The most outrageous effects of inflation revealed

I can deal with rising electricity costs.

I can deal with rising gas costs.

I can deal with rising mortgage costs.

I can even deal with the rising cost of hotels in London (exorbitant before, ludicrous now).

However, there’s one thing I cannot deal with.

When we began forecasting that inflation would rise, and rise, and rise this year, we expected it to hit most corners of the economy.

When we predicted that the bank rate would skyrocket, and that retail mortgages could soar to more than 6%, we knew it would hit the hip pocket of mortgage holders.

However, we were not complete in our assessment of the impact of the dire situation that we’ve been thrown into by the government and the Bank of England.

We missed something.

And now it’s coming back to haunt us…

Can you believe it? 9.5% higher

Yesterday the bad news came in.

A Greggs sausage roll was getting a price hike.

That’s right, the beloved Greggs sausage roll is going to be more expensive. And not just a little more expensive, either. The cost is rising from £1.05 to £1.15.

Now, you might scoff at that being “expensive” to begin with.

Until you run the numbers and realise it’s a 9.5% increase. Admittedly, that’s not the 10% to 20% inflation that ripping through most of the economy, but it makes a big difference across the board.

Interestingly, on the day of the announced “sausagerollgate”, Greggs Plc was up over 1,900 GBp in trading. This may have had something to do with its ongoing expansion of stores… including into Canary Wharf (bankers need “snag rolls” too, you know).

But it did get me thinking…

Greggs is one of those quintessentially British companies. I used the word “beloved” earlier. And for good reason.

Having lived in the UK now for nine years, I’ve figured out that there are really only two things that rile up the locals.

1. Any hint of a rise in the cost of a pint.
2. Any hint of a rise in the cost of a Greggs sausage roll.

From my point of view, if you do get riled up about things like price hikes to products at a company like Greggs, you can do one of two things about it.

1. Moan about it. A very popular choice, I might add.
2. Invest in the company, and benefit from it.

Not many people consider the second option. But in periods where there is inflation, where costs are increasing, and where your wealth is constantly challenged, then you really should be thinking, where should I invest when there’s high inflation?

Can a watch beat a sausage roll?

Thinking about where to invest during high inflation is a tough one. And for a lot of people, even knowing where to start is tricky.

The best thing to do though is to just start.

That means setting up an investment account, a stocks and shares ISA, a personal pension… whatever is appropriate and applicable to your situation.

Such vehicles are where you can buy the stocks you will invest in. Make sure you get the right advice so that you know which are right for you, if you are not sure. If you’re happy to do some preliminary research on your own, Finder.co.uk is a good site to compare and find accounts.  

Once you’re ready to go, then you need to start researching for some stocks.

Of course, there are great resources out there, in fact sometimes too many to decipher. You’ll find a lot of information here at Exponential Investor. And Southbank Investment Research has a range of different investment services where we provide specific stock recommendations.

Now, if I was thinking about how to invest during high inflation, I would consider the types of companies that I’m familiar with and that could benefit from higher prices.

And a company like Greggs is a great place to start when looking at different investment ideas.

A large, £1.9 billion consumer fast-food company that was profitable for the full year ending 31 December 2021. It pays a dividend – which helps fight that pesky inflation a little more – and is, as we say, quintessentially British, so should do pretty well when the pound is also trading lower.

Now, it should also be said that, just a week or so ago, Greggs was about 50% lower in value than in late 2021. The company’s capital fluctuation has been pretty dramatic.

So, while there are positives, there are also some risks and the possibility that the capital value could continue to decline if wider market forces pull things lower.

Still, it’s certainly a stock to look at more closely when researching investments.

Another stock that has been on my mind is Watches of Switzerland. Now this is not one that you’d call quintessentially British. But it’s still British, and could benefit from a strong US dollar and inflationary times.

Watches of Switzerland sells premium timepieces. And I’m not talking about watches that cost a few hundred pounds. I’m talking watches that cost a few thousand pounds… or a few tens of thousands of pounds and, in some cases, a few hundreds of thousands of pounds.

The most expensive men’s watch on the company site is a £565,900 Jacob & Co. Astronomia Casino Roulette Skeleton. Take a look at it here.

This end of the luxury-goods market isn’t bothered by inflation, rates, or tax cuts. People buying luxury watches likely do so more on the swings in currencies than anything else. Furthermore, the watch itself is often an investment to combat all the headwinds we’ve mentioned.

In fact, if you’ve got the money, then investing in luxury watches might even prove to be an inflation buster in its own right. You need to know a bit about them and have access to a fair chunk of capital already, but it’s certainly possible.

Considering that, in 2021, the watch industry saw record turnover and that sales now exceed pre-Covid levels, this could be an area of industry that’s warming right up for more growth.

If collectors, investors and the just-stupidly-rich continue to buy luxury watches, then Watches of Switzerland may come out of things pretty well.

These are two considerations to look deeper at when thinking about stocks to invest in during high inflation. Worthy of closer attention and more research indeed.

Until next time…

Sam Volkering
Editor, Exponential Investor