The inflation test for business models

The common thread is not glamour. It is durability. Customers may complain about higher prices, but they often still need electricity, logistics, medical products, insurance, software, payments or trusted everyday goods. That does not make these companies immune. It does mean some have more tools than a business selling products that consumers can easily delay, downgrade or skip.

Pricing power is central here. A company with pricing power can raise prices without losing too many customers. In an inflationary period, that can help defend margins, which are the profits left after costs. This is why investors often look for firms with scarce assets, trusted brands, strong distribution, regulation-backed positions or mission-critical products.

Still, HALO is not a golden ticket. Asset-heavy firms often carry debt and need constant investment. Railways, utilities and energy networks can face political pressure if prices rise too much. Strong brands can lose power if consumers trade down. A good business can also be a poor investment if the share price already assumes perfection. Even halos need maintenance.

The point is not to crown inflation winners. It is to ask a better question: if inflation stays higher for longer, which businesses can defend cash flows, and which ones are simply hoping the weather changes?

This is also the logic behind Saxo’s HALO theme list, which focuses on companies with durable assets, long-lived demand and business models that may be better placed to handle inflation pressure. The list is intended for inspiration and illustration only, and should not be read as investment advice or a recommendation.

Why markets care so much

The Federal Reserve wants inflation near 2% over time. Reuters reports that most economists now expect the Fed to keep interest rates at 3.50% to 3.75% for the rest of 2026, as inflation remains uncomfortable and the labour market stays resilient.

That matters because higher rates change the maths for investors. When safer assets offer better returns, investors often demand more proof from expensive growth stocks. Promises of future profits become less powerful when today’s discount rate rises. In plain English, tomorrow’s money looks less exciting when today’s money pays more.

This is why a CPI print can move technology, banks, energy, consumer stocks and bonds at the same time. A cooler print may ease pressure on rate-sensitive shares. A hotter print may support the view that rates stay higher for longer. A mixed print may keep the market in its least favourite place: waiting for the next data point.

Risks to watch

The first risk is reading too much into one number. Inflation data is important, but one CPI print does not define the whole economy. The trend matters more than the monthly surprise.

The second risk is confusing pricing power with unlimited pricing freedom. Consumers can trade down. Regulators can push back. Competitors can undercut. If companies raise prices too aggressively, demand may weaken later.

The third risk is valuation. Resilient companies can still become expensive. When investors crowd into “quality” or “defensive” names, future returns can suffer if expectations become too high. Safety is useful. Overpaying for safety is less useful, like buying an umbrella after the storm and paying surge pricing.

Investor playbook

• Watch core CPI and services inflation, not only the headline number.

• Track bond yields, especially after the CPI release, as they show the market’s rate expectations.

• Compare companies by pricing power, debt levels and cost sensitivity, not only by sector label.

• Use HALO as a checklist for resilience, not as a buy list.

The real test is staying power

Inflation is often presented as a macro story, but it quickly becomes a company story. A CPI print can move markets because it changes expectations for rates, margins and consumer spending. Yet for investors, the deeper lesson is simpler. Inflation tests whether a business has real staying power or just good conditions.

The best companies do not need a perfect economy to function, but even strong businesses need fair valuations and disciplined execution. Today’s CPI may be noisy. The business-model test it triggers is more lasting. In inflation, as in life, the calmest firms are often those with the strongest foundations.

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