Which Stocks Thrive - And Which Struggle - When Inflation Rises?

US inflation unexpectedly rose to 3% in January, challenging the perception that inflation was under control after a prolonged period of high interest rates. Recent data from both the US and Europe suggest inflationary pressures remain persistent, pushing rate expectations higher.

While the stock market generally reacts negatively to sustained high rates, not all stocks are equally affected. Some sectors and companies have historically performed better in inflationary environments.

Inflation Sensitivity Across S&P 500 Stocks

The visual shows how S&P 500 stocks have historically responded to inflation. It includes:

• Sector median impact, with sectors that tend to perform well during inflation (in green) at the top and those that struggle (in red) at the bottom.
• The 20 stocks with the strongest positive relationship to inflation.
• The 20 stocks most negatively impacted by inflation.

Based on 15 years of data, the sectors that tend to benefit from inflation include:

- Oil & Gas

- Metals & Mining

- Machinery & Electrical Equipment

On the other hand, sectors that struggle the most include:

- Household & Personal Products

- Food & Drug Retail

- Food & Beverage

- Utilities

At the stock level, Halliburton and EOG Resources have historically gained in inflationary periods, while Kimberly-Clark and Procter & Gamble have been among the hardest hit.

Methodology

We calculate an inflation impact factor using:

·       5-year weekly correlation to the 5-year Breakeven US T-Bond

·       Beta to the 5-year Breakeven US T-Bond in a 2-factor regression (5Y Breakeven + S&P 500)

The factor is computed over three periods (2020–2025, 2015–2020, 2010–2015). Stock scores represent the sum of their decile positions across these periods, and sector impact is based on the median score of constituent stocks.