WHICH STOCKS DO BEST DURING HIGH INFLATION?

Investors commonly hear that when inflation surges, it is best to put your money into physical assets that track the jump in prices, with real estate often suggested as the best option. But physical assets, particularly properties, generally can’t be bought as easily or quickly as securities, and acquiring them often entails significant transaction costs.

The second-best option is usually to rebalance your stock portfolio to shift it into industries that do well in an inflationary environment. So, when inflation surges, what industries do best for a stock portfolio?

To sum up: Shares in real-estate investment trusts or companies in the real-estate industry are not the best option. Stocks in the materials and energy industries outperform all others by a long shot, according to the findings of a study I conducted with my research assistants, Zihan Chen and Yiming Xie.

We gathered data on the returns for all stocks listed on the New York Stock Exchange or Nasdaq over the past 50 years. We then examined the course of the consumer-price index over those years and found three spikes in prices during which the inflation rate doubled in less than 24 months: March 1973 to May 1975, April 1978 to September 1980, and February 2021 to March 2022.

We separated each company in our data set into one of 10 industries, and examined how the median stock in each industry, in terms of returns, performed during those three periods of surging inflation.

The median real-estate stock delivered a 3.32% annualized return over the three periods, far below the annualized returns of 18% for the median energy company and 16.81% for the median materials company.

On the opposite end of the spectrum, healthcare (including pharmaceuticals) performed the worst, with an annualized return of minus 8.44%, followed by consumer staples at minus 6.73%, consumer discretionary at minus 5.71%, utilities at minus 4% and technology at minus 3.64%.

The negative results for healthcare, tech and consumer discretionary are understandable, because these are interest-rate-sensitive industries. But the results for consumer staples and utilities might surprise some investors, because these are often thought of as safe assets in rough times.

At the end of the day, the best move for investors who want to reposition their portfolios quickly when inflation is surging is to shift into materials and energy companies.

A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.

The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.

The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.

GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.

“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.

The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.

Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.

According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.

“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”

The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.

Hunt said consumer brands offered a level of tangibility that many investors found appealing.

“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”

The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.

With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.

WHICH STOCKS DO BEST DURING HIGH INFLATION?

A look at past inflationary periods offers clues on where to invest.

With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.