Stimulus and Inflation

Stimulus and Inflation

April 19, 2021

By now, you have probably heard about or been the recipient of federal stimulus. Recently a $1.9 trillion dollar package was passed. This is in addition to the trillions that had already been approved and passed prior. Now there is discussion related to more federal spending being referred to as an infrastructure bill with a price tag of approximately $2 trillion dollars.

All of these measures have and will be helpful to many families, businesses, states and towns. All of which have been impacted in some way shape or form by the ongoing pandemic. As a result, the printing press running in Washington is also creating an environment where inflation has/will become a concern.

There are other variables that may contribute to future inflation expectations. Federal spending to help individuals, as well as the infrastructure push top the list. But other topics to consider are higher inflation targets at the Federal Reserve level, campaigns for higher pay or mandatory pay increases, pent up consumer demand, re-openings, and low interest rates.  Inflation matters as it erodes the purchasing power of money over time. Most of us appreciate that much of what we pay for today is more expensive than twenty plus years ago. All of this in no way guarantees that inflation will rise in the upcoming months, but it certainly can create the right recipe for it to be a concern.

Now might be a good time to review your investment portfolio if you have inflation concerns. There could be opportunities which have historically provided benefits during periods of inflation. Some examples are TIPS (Treasury Inflation Protected Securities), international and emerging market stocks, and commodities.  Making sure you have the right mix of investments continues to be an important way to mitigate the risk of inflation.