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Investing During Inflation (Part Seven)

Catching Up

This series has been about finding the various investments whose returns have a positive correlation with inflation. We have found that most have a negative return during inflationary periods, but that there are certain things that have historically shown that they have returns that are positively correlated with inflation.

Today, we are looking at the Health Care sector. It is widely believed that Heath Care stocks have the ability to raise prices and keep their clients, even during times of rising inflation. So, below are a few companies representing different industries within the sector.

Pfizer, Inc.

Positive correlation

Baxter International

Positive correlation

Medtronic, PLC

Positive correlation

Implications

The Health Care inflation we have all seen over the years may be one of the reasons for the positive correlation between Health Care company returns and inflation. Given that Health Care inflation seems to be persistent and present even during times of otherwise low inflation may be skewing these results. However, we see the positive positive correlation in pharmaceutical returns, medical supply returns, and medical device returns with inflation, so we cannot justify away the relationship based upon the persistent sector inflation.

What’s Next

The next post will be the final one in this series, unless I start writing and it looks like it will be too long and involved, then there will be two more. In this(these) final post(s) I want to look at the remaining sectors – Industrials and Consumer Discretionary – plus summarize my thoughts on how a portfolio needs to be structured to perform during inflationary periods.

—Mark