Weekly Wrap: Our Outlook on the First Quarter, Inflation, and Tax Increases

Editor's note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Just as more arms get jabbed with COVID-19 vaccines each day, more stimulus dollars are hitting bank accounts and mailboxes. Restaurants are reopening, baseball is welcoming back fans, and Godzilla vs. Kong made an impressive $50 million in its first weekend in theaters.

Let the spending begin! And with it, talk of inflation. No, not runaway inflation, 1970s-style. The Fed is unlikely to let inflation go unchecked--but it has said it will allow for higher inflation until the economy gets back on track.

Should you be concerned about inflation? As with most money matters, it depends. For starters, it depends on your personal inflation rate. Inflation isn't just about where the Consumer Price Index is; it's also about whether your own pocketbook is feeling the pinch of rising prices (and how great that pinch is) based on your own spending habits.

It also depends on your life stage. Investors in accumulation mode probably have enough stock exposure to generate portfolio returns in excess of inflation--and there's a chance a raise from your employer could help cover increases in your personal inflation rate.

It's a different story for those nearing or in retirement, though. Those approaching retirement might wonder how inflation could impact their withdrawal-rate plans. And those who already rely on their portfolios for retirement income likely have more modest equity allocations to blunt inflation’s impact.

So, before heading out to that restaurant, ballpark, or movie this weekend, conduct a personal inflation check to figure out if you should, in fact, take action. Action might include increasing your savings rate (and spending less), considering a more conservative starting withdrawal rate, or adding Treasury Inflation-Protected Securities to your portfolio.

--Susan Dziubinski

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