Inflation Fears Are Surging — Should You Be Scared, Too?

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Americans are growing increasingly concerned about inflation, if Google searches are any indication.

Research strategist Jim Reid of Deutsche Bank recently noted that Google searches for “inflation” are at their highest point in 13 years of tracking. Concerns about inflation appear to be rising in the wake of the federal government’s unprecedented spending amid the coronavirus pandemic.

That spending includes two pieces of legislation with estimated costs of roughly $2 trillion each: the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and the American Rescue Plan Act that President Joe Biden signed into law last week.

Barron’s reports that the nation’s fiscal response to the pandemic amounts to about 27% of gross domestic product, or GDP. And that doesn’t even take the government’s monetary policy response into account.

It is not just average folks who are worried. Bank of America’s latest monthly survey of global asset managers found that inflation is now the No. 1 risk for the stock market. COVID-19 had held that position in every month from February 2020 to now.

As Deutsche Bank’s Reid says, “there is little doubt that concerns and interest around inflation are growing exponentially.”

Should you be concerned simply because so many of your fellow citizens are worried? Barron’s thinks so. As the publication recently opined:

“If searching the internet for ‘inflation’ can be interpreted as the general public’s growing concern around prices, then it seems fair to worry that inflation expectations are rising. Insofar as consumers’ expectations for future inflation pull forward some purchases, rising expectations can serve as a self-fulfilling prophecy for which investors should brace.”

Still, rising fears of inflation do not necessarily guarantee higher prices will follow. Barron’s notes that Google searches for “inflation” also surged in 2008 and 2010-2011. ln both cases, prices remained well under control.

While it is impossible to know whether inflation is truly waiting in the wings, you can still take steps to protect yourself should inflation suddenly ignite.

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