https://www.wsj.com/articles/strong-stocks-during-high-inflation-11654263353?mod=hp_lista_pos1
Investors commonly hear that when inflation surges, it is best to put your money into physical assets that track the jump in prices, with real estate often suggested as the best option. But physical assets, particularly properties, generally can’t be bought as easily or quickly as securities, and acquiring them often entails significant transaction costs.
The second-best option is usually to rebalance your stock portfolio to shift it into industries that do well in an inflationary environment. So, when inflation surges, what industries do best for a stock portfolio?
To sum up: Shares in real-estate investment trusts or companies in the real-estate industry are not the best option. Stocks in the materials and energy industries outperform all others by a long shot, according to the findings of a study I conducted with my research assistants, Zihan Chen and Yiming Xie.
The median real-estate stock delivered a 3.32% annualized return over the three periods, far below the annualized returns of 18% for the median energy company and 16.81% for the median materials company.
On the opposite end of the spectrum, healthcare (including pharmaceuticals) performed the worst, with an annualized return of minus 8.44%, followed by consumer staples at minus 6.73%, consumer discretionary at minus 5.71%, utilities at minus 4% and technology at minus 3.64%.
The negative results for healthcare, tech and consumer discretionary are understandable, because these are interest-rate-sensitive industries. But the results for consumer staples and utilities might surprise some investors, because these are often thought of as safe assets in rough times.
At the end of the day, the best move for investors who want to reposition their portfolios quickly when inflation is surging is to shift into materials and energy companies.
