Stocks for Inflation Protection

Have you seen prices at the grocery store lately? How about the gas pump? I hope you’re not on the market for a car or home right now! Prices of everyday goods have gone up quite a bit over the last several months. Americans are feeling it in their wallets. They’re also looking for stocks for inflation.

Inflation usually happens for two reasons. One, here is a high level of employed Americans, spending money and adding to the economy. If businesses cannot produce enough to meet the increased demand from American consumers, then prices can increase. Two, sometimes, the cost to produce goods increases to a point where businesses must raise prices to customers.

Stocks for inflation protection.

What Is Going On?

Right now, we have a little bit of both. COVID-19 related stimulus left many Americans with extra money in their pockets. Since they couldn’t travel or go to restaurants during the pandemic, they bought a lot of stuff! At the same time, many folks could not return to work. Because there is a shortage of workers, companies have not been able to keep up with customer demand.

When you combine all these factors, you get high inflation. In fact, inflation over January and December has been the highest in over forty years. That includes everything from building materials to computer parts.

Stocks For Inflation Protection

Worried that inflation could hurt your stock portfolio? I can see why you’d be concerned. Some analysts believe high inflation could continue until 2023.

A little inflation each year is a good thing. High inflation for long periods is not good for anybody. Though, some companies can handle inflation much better than others. That might include the companies in your portfolio. These companies have pricing power.

Pricing Power is also called price elasticity. Pricing power gives a company the ability to raise prices for the goods or services they produce without customers leaving. They’ll need to do this when their costs go up.

Companies create Pricing Power in many ways.

Brand Stocks For Inflation

For instance, a company may have a strong brand and customer loyalty. When their cost is up, they can increase their prices.

Here are some stocks that would fit into the brand category:

Commodity Stocks For Inflation

Commodity companies are another example. These companies all sell the same thing. For example, Exxon, Chevron and ConocoPhillips all sell oil. Other commodity industries include gold, silver, lumber, natural gas, steel, corn, wheat, soybeans and many more.

Commodity prices rise and fall with the economy, weather, or other factors. When all companies in the industry sell the same thing, the prices they can charge rise and fall in tandem.

Here are some stocks that would fit into the commodity category:

Best Dividend Stocks For Inflation

A stock that pays a regular cash dividend can take the sting out of inflation. Especially stocks that will increase their dividend over time.

Here are some stocks to consider for dividend yield:

Invest With Caution

An old joke goes like this: “Why did God create economists? In order to make weathermen look good.” Accurately predicting the economy or inflation is nearly impossible. Even the best economists in the world get it wrong quite often. Keep in mind there is risk in investing to protect against an inflation prediction.

In addition, you should consider your real rate of return. If you’re investing in a dividend stock to protect against inflation, the dividend may or may not match it. If inflation is higher than your dividend, your dollar might not go as far.

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