"Inflation may have moderated since growing uncontrollably just a few years ago, as COVID lockdowns lifted, paving the way for skyrocketing prices of pretty much everything. While core inflation rates seem to be less of a problem these days, as they settle in a 3% range, there's concern that the Federal Reserve's new rate-cutting cycle could cause inflation to pick up over the shorter term, perhaps at a rate that brings considerable pain to consumers."
"Of course, artificial intelligence (AI) stands out as a deflationary force, given the cost savings of automation and AI-driven optimization. But, at this juncture, it's unclear when AI spending will translate into such big profitability drivers for companies. One has to imagine we're still in the earlier innings and that firms will need to keep spending far more than they'll get back in near-term profitability gains."
"In any case, don't count on AI's deflationary potential to save the day anytime soon, especially if profitability gains for everyday companies lie farther out into the future. In the meantime, it may be a good idea to load up the shopping cart with cheap dividend stocks that can help investors stay ahead of the rising tide of inflation. When it comes to businesses that can fare well in a climate where inflation hovers in the 3-5% range,"
Inflation eased from the post-lockdown spike but could rise again if Federal Reserve rate cuts spur demand, causing consumer pain. Artificial intelligence offers long-term deflation through automation and optimization but likely requires sustained corporate spending before producing significant profitability gains. AI's deflationary effects are unlikely to offset near-term inflation pressures. Investors can mitigate inflation risk by buying inexpensive dividend stocks that provide income and potential price resilience. Companies that have demonstrated pricing power over the past three years should perform well if inflation stabilizes in a 3-5% range. Coca-Cola exemplifies durable brand-driven pricing power and consumer loyalty.
Read at 24/7 Wall St.
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