As with any historical data assessment, I could give you the standard boilerplate disclaimer that past performance is not always a good predictor of the past, but to the extent that the past provides signals, your expectations of how inflation will play out in the coming year will play a key role in your asset allocation and stock selection decisions. If you believe that last year's surge in inflation is a precursor to a long time period when inflation is likely to stay high, and come in above expectations, you should be shifting your holdings away from financial to real assets, and within your equity holdings, towards small cap stocks, stocks trading at lower pricing multiples (PE, Price to Book) and companies with more pricing power. If, on the other hand, you believe that inflation worries are overdone, and that there will be a reversion back to the low inflation that we have seen in the last decade, staying invested in stocks, and especially in larger cap and high growth stocks, even if richly priced, makes sense.
