S&P 500 has gained 924% (8% per year) after adjusting for inflation,” he said, explaining that Americans have no choice but to invest in the market.

The following chart, provided by Bilello, painfully reminds us why putting money away in a savings account makes little financial sense in today's economy.

While many Americans have exposure to the S&P 500 through 401(k)s and other registered investment plans, they don’t consider the stock market an inflation hedge.

On the other hand, wealthy investors use the stock market all the time to preserve and grow their purchasing power.

According to Fed data analyzed by Axios, the wealthiest 10% of U.S. households now hold roughly 93% of stock market wealth. That’s up from 89% in 2021.

As the rich get richer, the rest of Americans are left holding the bag.

Inflation and its discontents

One of the biggest problems with inflation is that it disproportionally impacts poorer households.

Research from the Dallas Fed found that low-income households are more stressed by inflation because they spend a greater share of their income on more inflationary necessities such as food, gas, and rent.

They also have less of their net worth tied up in the stock market, so their savings tend to lose purchasing power faster.

According to Sven Henrich, market analyst and founder of Northman Trader, high inflation and the Fed’s response to it means “the top 1% gets record stock prices while you get stuck with the most unaffordable housing market ever, permanent price increases, and record credit card debt.”

For those who don't own enough stocks, “Inflation makes everything so expensive that people have to cut back on several ends,” said Andrea Hasler, an assistant research professor at George Washington University School of Business.

The good news is that inflation appears to be moderating again following months of higher-than-expected readings. The bad news is that Americans are stuck with permanently higher prices.

As Creditnews reported, the dollar has lost about 20% of its purchasing power since the beginning of Covid. That means $1 in January 2020 is now worth only about $0.80.