The Chicken Littles are out in force again. This time, they’re warning that the economic sky is falling because of inflation. It begs the question: What will these doom-and-gloomers have left to say when, one day, the sky really is falling?

Last night on the tube, I actually heard a news commentator say that hyperinflation of the type experienced in Weimar Germany was around the corner for America. I’ll say one thing for these pundits, they’ve got the courage of their ignorance. Below, I explain why you should remain bullish.

It’s true, inflation is climbing. But keep your sense of perspective. It was only a year ago that economists worried the coronavirus-induced recession would lapse into a full-blown depression and we’d suffer deflation.

Read This Story: The D-Word: How Bad Will The Economy Get?

Deflation is caused by a sustained period of falling prices, in which lower spending causes businesses to reduce staff and wages. Deflation is particularly insidious because it generates expectations for a further decline in prices. That’s the downward spiral that occurred during the Great Depression of the 1930s.

Inflation Apocalypse: Not Now…

After a three-day slump, stocks Thursday got their mojo back in the wake of positive news on employment. The Dow Jones Industrial Average soared 433.79 points (+1.29%), the S&P 500 jumped 49.46 points (+1.22%), and the tech-heavy NASDAQ climbed 93.31 points (+0.72%). The yield on the benchmark 10-year Treasury note pulled back.

In pre-market futures contracts Friday, all three major U.S. stock indices were trading firmly in the green. Global stocks were bouncing back as well.

There’s no reason to panic about current inflationary pressures. Much of the blame lies with temporary shortages caused by distribution bottlenecks, which in turn were caused by the pandemic’s turmoil. As lockdowns ease, these anomalies should gradually get smoothed out.

Despite April’s jarring inflation numbers, I remain long-term bullish over the economy and stock market. Gross domestic product growth for the global economy, including the U.S., is projected to be strong this year. The same goes for the earnings of S&P 500 companies.

The consensus among credible economists, including those in charge of U.S. economic policy, is that some inflation is actually healthy. Even seeing 4.2% inflation in April 2021 isn’t frightening them. One reason is the abnormally low baseline of last year, when the pandemic clobbered the economy and prices (see the following tweet, posted by the CEA on May 12):

To be sure, the Consumer Price Index (CPI) data released Wednesday rattled Wall Street and sent stocks into a tailspin. As I explained in my Mind Over Markets column on May 12, it’s only prudent to implement inflation hedges, if you haven’t already.

Read This Story: Investors Get Spooked as Inflation Runs Hot

In a separate report Thursday, the government reported that its Producer Price Index (PPI) for final demand climbed 0.6% in April after rising 1.0% in March. In the 12 months through April, the PPI spiked 6.2%. The PPI for final demand measures changes in prices for everything from food and machinery to warehousing and transportation services. Again, supply chain disruptions are largely to blame.

Investors are reacting to recent inflationary signals with increased buying of inflation protection securities. During the “stagflation” of the 1970s, there were limited ways to hedge against inflation. But today, there is a cornucopia of currency and international commodities instruments available.

There’s still sufficient good news about the economy to keep the stock rally alive. Notably, new claims for unemployment benefits fell last week, the Department of Labor reported on Thursday, as the jobs market slowly heals from the trauma of the coronavirus pandemic.

About 487,000 workers filed first-time claims for state benefits during the week that ended May 8, the government reported, a decline from 514,000 the previous week. In addition, about 104,000 new claims were filed for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who don’t routinely qualify for state benefits.

Stay calm. Tweak your portfolio by adding inflation protection, but stick to your overall investment plan. As vaccinations proliferate and COVID infection rates decline, a return to economic equilibrium is in sight.

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John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.