Rising inflation due to the fast-paced economic recovery and improving job market has been raising concerns over the potential for a stock market correction. However, the business models and the nature of products delivered by Procter & Gamble (PG), Colgate-Palmolive (CL), Centerra (CGAU), and Preformed Line (PLPC) we think make their stocks inflation resistant. So, one could hedge one’s portfolio against rising inflation by betting on these stocks. Let’s discuss these names.The faster-than-expected U.S. economic recovery, driven by ultra-loose monetary policy, several fiscal stimulus packages and an improving job market, has caused the inflation rates in the United States to climb to 13-year highs. In May 2021, the Consumer Price Index increased 5% year-over-year, making it the largest 12-month rise since August 2008. The Federal Reserve expects the inflation rate to rise further in the near term, driven by increasing consumer spending and impressive job growth. The Fed forecasts inflation to be 3.4% in 2021.
Given the rising price levels—which could precipitate a stock market correction—betting on inflation-resistant stocks could be the way to hedge the current downside risk in an investment portfolio. Because industries such as consumer goods, manufacturing and precious metals typically perform well even in an inflationary environment, it could be wise to bet on fundamentally sound stocks from these industries.
We believe Procter & Gamble Company (PG), Colgate-Palmolive Company (NYSE:CL), Centerra Gold Inc. (CGAU), and Preformed Line Products Company (PLPC) have the potential to deliver solid returns, dodging the consequences of rising inflation.