As the Federal Reserve continues to keep the idea of tapering its asset purchases alive and in the limelight, more folks in the media are wondering if deflation is a greater risk than inflation.

Using the price stability side of its dual mandate as justification, the Fed’s purpose for its quantitative easing (QE) program and $85 billion in monthly asset purchases has been to produce inflation. That should, in turn, create a wealth effect as asset prices rise, restoring business and consumer confidence. When that occurs, spending picks back up and the economy should soon be firing on all cylinders again.

The worry at this point is that the market has become too accustomed to government support in the form of QE—look at how violently it reacted to the downside when just the idea of tapering was first brought up.

Pessimists argue that if the Fed takes away the punchbowl, investors may go from drunk to hung over in the time it takes to read a news release. Banks will stop lending, businesses will stop investing and consumers will stop spending.

However, I see the worry of deflation as overblown for two main reasons.

The first is that deflation is precisely what the Fed wants to avoid, hence the trouble it’s taking to condition the market to tapering. By talking about it for months before actually pulling the trigger, we’ll have become so used to the idea that it will already be largely priced in, reducing the chance of market disorder.

Secondly, while consumer confidence has its ups and downs, consumer spending has recovered to levels that are well above pre-recession levels.

Prior to the recession, consumer spending was averaging $9.2 billion between 2006 and 2008. While it dipped down closer to $9 billion in 2009, it has since bounced to over $10.5 billion in the past two quarters.

Barring another full-blown recession, it’s tough to imagine a scenario where a collapse in spending would crash the economy. While there are obviously many more moving parts to the economy than just the consumer, spending is the lynchpin.

I also suspect that the Fed will be slow easing off the QE throttle, ending up with more inflation than it bargained for by the time indicators catch up.

That said, if you’re on the fence about whether or not inflation or deflation is the greater concern, you should be happy to know the many of the same assets that protect against the one protects against the other. No matter what comes, if you hold a few basic types of investments, odds are you can weather either eventuality.

The most obvious is real estate and other hard assets which, when we’re not in the midst of a collapsing real estate bubble, tend to hold their value better than equities. Real estate is generally sensitive to deflation. However, because we’ve recently gone through nearly five years of falling property values, there’s not much room on the downside.

Foreign bonds denominated in currencies other than the US dollar are also a terrific option. It’s tough to predict how the dollar would respond to high inflation or plunging deflation, so currency diversification alone is an excellent hedge.

At the same time, if the US is experiencing more extreme problems than those abroad, the higher yielding foreign bonds would ultimately result in higher income streams thanks to deflation.

And although emerging market stocks are undergoing a rough patch of their own, they’re also generally solid hedges against deflation. Even as slowing economic growth in China, India and Brazil prompts many investors to exit those markets, the odds are those nations would continue expanding even in the event of US deflation.

Emerging market stocks also are solid hedges against inflation, since they tend to be the top producers of commodities, the value of which typically keeps pace with inflation.

And US blue chip stocks are solid bets during either deflation or inflation, because their underlying businesses enjoy steady demand for their products while maintaining pricing power.

In periods of inflation, companies such as Thrive Portfolio holding Johnson & Johnson (NYSE:JNJ) are generally better able to pass along the rising cost of raw materials to their consumers than companies that make more discretionary items. And since prices tend to remain sticky even in times of deflation, while some discounting may occur, both companies and others like them should be able to maintain earnings growth, albeit at lower levels.

If you’re like most investors and you’ve had to stretch a bit for yield, you likely already hold at least one or two real estate investment trusts (REITs). You probably even have some international bonds in your portfolio if you own a bond fund or two. And because US blue chip stocks are typically the core of any portfolio, you’re most likely well covered there as well.

The one area you might lack is emerging market stocks, considering the recent drubbing many developing markets have taken. While the problems in those regions are likely to persist for at least the rest of the year, if you’re light on emerging markets I would encourage you to take advantage of the weakness and add at least an index fund such as Vanguard FTSE Emerging Markets ETF (NYSE: VWO) to your holdings.

This exchange-traded fund (ETF) holds a well diversified portfolio of nearly 1,000 stocks spread across more than 20 nations, so while it will generally move in lockstep with broad emerging market indexes, there isn’t a great deal of concentration risk. On top of that, the best time to buy is when there’s blood in the streets, especially if you’re in for the long haul.

Portfolio Roundup

The US dollar has posed a headwind for Survive Portfolio holdings Vanguard Global ex-US Real Estate (NSDQ: VNQI) and SPDR DB International Government Inflation-Protected Bond (NYSE: WIP) as the US Dollar Index, which measures the value of the dollar relative to a basket of international currencies, has risen from a value of 81.29 to 82.55 over the trailing 30-days.

Neither fund takes steps to hedge currency exposures and both have some exposure to emerging market currencies. Consequently, the dollar situation will likely remain a challenge for some time, as expectations of Fed tapering push the greenback higher.

That said, both pay attractive yields and will benefit from the growing inflation in the emerging markets. In South Africa and Brazil, two key markets while consumer prices are growing at a decent clip, inflation is currently running at 6.3 percent and 6.2 percent, respectively. That will help drive real estate prices higher, while forcing principal and coupon resets on inflation-protected securities.

Vanguard Global ex-US Real Estate remains a buy up to 63 and SPDR DB International Government Inflation-Protected Bond is a buy up to 65.

Currency headwinds were also a bit of a drag on Thrive Portfolio holding Pall Corp’s (NYSE: PLL) earnings, costing the company about $0.03 on earnings per share (EPS) in its fiscal fourth quarter. That said, EPS of $0.90 came in above analyst estimates and beat the $0.86 of the same period last year. Full-year EPS came in at $2.89 in fiscal 2013, versus $2.39 last year, with a $0.10 hit on currency exchange.

Revenue was essentially flat at $716.8 million, down 0.8 percent due to weak industrial sales which declined 5 percent year-over-year in local currency terms to $363 million. Sales in the Life Sciences division picked up much of the slack, growing 6 percent to $354 million, although not making up all of the lost ground due to higher research and development spending.

Management said that it expects EPS of between $3.30 and $3.50 in fiscal 2014, with revenue growth in the low to mid-single digit range.

Continue buying Pall Corp up to 80.