The US is just days away from an ‘absolute explosion’ of inflation – here are 3 shockproof sectors to help protect your wallet

The US is just days away from an ‘absolute explosion’ of inflation – here are 3 shockproof sectors to help protect your wallet

US consumer prices rose 8.6% in May from a year ago, marking the largest increase since December 1981. But according to pollster and Republican political strategist Frank Luntz, things are about to get a lot worse.

“We’re 13 days away from having an absolute explosion on inflation,” Luntz told CNBC last week, referring to the upcoming July 4th weekend.

He explains that Independence Day, Thanksgiving and Christmas are three holidays that Americans take to the road and “buy more food than any other time of the year.”

“They can’t put $40 or $50 in their tank, they really have to fill it. That’s when the explosion happened.”

The good news? Even in a period of high inflation, few sectors can still make money.

do not miss

Services

It’s easy to see why utilities can withstand inflation: No matter how much things cost, people will still need to heat their homes in the winter and turn on the lights at night.

Businesses also have high barriers to entry.

It is very costly to build the infrastructure needed to distribute gas, water, or electricity. In addition the industry is highly regulated by the government.

As a result, utility companies typically operate as monopolies or oligopoly in their respective operating areas. Because of the recurring nature of the business, the segment is known for providing reliable dividends to shareholders.

The best part? Utility companies such as Consolidated Edison (ED), American Water Works (AWK) and NextEra Energy (NEE) are increasing their earnings year after year.

food

Next, we have the food industry, which includes grocers, food distribution companies, and food producers.

No matter where we are in the economic cycle, people still need to eat.

Case in point: While the COVID-19 pandemic presents serious challenges to many brick-and-mortar businesses, supermarket giant Kroger (KR) has continued to thrive.

Kroger’s shares are up 6% in 2022, in stark contrast to a double-digit decline in the market.

Then there’s PepsiCo (PEP), which includes 23 brands that each generate more than $1 billion in estimated annual retail sales. Sure, inflation can drive up costs, but management plans to take “good, strong price increases” to counter those pressures.

In the food industry, the high costs are usually borne by consumers.

Apartments

Real estate is a well-known way to hedge against inflation. As the prices of raw materials and labor rise, it becomes more expensive to build new properties. This raises the price of existing properties.

But not all characteristics are the same.

To prepare for the uncertainty in this economic climate, look at apartments.

No matter how slow economic growth is, people need a place to live. With property prices rising to unsustainable levels in many parts of the country, rent has become the only option for many people.

You can always buy an apartment building yourself, find tenants and receive monthly rent checks. Of course, real estate investment trusts focused on apartments can do this for you.

For example, Camden Property Trust (CPT) owns, manages, develops and acquires multi-family residential communities. It has investments in 170 properties containing 58,055 units across the United States and offers an annualized return on earnings of 2.8%.

The Essex Property Trust (ESS) invests in apartments located primarily on the West Coast. REIT’s revenue is currently 3.4%, buoyed by its stake in 253 residential communities – in California and Seattle – totaling about 62,000 units.

What do you read next

  • Subscribe to our MoneyWise newsletter to receive a constant stream of actionable ideas from the biggest companies on Wall Street.

  • The US is just days away from an ‘absolute explosion’ of inflation – here are 3 shockproof sectors to help protect your wallet

  • “There is always a bull market somewhere”: Jim Cramer famously says that you can make money no matter what. Here are two strong tailwinds to take advantage of today

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

%d bloggers like this: