Inflation is climbing at its fastest pace in 40 years, and Credit Suisse believes these stocks will perform well in this environment.
The consumer price index, the widely used measure of inflation, rose 7 percent year-over-year last month. This is the largest increase in the indicator since 1982. The surge caused a ripple effect in financial markets, weighing on the broader market.
At the start of 2022, the S&P 500 fell by more than 4 percent, with the real estate, healthcare and technology sectors leading the decline. Meanwhile, as expectations of the Fed to tighten monetary policy continue to heat up, 10-year Treasury yields have soared to their highest levels in more than two years.
But Credit Suisse believes that some stocks may perform well at present. Credit Suisse on Wednesday listed a list of the most inflation-sensitive stocks in the S&P 500 constituents.
In the energy stock, Credit Suisse focused on Devon energy (DVN) and Diamondback energy (FANG). Both stocks surged at the start of the year, up 12 percent and 17 percent, respectively. Devon and Diamondback have also more than doubled in the past year.
Credit Suisse also noted that Freeport-McMoRan (FCX) and Vulcan Materials (VMC) are inflation-sensitive stocks in the materials segment. Freeport is up more than 7 percent so far this year. Vulcan, on the other hand, is down more than 8 percent in 2022.
Credit Suisse said that in the technology sector, chipmakers Micron Technology (MU) and Hewlett Packard Enterprise (HPE) will benefit from the inflation spike. Micron has risen more than 6 percent over the past 12 months, well below the S&P 500's 20 percent gain over the same period, as supply chain issues have left the industry in trouble during the COVID-19 pandemic. Hewlett Packard Enterprise, meanwhile, is up nearly 39 percent over the past year.
Credit Suisse believes that other well-performing stocks in the context of rising inflation include Charles Schwab (SCHW), Disney (DIS), public sector stocks FirstEnergy Corp (FE) and Zions Bancorp (ZION).
This article originated from the financial world