Inflation is on the rise and has many investors worried about their portfolios. But, in this video clip from "Ask Us Anything" on Motley Fool Live, recorded on April 22, Fool.com contributors Matt Frankel and Jason Hall discuss how inflation doesn't need to be a scary word and that there are companies to invest in that are built to weather market uncertainty.
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Matt Frankel: I find it easier to deal with situations like this, the more things I experience in the market. Every time I think I've seen everything in the stock market, and I mean I'm sure other people are like this too, something totally new happens. No one saw anything like the COVID pandemic since 1920. No one saw anything like what's going on right now since 1980. It's really important that these situations are not totally unique. There are precedents for them, and like John and Nick, both said, great companies tend to do well over the long-run no matter what.
Like, inflation, for example, it's pretty common knowledge that the last what you can call rapid inflation happened in the late '70s, early '80s. Inflation is kind of being thrown around as this big scary word right now, but it really doesn't have to be. Inflation peaked at about 15% in 1980 and stayed above 6% from 1977 through 1982. You want to know what the S&P 500 did during that time. Anyone. Anyone know? It went up.
Jason Hall: Yeah. Right.
Frankel: Pretty handily.
Frankel: Look at during that peak inflation year of 1980. Look at what the S&P did during 1980 when inflation was running so hot. Don't necessarily buy into the headlines that inflation is going to crush stocks that no stocks, no growth stocks are going to perform well during an inflationary period because that's just not true.
Some are going to do poorly, the ones that are in over their head in debt, for example, are not the companies I'd like to be in right now. The ones that are going to need to borrow money in this environment are not the kind of companies I want to be in right now.
The companies that make great products that have pricing power that have lots of cash on their balance sheet, they actually don't do that poorly during inflationary environments historically. It's really important.
This is why I was so excited to do this show because there are precedents for these situations. You really have to look back for them. But it's not unheard of. That's my thoughts on what's going on.