Inflation is one of the biggest threats facing the economy. This is evident by looking at public polling, consumer sentiment, recent earnings reports, and statements from government officials. And it’s something to keep in mind when looking for stocks to buy.
About 80% of companies that reported earnings in the third quarter cited factors like supply chain challenges, the difficulty of finding labor and rising costs in their conference calls. This is a sharp contrast to the last decade, when the biggest challenge was deflation and low demand. Investors will certainly have to adjust their approach and strategy in order to profit in this environment.
One profitable strategy during this time of high inflation is to focus on stocks that have pricing power, as these companies’ margins will continue to expand. In contrast, stocks without pricing power are likely to underperform as margin compression erodes EPS.
This article originally appeared at InvestorPlace.