How confident are you feeling about the economy?

First and foremost, we caution against succumbing to fear or panic in the face of inflation (and short term thinking in general). As usual, careful planning remains our best guide. Not all inflation is bad. In fact, a bit of inflation goes hand in hand with economic growth (the OECD reckons UK GDP will rise by 7.2% this year and 5.5% next year, following a 9.8% contraction in 2020 – the worst for 300 years). This in turn gives reasonable interest rates for lenders and borrowers alike. A 2% annual inflation rate is typically considered a desirable norm for greasing the wheels of commerce, without destroying the working relationship between currencies and costs. While inflation has its purposes, it’s concerning if it goes on a rampage. When it has done in the past, uncertainty has spiked as well, wreaking havoc on commerce, the economy, job markets, real estate and financial markets. (Deflation – the opposite of inflation – can also upset the economy if prices drop too precipitously.) Investors who were around in the 1970s may remember the last time we experienced red-hot inflation, and what it felt like in the UK when it spiked to over 20% in 1975, and coined the term The Great Inflation in the US. The New York Times described it as an era when, “Prices of real assets like houses, gold and oil soared. Average mortgage rates exceeded 17 percent, and interest rates on bank certificates of deposit approached 12 percent. It was hard to know whether a 5 percent pay raise was cause for celebration or despair.” Younger investors have heard of, but never experienced such steep inflation for such an extended time. Despite occasional alarm bells, inflation has mostly continued to hit the snooze button, at under 4% for most of the past two decades. At least so far...