Which assets hold up when prices rise?

STEP 1Three ways inflation shakes assets

In Lesson 7 you learned that when prices rise, the power of 'cash' shrinks. So what about assets other than cash? First, let's sort out how inflation reaches assets.

Three ways inflation reaches assets

There are broadly three ways that rising prices affect asset prices. Even the same asset is affected differently along each of the three, so the result is determined by their sum.

Path 1 corresponds to the 'earnings knob' of Lesson 1, and Path 2 to the 'multiple knob'. Path 3 goes back to the earnings knob. In the end, the question for valuing assets when prices rise boils down to: "Does earnings (income) keep up with prices, and how much does the multiple (discount rate) shrink?"

Holding up in 'nominal' terms versus in 'real' terms

Here we need to bring back the distinction from Lesson 7. Even if an asset's price rose 5% in a year, if prices rose 8% that year, you lost about 3% in real terms. So 'strong against inflation' strictly means an asset that rises more than prices and preserves purchasing power. An asset that stood still in a year like 2022 in the US, when prices rose 8%, broke even in numbers but actually lost about 8% of its strength.

STEP 2Assets that hold up, assets that weaken

Now that you have the three paths in hand, let's test assets one by one. You'll see why the same rise in prices hits each asset differently.

Tends to hold up: real assets and pricing power

Real assets are tangible 'goods' such as crude oil, natural gas, grain and metals, or the rights to produce them. Inflation is ultimately the rise in the prices of such goods, so real assets follow inflation most directly. In particular, in phases where oil prices push inflation higher, the revenue and earnings of energy companies that extract and refine oil rise right away. They come out well ahead on Path 1.

Companies with strong pricing power also hold up relatively well. Companies with everyday household goods, hard-to-replace brands, or services with few competitors can raise selling prices along with costs. These are the companies good at the pass-through from Lesson 9. However, 'holding up' means protecting earnings, not that the stock price necessarily rises. When rates rise, the multiple can shrink as well.

Depends on the situation: gold and inflation-linked bonds

Gold is often called an 'inflation hedge'. Over long periods it has preserved purchasing power, but gold has the weakness of paying no interest. When real interest rates rise sharply because of inflation, other assets that pay interest become relatively more attractive and gold can struggle. The relationship between gold and real rates is covered in detail in Lesson 30.

Inflation-linked bonds are bonds whose principal grows with the price index. When prices rise, the money you receive grows too, so they are favorable on Path 1. But they are still bonds, so when real rates rise, their prices fall (Path 2). If real rates rise faster than prices, inflation-linked bonds can also lose money.

Tends to weaken: long-term bonds, growth stocks, cash

Long-term fixed-rate bonds are unfavorable on all three paths. The interest is fixed so it can't keep up with prices, and when rates rise, the longer the remaining term, the more the price falls. The principle by which bond prices and interest rates move like a seesaw is covered in Lesson 15.

Growth stocks are companies expected to earn large profits in the more distant future. As seen in Lesson 1, when rates rise, the present value of far-off earnings shrinks sharply, so the multiple knob shakes the most (Lesson 17). Cash and deposits don't fall in price, but if the interest is lower than inflation, purchasing power quietly shrinks, as calculated in Lesson 7.

In pictures: asset explorer

Tap the assets one by one. The two bars are 'power to keep up with prices' and 'power to withstand rate shocks', and the lower right shows the actual 2022 result.

STEP 3Checking against the 2022 scorecard

It's time to test the theory against the real market. In 2022, when prices rose the fastest in 40 years, let's read the US market's scorecard through the three paths.

What happened in 2022

In 2022, US consumer prices rose as much as 9.1% year over year in June (Lesson 8). International oil prices (WTI) surged to $123.64 per barrel on March 8. The Fed began raising its policy rate in March and reached 4.25–4.50% by year-end, and the US 10-year yield rose from about 1.5% at the start of the year to 3.88% at year-end. It was a year when all three paths worked strongly at once.

WTI source: FRED DCOILWTICO (daily close). Inflation and rate figures come from the same sources as Lessons 1 and 8 (BLS, Fed, Yahoo Finance). Checked 2026-10-05.

A scorecard read through the three paths

Where Path 1 won. The energy sector (XLE) rose +57.6%, the only one of the 11 sectors to rise sharply. Higher oil prices lifted revenue and earnings right away. Interestingly, WTI ended the year at $80.16, only about 6% above the start of the year ($75.33). But earnings from selling at high prices all year rose sharply, and the market focused on those earnings. The commodities ETF (DBC) also gained +18.6%.

Where Path 3 held up. Utilities (−1.5%), consumer staples (−3.3%) and health care (−3.6%) fell much less than the market (−19.5%). These are services used regardless of the economy and sectors where it's easy to raise prices, so earnings were relatively stable. This is the defensive stock profile from Lesson 5.

Where Path 2 hit hardest. Communication (−38.2%), consumer discretionary (−36.8%), real estate (−28.7%) and technology (−28.4%) fell sharply. Many are large tech and platform companies with high growth expectations, so their multiples shrank a lot, and real estate, being heavily indebted, took a direct hit from higher rates. US long-term bonds (TLT) fell −32.8%, more than most stocks. Despite the name 'safe asset', this shows they can become the weakest asset in a year when prices and rates both jump.

For stocks: also watch the 'direction' of inflation

So when prices rise, can you always buy energy and avoid tech? The very next year gives the answer.

Price returns based on closing prices from 2022-12-30 to 2023-12-29. Source: Yahoo Finance, checked 2026-10-05.

In 2023, as the inflation rate came down (the disinflation of Lesson 10), the rankings flipped completely. The market reacts less to 'inflation is high' than to 'will inflation go up further or come down from here?' So in practice you can think in the following order.

To see which direction inflation and rates are heading now, look at the 'Inflation ↑' row in the Impact Map of the Macro Map for a sector-by-sector overview.

Not always. Even with the same rise in prices, the outcome differs depending on whether the cause is demand or supply (oil), and how fast the central bank raises rates. Also, for assets that have already risen a lot, the good news may already be priced in. This table is a starting point, not an answer.