Inflation or Recession: Which Should You Fear More?

One is here already. The other is lurking right around the corner. Which should worry investors more?

It’s a question that’s increasingly hard to ignore as the twin troubles of inflation and recession loom over portfolios and pocket books. US prices in June rose the most since 1981. And the odds of a recession in the next year are now close to 50%, according to Bloomberg’s monthly survey of economists.

Inflation and recession are closely linked: To battle high prices, the Federal Reserve could raise interest rates so fast that it triggers an economic slowdown. This isn’t the case yet, at least not formally, and central bank officials are still saying a so-called soft landing is “very plausible.”

Given all this, should you be positioning your portfolio more for continued inflation or an imminent recession?