Who’s Actually Benefiting From Inflation? The Industries and Investors Coming Out on Top
Written by
Stacy Sare Cohen
Edited by
Caitlyn Moorhead
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As President Donald Trump’s new tariffs on imports from Mexico, China and Canada ignite trade wars, it could drive up prices even higher for Americans still feeling the financial strain of years of high inflation, reported Reuters.
While rising prices continue to squeeze American household budgets tighter, some industries are thriving more than others. GOBankingRates tapped the expertise of financial experts for their insights on the sectors raking in the highest profits.
Consumer Goods
One of the industries that benefit from inflation is the consumer goods market.
“Consumers still depend on the necessities, even when they’re more expensive,” said Melanie Musson, finance expert with Clearsurance.com. “Even when they have less money and have to cut back, consumer goods are not the things they cut back on; people are going to need toilet paper, soap and food, regardless of how much they have to try to hold back from spending.”
Commodities and Natural Resources
“Other sectors that benefit from high inflationary environments are commodities and natural resource investments, [such as oil, minerals and agricultural products],” said Michael Collins, CFA at WinCap Financial.
Investors profit during inflation because consumers rely on these raw material essentials. While producers pass on the cost to consumers, it creates a hedge against inflation, protecting the value of their investments.
“A potential headwind to this thesis would be the impact of a de-escalation in Ukraine,” Collins added.
Real Estate
“Real estate has also been a typical beneficiary of more inflationary environments,” said Collins. “While there are some imbalances in the real estate market within the office space and multi-family space, there still appears to be a large shortage of single-family homes.”
With less land to build on, the price of land increases in value. As a result, the demand for housing grows, driving up home sale prices. In addition, landlords benefit by raising prices on rental properties when buyers are priced out of the market during inflation.
Banking
“Banks tend to be another beneficiary, as [inflation] improves key metrics such as net interest margin, a key source of profits for banks,” Collins said.
“As inflation [grows], interest rates increase as an attempt to bring inflation down,” said Musson. “That means lenders make more money through interest; additionally, inflation makes people need to borrow more, [making] inflation a good thing for the lending industry.”
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