U.S. consumers at present have been splurging more on non-durable goods than they did last year. An increase in wages and healthy job additions for quite some time did boost consumer outlays. Citing a
Wall Street Journal article, personal outlays on goods and services rose 0.8% in August. Consumers’ personal income too increased 0.2%, according to the Commerce Department. Consumers’ views about the state of the U.S. economy did improve last month, indicating that consumers may spend more in the near future (read more: 5 Top Consumer Discretionary Stocks to Buy for Q4).
However, the U.S. economy is also facing the threat of higher energy prices at the moment. Notably, if energy prices continue to scale northward, it could easily push up the prices of essential commodities in the near future and dampen consumer spending. Therefore, inflation will lead to fewer consumer outlays, and will eventually slow down economic growth.
Nonetheless, talking about higher energy prices, coal price is now at a record high, while heating oil has soared 68% so far this year, as mentioned in another
Wall Street Journal article. The article further stated that the price of natural gas has almost doubled in the last six-month period to hit a seven-year high. Interestingly, prices at pumps are now a little over $3 a gallon, which is up almost a dollar in the past 12-month period. In fact, Americans are now paying more at gas stations than they have since 2014.
What’s more, this year crude oil has surged 64% to a seven-year high. In reality, oil prices have jumped more than 16% since the beginning of last month. On Oct 11, the U.S. crude benchmark – West Texas Intermediate, touched a high of more than $82 a barrel, the highest level since 2014, citing a
Financial Times article. Shortage of natural gas did increase the demand for various energy sources, ultimately leading to higher oil prices.
Coming back to inflation, it’s worth pointing out that the Fed’s preferred gauge of inflation has actually jumped the most in the last three decades on a yearly basis, raising concerns that prices of essential goods will continue to increase in the near term and hit consumers’ outlays. Citing a
MarketWatch article, the government had stated that the personal consumption expenditure (PCE) index increased 0.4% in August from a month earlier. Most importantly, the PCE index jumped to 4.3% in August from a year earlier, its highest rate since 1991.
Thus, from an investment standpoint, it’s not congenial for investors to invest in growth stocks as inflation may easily impact their future cash flows. But there are stocks that benefit from a rise in inflation, which at present should be enticing enough for investors. For instance, real estate tends to gain from an increase in inflation. After all, inflation leads to an increase in property prices. Thus, one can invest in real estate through a real estate investment trust (REIT).
Similarly, companies in the consumer staples sector benefit from an increase in inflation. This is because such companies have pricing power, meaning they can increase the prices of their commodities with inflation. At the same time, gold doesn’t tend to lose its shine amid rising inflation. The best way to invest in gold is through gold mining stocks.
We have, hence, highlighted three noteworthy stocks from the aforesaid areas that stand to gain from a rise in inflation. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. BRT Apartments Corp. ( BRT Quick Quote BRT - Free Report) is a real estate investment trust. The Zacks Consensus Estimate for its current-year earnings has moved up 19.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 10.7%. J & J Snack Foods Corp. ( JJSF Quick Quote JJSF - Free Report) is an American manufacturer, marketer, and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. The Zacks Consensus Estimate for its current-year earnings has moved up 6.8% over the past 60 days. The company’s expected earnings growth rate for the current year is almost 182%. GoldMining Inc. ( GLDG Quick Quote GLDG - Free Report) is a mineral exploration company. It is focused on the acquisition and development of gold assets principally in the Americas. The Zacks Consensus Estimate for its current-year earnings has moved up 650% over the past 60 days. The company’s expected earnings growth rate for the current year is 466.7%.