The cost of living in the United States accelerated at the fastest pace in more than a decade in June as economic recovery from the coronavirus pandemic gained steam. The Labor Department, citing a
MarketWatch article
, noted that the consumer price index (CPI) soared 5.4% from the year-ago period, the highest 12-month jump since August 2008 when oil prices had touched a record $150 a barrel.
The Labor Department further added that on a month-over-month basis, the CPI advanced 0.9% last month from May, the largest one-month increase since June 2008, citing a
WallStreet Journal article
. In fact, excluding the volatile food and energy categories, the core CPI rose 4.5% from a year ago and is now at a 29-year high, as mentioned in the MarketWatch article.
Interestingly, economists had expected a smaller increase in inflation in June. So, what led to the big jump in the cost of goods and services last month? Many opine that the substantial rise in consumer prices is typically due to the increase in prices of used cars and trucks along with airfares. The cost of such used vehicles leaped 10.5% last month after registering massive gains of 7.3% and 10% in the months of May and April, respectively, citing the MarketWatch article.
With a greater number of customers purchasing cars and trucks amid supply shortages, auto dealers are particularly charging more. Similarly, the index for airline fares jumped as a greater number of passengers took to the sky, thanks to the reopening of the economy and relaxation of travel restrictions.
Not just airlines and vehicles, prices in hotels and restaurants also increased on higher footfall. By the way, gas prices have been increasing for quite some time now and have significantly contributed toward inflation in June. Alarmingly, the rise in food prices in recent times raised concerns that inflation is actually spreading across the economy.
Nonetheless, inflation not only increased in June but is also expected to increase in the near future. This is because robust consumer demand in the near term, banking on an increase in the pace of vaccination, ending of business curbs, government’s array of financial relief and an uptick in household savings, will certainly result in rising prices of goods and services.
In reality, consumers are actually expecting higher inflation. Citing the WallStreet Journal article, the University of Michigan Survey of Consumers noted that the median rate of inflation that consumers expect five to 10 years from this day and age hit 2.8% last month.
But, a rise in inflation doesn’t bode well for stocks. The biggest jump in inflation in years has resulted in an increase in bond yields, thereby damaging the allure of growth-oriented stocks. However, investors shouldn’t feel dejected. There are stocks that tend to do well when the cost of living goes up, which at present should be compelling enough for investors to watch.
The rise in inflation leads to a rise in property prices. Additionally, as the value of the property increases, landlords can levy higher rents. Thus, real estate is an obvious choice, and it can be bought indirectly through investment in real estate investment trust (REIT). Similarly, demand for gold goes up at times of rising inflation. Since the yellow metal tends to gain value, investors can consider keeping an eye on gold mining stocks.
We have, thus, highlighted four such stocks from the aforesaid areas that are worth a watch for now.
RPT Realty
RPT
operates as a real estate investment trust. The company owns, develops, acquires, manages and leases regional malls, community shopping centers, and single tenant properties. The company currently has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the current and next year is 10.3% and 15.1%, respectively. Additionally, the company’s projected earnings growth rate for the next five-year period is 6.5%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
American Homes 4 Rent
AMH
is an internally-managed real estate investment trust. It is focused on acquiring, renovating, leasing, and operating single-family homes as rental properties. It rents residential properties, primarily in Arizona, California, Florida, Georgia and Nevada. The company currently has a Zacks Rank #3 (Hold). The company’s expected earnings growth rate for the current and next year is 10.3% and 11.7%, respectively. Furthermore, the company’s projected earnings growth rate for the next five-year period is 14%.
NexPoint Residential Trust, Inc.
NXRT
is engaged in acquiring, owning, operating and selectively developing multifamily properties. It operates primarily in the Southeastern United States and Texas. The company currently has a Zacks Rank #3. The company’s expected earnings growth rate for the current and next year is 4.5% and 7.4%, respectively.
Newmont Corporation
NEM
is one of the world’s largest producers of gold, with several active mines in Nevada, Peru, Australia and Ghana. Newmont’s operating segments are North America, South America, Australia and Africa. The North America segment has operations in the United States. The company currently has a Zacks Rank #3. The company’s expected earnings growth rate for the current and next year is 24.1% and 11.2%, respectively.
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