Worried About Inflation? Don't Change a Thing
The trusty mix of stocks and bonds has nearly always held up well against rising prices.
No need to rush here.
Photographer: JOEL SAGET/AFP/Getty Images
Investors tend to watch inflation closely, and for good reason. The whole point of investing is to increase the value of money, so keeping pace with rising prices is crucial. But for a growing number of U.S. investors, a healthy regard for inflation has been replaced by anxiety that the U.S. is on the brink of surging prices.
Admittedly, the current environment seems fertile for inflation. A lot of money is floating around. The Federal Reserve has injected roughly $3 trillion into the economy so far this year. Add to that the projected federal budget deficit of $3.7 trillion for 2020, according to the Congressional Budget Office, nearly triple the previous record of $1.4 trillion in 2009. Meanwhile, Covid-19 is disrupting supply chains and hastening the breakdown of global trade. The cocktail of ample cash and shrinking inventories is a recipe for higher prices.