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US inflation nears 4-decade high: What does it mean for your portfolio?

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Higher-than-expected inflation has seen $60 billion wiped from the ASX, but that doesn't mean it's time to sell.

It has been a brutal day for investors.

The ASX 200 was down by as much as 2.9% during the first hour of trading and at the time of writing is still down 2.5%.

Meanwhile for the overseas investors it has been the worst day on the market since June 2020 as the S&P 500 dropped 4.32% to 3,923 and the Nasdaq Composite sank 5.16%.

But 2 industry experts urged investors to stay focused on their long-term objectives over listening to the current market sell-off.

"Focus on why you're investing, invest for the long term and if that is you, then you should be trying to invest regularly and blocking out the noise," Pearler's co-founder Nick Nicoladies said.

Markets simply got ahead of themselves

Today's results surprised many investors, as the preceding days saw strong rallies, based on inflation peaking.

But overnight on Tuesday our time, the US consumer price index (CPI) figures went the other way.

In fact, the CPI rose by 0.1% in August.

Even with input costs such as fuel falling during the period.

But according to AMP's chief economist Dr Shane Oliver the falling share price was to do with markets getting ahead of themselves.

"Back in June shares were in panic mode after some high inflation numbers. Since then, markets have started to relax, thinking we've seen peak inflation," Oliver told Finder.

"The numbers overnight show inflation is still high."

But market pullbacks are normal

Despite the panic in the market, Oliver suggested that this is all a natural part of the market cycle.

In fact, the economist pointed out that in the past shares have survived rising interest rates.

"Share market pullbacks, often quite sharp ones like we've seen today, are not that unusual in the grand scheme of things and this sort of periodic volatility is the price you pay for higher longer-term returns,'' Oliver said.

"So those that can look through the volatility should just sit tight."

Meanwhile Nicolaides highlighted accumulating assets is of greater value to younger investors over getting the best price today.

"For most young people how much they save and invest will have a far greater impact on their wealth when they're older than if they bought at 1 cent more or less on a Wednesday", the co-founder said.

Continue to focus on the bigger picture

While much of the focus remains on today's share price movement, investors are being urged to zoom out.

According to Nicolaides, it is important for you to focus on your individual circumstances over periods of volatility.

"For a lot of investors who are between 20 and 40 years old who not a lot in their life has changed [following today's falls], and maybe the stock market has little to do with their everyday life, then nothing should change with their investments," he said.

The co-founder pointed out that even with a lot of anxiety around red screens today, it's important to learn from these falls instead of reacting to them.

"If people are doing simple things the biggest risk they run is getting scared off investing and all of sudden 12 months has passed before they get back on the horse."

"Unfortunately, people will wait for things to rebound before dipping their toes back in. What we try to do is help people not lose that time to compounding," he said.

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