If there's one thing holding back the stock market this year, it's inflation. Over the last year, prices, as measured by the Consumer Price Index, surged by 8.5%.
In response, the Federal Reserve, tasked with maintaining price stability, has hiked interest rates to bring down inflation. However, higher interest rates apply downward pressure on more than just prices; they slow economic activity.
This year, the stock market has failed to launch. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are all down year to date, yet some stocks can help investors weather inflation. Here are three inflation-conscious stocks investors should consider.
1. Amazon
Inflation affects everyone. When prices rise rapidly, consumer budgets get pinched, and the companies that can deliver goods at the lowest prices win.
This scenario is bullish for Amazon (AMZN 1.08%) because when it comes to e-commerce, Amazon is second to none. The company dominates the e-commerce market, with over 40% market share. With gasoline prices still averaging nearly $4 a gallon, many consumers will likely lean on their Amazon Prime membership to have goods delivered to their homes rather than trekking to a big-box store.
What's more, Amazon is so much more than just an e-commerce business. The company has the largest share of the booming cloud infrastructure market. This benefits Amazon in two ways.
First, the cloud market diversifies Amazon's revenue stream, taking some pressure off the e-commerce business and adding a high-growth component. Second, the cloud's deflationary nature helps customers be more productive, which helps businesses battle inflation and rising wage costs.
Nevertheless, Amazon has suffered this year as the stock market has slumped. Shares are down 19% year to date. Investors looking to battle inflation should consider that a golden opportunity to buy shares of this American icon on the cheap.
2. Spotify
The second stock investors can rely on to conquer inflation is Spotify Technology (SPOT 5.67%). This audio streamer reported an excellent quarter, driven by fantastic growth in paid subscribers and ad-supported listeners.
Spotify, supported by the recording industry, seems to have finally cracked the problem that has plagued music since the late 1990s: how to generate revenue from it. American music industry revenue peaked in 1999 at $23.7 billion. However, streaming is leading a revival. Revenue hit $14.9 billion last year, thanks to streaming platforms like Spotify.
In its most recent quarter, Spotify's monthly active users (MAUs) hit 433 million -- up 19% year over year. Paid subscribers jumped to 188 million. What's more, the company reiterated its MAU and subscriber guidance despite high inflation.
Even with its soaring growth, Spotify is down more than 50% this year. Savvy investors will use that decline as an opportunity to accumulate shares on the cheap.
3. Airbnb
My final stock that can help investors conquer inflation is Airbnb (ABNB 0.91%). Airbnb is an online travel booking site, but its business model sets it apart from competitors like Booking Holdings, Expedia, and TripAdvisor.
Airbnb doesn't simply help its guests travel to predetermined locations -- it seeks to inspire them. By suggesting categories like treehouses, windmills, and castles, Airbnb brings a sense of whimsy to travel booking.
The results speak for themselves. In its most recent quarter, Airbnb recorded a record-high 103 million nights and experiences booked. Quarterly revenue growth now stands at 58%.
What's more, inflation might actually be a catalyst for the company. Some homeowners could use Airbnb as an easy way to generate additional income. Long-term investors would be wise to view the stock's year-to-date decline as a buying opportunity.
