Which ASX Stocks Offer Relief from Rising Inflation?

Dale Gillham, Chief Analyst and Head Trainer of Wealth Within

By Dale Gillham |

Recently, Australians received unwelcome news: the Reserve Bank of Australia (RBA) announced that inflation is rising again. Already burdened by the high cost of living, Australians are anxiously awaiting next month's RBA meeting, whether a rate hike is possible. This situation has many pondering how to mitigate the pressure, leading to the question: Is it time to consider commodity-related stocks?

Why commodity-related stocks offer relief

Historically, commodities such as gold, oil, and natural gas have been effective hedges against inflation. Australia is abundant in these resources and hosts numerous companies in these sectors on the ASX. Here are three notable ones:

Westgold Resources (WGX)

WGX, an Australian gold producer based in Western Australia, has seen impressive growth since relisting in 2016. Its share price has surged over 200 per cent since November 2022, recently surpassing the float price of $1.50. The share price has also recently cleared the $2.60 level that has previously held up the stock. With the most recent break, the stock is now positioned to target the previous all time high at $3 and beyond.

Santos Limited (STO)

STO, an oil and gas producer with nearly 40 years of trading history on the ASX, offers an intriguing opportunity despite its share price remaining around $7 for the past two years. The extended sideways movement at $7 suggests a potential strong breakout is on the horizon. As such, I would encourage you to watch this stock closely for a decisive move above $9, which could signal the beginning of the next bullish phase.

Beach Energy Limited (BPT)

BPT, operating in the hydrocarbons sector, is well-positioned to perform during inflationary periods. Like Santos, Beach Energy's share price has been stagnant since February 2020, indicating potential pent-up demand ready to be released. A strong break above the $2 level could lead to a run back to $3, offering a fantastic investment opportunity.

Therefore, as inflation rises, I would encourage you to consider these commodity-related stocks as a strategic move to hedge against economic pressures. They have the potential to put some well-needed dollars in your hip pocket.

What were the best and worst-performing sectors last week?

The best-performing sectors included Information Technology, up 2.67 per cent, followed by Energy, up 0.93 per cent and Financials, up 0.16 per cent. The worst-performing sectors included Real Estate, down 3.34 per cent, followed by Consumer Discretionary, down 1.29 per cent and Materials, down 0.84 per cent.

The best performing stocks in the ASX top 100 included Wisetech Global, up 7.48 per cent, followed by Insurance Australia Group, up 5.93 per cent and Worley Limited, up 5.12 per cent. The worst-performing stocks included Resmed down 8.95 per cent, followed by Charter Hall Group, down 8.66 per cent, and Metcash Limited, down 6.35 per cent.

What's next for the Australian stock market?

Last week showcased a tale of two halves for the All-Ordinaries index. The market spent most of the week declining, only to see a surge on Thursday, pushing the index back above the 8,000-point level, with the week ending slightly down under half a per cent.

What's particularly notable is the resilience of the 7,900-point level as support for the All Ords. Last week marks the fifth instance this year where sellers attempted to push the price below 7,900, only for buyers to step in forcefully and reverse the trend. While this indicates strong buyer support, the market remains stuck in a sideways movement between 7,900 and 8,100 points.

Although the current market resembles a yo-yo, the future looks extremely promising, especially since this week marks the end of June. Historically, June has been one of the most bearish months for the All Ordinaries Index. However, this June is likely to end on a positive note, which is a very bullish sign. What makes the future even brighter is the fact that July is typically the best month of the year in terms of gains in the market from a seasonal perspective.

So, as we enter the best month of the year, combined with the built-up energy from the recent sideways movement, we are set for potential growth over the next four weeks. As such, keep a close eye on the materials sector, as it could present lucrative opportunities during what is expected to be an explosively bullish July. This might be your chance to capture the best returns for the rest of the year, so be prepared to take advantage if the opportunity arises.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.

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