How to Protect Yourself Against Medical Inflation
Medical expenses can create financial strain, even for those with robust savings plans. The added problem of medical inflation, which is the increase in the cost of healthcare services over time, can further exacerbate this burden.
Therefore, it is critical to develop strategies to protect oneself from the impacts of medical inflation.
Maintain Good HealthFirst, it's essential to maintain good health. Prevention is always better than the cure. A well-balanced diet, regular exercise, and routine check-ups offer the first line of defense against any health-related issues. By focusing on preventive care, individuals can mitigate the likelihood of needing costly medical services.
Purchase Health InsuranceInvesting in a health insurance policy is a smart move. Look for comprehensive insurance plans that cover a wide array of ailments and medical procedures. Understand the policy terms and conditions in depth, especially regarding how they handle inflation. Some insurance policies offer an inflation protection rider, which can significantly help when medical costs rise.
Open an HSA or FSAConsider establishing a health savings account (HSA) or flexible spending account (FSA). Both offer tax advantages and can be used to pay for qualifying medical expenses. Not only can you contribute pre-tax dollars to these accounts, but the money you withdraw to pay eligible medical expenses is also tax-free.
Invest for the Long TermBuilding a diversified investment portfolio with a mix of equities, bonds, and mutual funds may generate returns that outpace medical inflation. Investing in health care sector stocks or funds may provide an additional hedge, as these investments could appreciate alongside rising healthcare costs.
Maintain an Emergency FundA healthcare-focused emergency fund can also serve as a safety net for unexpected medical costs. A good rule of thumb is to set aside at least 3 to 6 months' worth of living expenses in this fund.
Stay InformedUnderstand what drives medical inflation, monitor how costs are changing, and understand the healthcare market. For instance, it is often cheaper to purchase prescription drugs from a pharmacy than to receive them at a hospital.
While medical costs and inflation may seem beyond our control, several strategies can help manage and potentially reduce their impact. Remember, your health is your greatest wealth.
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By taking proactive steps today—protecting your health, planning for expenses, and making informed financial choices—you can reduce the strain of rising medical costs and build greater peace of mind for the future. In a world where healthcare expenses continue to climb, preparation is one of the most effective forms of protection.
Due to this content, the following risk disclosures should be added for balance: There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries, and companies.
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Since the market lows in March, momentum stocks have pulled meaningfully ahead of quality stocks. Before that, both factors had largely moved together, benefiting from improving earnings expectations and a resilient economic backdrop. More recently, however, investors have rewarded companies exhibiting the strongest earnings and price trends, allowing momentum stocks to extend their lead.
One reason for this divergence has been investors’ preference for market leaders. Momentum’s outperformance accelerated as the Iran conflict began, with investors gravitating toward companies demonstrating strong earnings growth and positive price trends, allowing momentum to pull further ahead. The backdrop for this leadership remains supportive. Importantly, momentum’s recent outperformance has not been driven solely by expanding valuations. Instead, many of the market’s strongest performers have continued to deliver improving earnings growth, positive revisions and resilient margins, providing a fundamental justification for their leadership. Consistent with that, earnings expectations for U.S. companies have continued to move higher, with the market now expecting consensus EPS growth for 2026 of 22%, up from 13% at the start of the year.
At the same time, the strength of the earnings environment suggests leadership could eventually broaden. 85% of companies exceeded earnings expectations during the first quarter, the highest percentage since 2021 and above the long-term average of 73%. Strong results were not limited to technology, with every sector delivering earnings above expectations. If earnings strength continues to spread across industries, market leadership could begin to broaden. For now, however, investors remain focused on companies delivering the strongest combination of earnings and price momentum.
Chart of the Week: Source: Source: Factset, MSCI, J.P. Morgan Asset Management.
Thought of the Week: Source: Factset, MSCI, J.P. Morgan Asset Management.
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg. Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
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