Here's a little twist for those who like to focus on fundamentals and economic forces when predicting the stock market. When inflation runs hot, it benefits stocks overall, and the opposite is true. Inflation brings on higher earnings through pricing power and margin expansion for most businesses, and the weakening impact it has on the dollar drives stock prices higher.
However, not all stocks are made equal. Some actually suffer during inflation as they cannot keep up with economic growth. The same is true when slowing inflation hits the economy. Instead of placing a bearish bias on the whole S&P 500, investors can apply some fundamental reasoning to find potential stocks that may outperform during the next couple of quarters.
Operating in the consumer staples sector, stocks like Coca-Cola Co. (NYSE: KO) offer some growth potential as they have enough pricing power and international reach to cushion the falling inflation rates in the United States. Others, like Realty Income Co. (NYSE: O), offer investors stable income during times when income loses its power. Moving outside this real estate investment trust (REIT), the healthcare sector offers some additional upside in shares of Pfizer Inc.
Coca-Cola: The Fortress Stock Every Investor Needs in Their Portfolio
Investors can always expect Coca-Cola to deliver stability and potential growth during most cycles, whether the economy is booming or busting and whether inflation is running hot or cold. Even as inflation slows down through a 2.2% PCE measure, compared to over 3.5% a year ago, Coca-Cola's scalability offers ...
