Inflation is skyrocketing – and these 2 stocks are still on the rise

The stock market ended the week on a record high, rebounding from the big losses of the previous week. the S&P 500 (^ GSPC 0.95% ) closed at a record high, and similarly sized gains of 0.5% to 1% for the Dow Jones Industrial Average (^ DJI 0.60% ) and Nasdaq composite (^ IXIC 0.73% ) has shown a noteworthy level of confidence in a context of macroeconomic uncertainty.


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Data source: Yahoo! Finance.

Investors might have thought the stock market would be in bad shape after the Bureau of Labor Statistics (BLS) announced Friday morning that consumer inflation levels had hit decades-long highs. However, Wall Street ignored this news and, in fact, a few stocks appeared to be taking advantage of it. Below we’ll talk more about these companies, but first let’s take a look at exactly how bad the inflation numbers were.

Higher prices everywhere

The BLS inflation news was worse than expected. The Consumer Price Index (CPI) rose 0.8% in November, marking the fourth time in the past eight months that the CPI had risen as much or more in a single month. That brought the 12-month rise in prices paid by consumers to 6.8%, the largest 12-month increase in nearly 40 years. Indeed, we have to go back to the oil shocks of the 1970s and the beginning of the 1980s to see inflation persist at such high levels.

The winnings were prevalent in many categories. Energy prices rose 3.5%, as gasoline prices climbed more than 6% in a single month. Food prices increased 0.7%. Some other items that saw high and stubborn price increases remained at the top of the list, with new vehicle prices rising 1.1%, used car prices climbing 2.5% and clothing registering. price increases of 1.3%.

Image source: Getty Images.

Pricing power for victory

Inflation is not necessarily bad for everyone. Those with fixed incomes suffer when the purchasing power of their money declines, but those whose wages increase with inflation can keep pace. Likewise, companies that have to bear higher input costs themselves suffer their profits, but those that can pass higher costs on to consumers can avoid or at least reduce the impact on their revenues.

For example, Wholesale costco ( COST 6.58% ) saw its stock climb nearly 7% on Friday. Those gains were initially driven by the warehouse retailer’s first quarter financial report Thursday night, which showed extremely strong consumer demand, even at high price points.

Comparable sales were up 15% from a year ago levels, and while a significant portion of those gains were due to rising gasoline prices, Costco still saw its prices rise by. almost 10% after taking into account the effects of gasoline and exchange rates. Earnings of $ 2.98 per share were up 14% year-over-year, showing that Costco appears to be passing on the increased costs of goods sold to its members.

In the same way, Ford engine (F 9.61% ) stocks climbed nearly 10%. Investors have responded positively to news that executive chairman and family descendant Bill Ford has spent more than $ 20 million to exercise stock options granted as compensation, and rather than sell immediately. the stocks at a profit, he apparently chose to keep them.

The vote of confidence comes amid Ford’s continued efforts to overcome the challenges posed by semiconductor chip shortages in order to meet the huge and growing demand for cars and trucks. Additionally, Ford’s shift to electric vehicles is gaining momentum, with customers clamoring for the upcoming F-150 Lightning electric pickup.

You can beat inflation

Inflation hurts consumers, but it can be good for good stocks. By identifying companies that can profit from inflationary conditions, you can potentially benefit from high prices and maintain the purchasing power of your investment portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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