(DE), a manufacturer of farm vehicles, have gained 8% this year. Some industrial stocks, too, should also get a boost from higher prices. While the company’s gross margin should decline by about a percentage point year-over-year as costs rise, operating profit should still grow by 18%. The company said on its most recent earnings call that it has increased prices aggressively, enough for analysts to forecast sales growth of 16%, to $42.3 billion, in 2022, according to FactSet. The materials sector has benefited from strong pricing, too. Nucor (NUE), a steel manufacturer and constituent of the Some of the widespread inflation has been caused by the rise in oil and gas prices, which has boosted the profits of producers. The MSCI USA, meanwhile, has dropped over 14%. (XLE), which contains oil producers and pipeline providers, has gained 31% for the year. Oil has been a poster child for the inflation play in the equity market. The heaviest weightings in that portfolio are stocks in the energy, materials, and industrials sectors, sectors that have outperformed this year.

MSCI’s inflation-exposed portfolio has outperformed the MSCI USA Index since inflation became prevalent in the first half of 2021.

The good news is that there are some stocks that can still benefit from inflation. But the real fear is that the Federal Reserve will have to lift interest rates even higher as it tries to tamp down demand to fight inflation. Rising costs hurt companies’ profit margins, while price increases can hurt consumer demand.

It’s not difficult to see why markets might not like inflation.

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