Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THREE of the most hated words right now must be covid, inflation and shortages. On their own they’re emotive enough. Put them together and they take on a whole new level of jeopardy. Especially when you acknowledge the fact that none of these issues are exactly transitory either.

Take the latest FTSE reshuffle. Covid and supply chain issues loom large when it comes to filtering out the winners and losers in this quarterly review. Nevermind the fact it took just one comment from the boss of Moderna, about the vaccines’ potential inability to fend off the new variant, to knock world markets off course.

And then there’s inflation. This year the price of goods and services has risen more than in any year since 2008. And that is largely down to the on/off stop-starts, closures and then rapid reopening of our economy, which has caused multiple supply shocks all of which have driven inflation higher. Supply and demand has pushed up prices, so costs have gone through the roof. Take container shipping rates, which have risen three to four times in as many months.

But there is a plus-side to rising inflation; if not for consumers at least for companies and those who invest in them. Inflation is actually good for some companies, lifting earnings for those in sectors that can increase prices. While some - usually smaller - companies that find themselves boxed into a corner unable to rise prices, will struggle, others, with an opportunity to flex their pricing power, could find the inflationary environment transformatory.

So who are we talking about? Namely large, established companies with the power to raise prices and the muscle to cope with short-term problems with freight, inventory supply and so on. Think miners with exposure to industrial metals, such and Rio Tinto and BHP, which also offer exposure to the wider global economy. Paper and packaging companies like DS Smith and logistics giants Royal Mail, James Fisher and Wincanton.

On the retail side, where the pandemic winners are less reliant on rising prices, but instead just sheer demand, companies like Pets at Home and Dechra Pharmaceuticals are both perfectly poised to cash-in on the pandemic pet boom.

And the same goes for those positioned to take a slice of the so-called stay-at-home economy that has boomed during lockdowns and shows no sign of abating any time soon. Think Netflix, Ocado, Just Eat, Domino’s Pizza, and all the other companies that have been feeding our insatiable stay-at-home appetites.

These are uncertain times, still, but companies that have demonstrated their agility and adaptability have a unique, probably once-in-a-lifetime opportunity to build brand affinity that may never have come to fruition, had it not been for the pandemic.

Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

Share this article

Latest articles

Watch: Market News Update - 16 May 2022

In this week’s market update: another down week for shares; bond markets catc…


Tom Stevenson

Tom Stevenson

Fidelity International

Market news today - Contrarians sense a turning point

What’s driving your investments this week?


Tom Stevenson

Tom Stevenson

Fidelity International

How to turn a profit in the post-Covid market

A bigger state and rising inflation means it really may be different this time


Tom Stevenson

Tom Stevenson

Fidelity International