May Inflation Comes in at Record Highs
It’s been 40 years since we’ve seen inflation as high as it was in May, and most of us aren’t surprised. Before it shows up in any report, we’ve experienced this inflation at gas stations and at grocery stores. Everything is getting more expensive but wages aren’t going any higher. This is classic economic inflation and until the Fed is able to get it under control, we will likely continue to see hawkish behavior. So as investors how do we hedge against this inflation? You can probably guess that high-growth tech stocks are not in favor right now. But here are three stocks that can help you protect against sky-high levels of inflation in the economy.
Exxon Mobil (NYSE:XOM)
What a boring stock to choose. Exxon Mobil? The oil company? But I thought nobody was using fossil fuels anymore. Crude oil is used for much more than just gasoline. In times of inflation, energy stocks are generally safe havens for the reasons listed above. Prices on things like gasoline and other forms of fuel rise, therefore expanding the margins and revenues of these companies. It also helps that Exxon pays out a healthy 3.50% dividend yield to shareholders. As boring as it may sound, there is no better time to invest in energy stocks than in a high-inflation environment.
Procter and Gamble (NYSE:PG)
You can insert any consumer goods conglomerate here like Johnson & Johnson (NYSE:JNJ) or Colgate-Palmolive (NYSE:CL). Why? Because no matter how much inflation rises, we all still need the staples of life. Things like toothpaste, soaps and shampoos, deodorant, toilet paper, and diapers. These are things we need whether inflation is high or not so no macroeconomic environment will slow this down. Some popular brands owned by Procter and Gamble? Tide, Bounce, Pampers, Always, Bounty, Charmin, Crest, Oral-B, and Febreeze. I bet most of us have used at least one of these products in the past week. The stock also pays a nice 2.57% quarterly dividend to add some much needed cash flow during this bear market.
Altria Group (NYSE:MO)
Some people might not know what Altria is. It is the US subsidiary of Phillip Morris which is one of the world’s largest tobacco and cigarette producers. A lot of investors actually won’t touch Altria due to its business and products. As sad as it is to say, people who are addicted to smoking will continue to smoke in an inflationary environment. It’s similar to not being able to live without essentials from Procter and Gamble. Cigarettes sell when there is inflation, no matter what the price rises to. While you might not like the investment thesis behind the stock, you might feel a bit better when you see Altria’s 7.36% dividend yield. Altria is one of the steadiest performers on the market and the addictive nature of nicotine guarantees continued sales even during inflationary periods.