Worries over inflation are rippling through the U.S. stock market, spooking equities overall while causing investors to consider which shares can hold up better in an environment where inflation may be heating up.
Inflation talk grew on Wednesday as data showed U.S. consumer prices increased by the most in nearly 12 years in April.
Rising prices and costs can crimp consumer demand and corporate profitability. They could also pressure the Fed to tighten monetary policy, which in turn could harm economic growth and stock valuations.
“Some inflation for companies and markets are healthy,” said Keith Lerner, chief market strategist at Truist Advisory Services. “There’s a sweet spot and then it gets to a place where it gets a bit too hot.”
Research by UBS equity strategists found the S&P 500 starts moving in the opposite direction to inflation expectations when the breakeven rate on the 10-year U.S. Treasury Inflation-Protected Securities (TIPS) — a market-based measure of inflation — exceeds 2.5%. The rate rose above that level in the past week for the first time since 2013, according to Refinitiv data.