How to Find the Best Stocks for Inflation

Which stocks go down during inflation?

High inflation has historically correlated with lower returns on equities. Value stocks tends to perform better than growth stocks in high inflation periods, and growth stocks tend to perform better during low inflation.

This doesn’t mean all growth stocks will be pummelled in an inflationary environment, but it can be a good idea to be more particular about stock picks. Service companies with lower labor costs, enough cash to fund investment, and access to revolving credit facilities can be things to watch out for, and the more essential its service is, the better. And the performance of portfolios in 2022 proved that point, he said. The hedge that investors thought they had created by investing in both stocks and bonds failed due to inflation, sharp increases in real interest rates, and rate-hiking cycles. Inflation can cause stock prices to go up or down, depending on the industry. Stocks that are positively affected by rising inflation are usually for products and services that people need to buy despite high prices .

Still, inflation is a heads-up for many investors who own bond funds. The Vanguard Total Bond Market ETF is down more than 12% this past year. The United States Oil Fund , a major ETF that tracks the price of oil, is up 62% in the past 12 months so far. That’s a larger jump, too, than any other ETFs tracking the asset classes Wells Fargo analyzed.

Tangible assets, like real estate and commodities, have historically been seen as inflation hedges. TIPS try to stay ahead of inflation by having their principal value adjusted every six months based on changes in the CPI. Inflation-protected bond funds use trading strategies to target returns that are at least equal to the inflation rate. Dividend stocks also give investors a portion of a company’s earnings on a regular basis. The investing information provided on this page is for educational purposes only.

Unfortunately, this uncertainty is more likely to influence share prices than industry macros and PPC’s fundamentals. And there are wildcards in oil markets that could drive prices higher. And high oil prices are good for Devon Energy and its investors. The dividend is small, about 0.8%, but investors might be encouraged that the company has grown it at about a 13% clip annually for the last decade.

This is why energy stocks are one of the best stocks for inflation. You won’t get outsized returns by investing in I-bonds, but you will preserve purchasing power for a segment of your portfolio. MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice.

Best inflation stocks? This asset manager calls Visa and Mastercard ‘the purest hedge’

Some research has shown that value stocks tend to do better than growth stocks during periods of inflation. Value stocks are companies that have strong earnings relative to their current share price. They are also known to have robust cash flows, which investors typically value when prices are rising. “Sticky” costs of living have pressured the Fed to raise rates. The markets – especially growth and tech stocks – are sensitive to the hikes, which can impact companies’ growth and profits. Building a portfolio with stocks that can weather such storms offers an opportunity to hedge against inflation.

What stocks do best during inflation?

Mortgage providers.
Communications.
IT (Information Technology stocks)
Growth stocks.
Consumer discretionary businesses.

First, Photronics reported solid results for the year ended Oct. 31. That Costco can be responsive to price changes and still pull profits to the bottom line. One of the largest utilities in the U.S., Excel Energy serves customers in eight states with electricity and natural gas.

Who will benefit from inflation?

Agricultural companies also benefit from inflation-driven higher prices. So agricultural stock investors can take advantage of rising price levels and a higher profit margin since the higher production costs are passed on to consumers.