The coronavirus pandemic is subsiding, but the new normal might not look the same as 2019.
One reason why: The prices of some goods and services have crept up due to inflation and could continue to rise, especially if the government pushes President Joe Biden's proposed $6 trillion spending plans.
This is a major worry for most wealthy investors, according to CNBC's latest millionaire survey. As many as 65% of millionaires are concerned about inflation caused by recent government spending, according to the report. Of those, 34% said they were very concerned.
The survey, conducted online in April and May by Spectrum Group on CNBC's behalf, had 750 respondents with investable assets of $1 million or more.
In April, the core price index — a key gauge of inflation in the U.S. that strips out the volatile costs of gasoline and food — jumped 3.1%, according to the Commerce Department. That was higher than the 2.9% forecast, and the 1.9% inflation seen the previous month. Including food and fuel, the gauge was up 3.6% year over year, the fastest pace in 13 years.
The Federal Reserve generally looks for the measure to be around 2%. Following the pandemic recession, however, the central bank has said it will let inflation run a bit higher to boost the employment rate.
Inflation, especially if it is persistent and continues, can be a problem for both consumers and investors. Higher costs weigh more heavily on wallets, and the overall environment can be a drag on riskier assets, as well.
"Generally speaking, equities do better in a low inflationary environment as compared with a high inflationary environment," David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a Tuesday interview with CNBC's "Squawk on the Street." "And alternatively, falling inflation is generally better than rising inflation."
Breaking down inflation fears
While many investors are worried about inflation, some groups see it as more problematic than others. For example, 85% of Republican millionaires are concerned about rising prices, compared with 42% of their Democrat counterparts.
Younger investors are also more worried than their elders. As many as 52% of millennial millionaires said they're "very concerned" about inflation, compared with 40% of Generation X and 31% of baby boomers surveyed. Across the board, men were more concerned with inflation pressures than women.
Another reason that rising inflation worries investors is that it could encourage the Fed to raise interest rates. That could be a headwind for equities and means that borrowing money will become more expensive.
So far, the Fed hasn't said when it will begin to raise rates but may start discussing the timing soon. As many as 64% of millionaires said they think interest rates will go up next year.
The economic backdrop
Of course, some of these pressures are a normal part of the economy stabilizing following a shock like the coronavirus pandemic.
Treasury Secretary Janet Yellen has argued that rising prices are related to the pandemic, such as supply chain disruptions and spikes in spending as the economy reopens. She said during a Monday interview with Bloomberg News that further government spending would be a good thing, even if it did trigger inflation and higher interest rates.
"If we ended up with a slightly higher interest rate environment it would actually be a plus for society's point of view and the Fed's point of view," she said.
Investors seem to agree that overall, the economy and stock market are on track to grow. As many as 65% of those surveyed said the economy will be stronger at the end of 2021 than it was a year earlier, and 77% think that the S&P 500 index will close the year up 5% or more.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.