Economists and investors have been studying the stock market and its response to inflation for decades and they are far more versed on the topic than I am. As such, I’ll leave the expert advice to the experts. My perspective is one of a woman, a consumer, a business owner, and an investor, so perhaps that will lend a fresh pair of eyes to the popular topic when that ominous word “inflation” arises.

The causes of inflation can be manyfold, from the shortage of supplies to manufacture goods to the shortage of employees to do the work. It shows how interconnected and international societies are, as one halfway around the world can lead to inflation in a country on the other side.

At its core, inflation is the rise in prices and typically hits consumers first. I was recently at the grocery store and overheard a customer commenting about how the price of soda has increased in this past week. I could have used the opportunity to step on my soapbox and suggest that there may be healthier and cheaper alternatives to soda, but I resisted the urge. I have a SodaStream and make soda as I need or want it, so it fits my lifestyle and, as of now anyway, my budget. As a consumer I like to stay within my budget. I will continue to buy my staple items that help me meet my goals and priorities in living a healthy lifestyle (e.g. coffee, fresh fruits and vegetables, fitness classes, getting my hair done, etc.), but may be more hesitant to stretch my budget on “nice to have items” like a new pair of “going out” shoes, since I rarely go out.

As a business owner, I may start to see the effects of inflation as my clients work through their own budgets and priorities. I have noticed that people spend less time in the retail section of my studio. Some people have even had to reduce their membership packages for financial reasons. As inflation impacts businesses, operating margins may decrease as the cost of goods increases and revenues may decrease, depending on the business, if people are less willing to buy a business’s products at a higher cost.

As an investor, I use operating margins as an important factor in selecting my companies so need to take this into consideration. I will still look for companies that manage their operating expenses well, but will also pay closer attention to costs of goods sold, amounts of inventory, and accounts receivable to learn more about the expenses the business has and whether or not their customers are willing to buy and pay for the goods.

Although I focus on investing in health care companies, health care as an industry isn’t necessarily inflation-proof. Although people need care, including preventative primary care, they may prolong scheduling an elective surgery or switch to a cheaper medication if they are working to stay in their budgets and choose to spend their money on food and shelter.

Fortunately, many of the companies that I like to invest in are focused on value-based health care – providing quality care at a lower cost. Companies that have already made value-based care a priority have done the hard work of setting up their processes, practices, and supply chains to reduce costs. They have also negotiated contracts with insurance providers for a set fee amount, so if they can continue providing value to patients (where value is quality patient outcomes for a certain cost), then they should continue showing strong margins. As a result, they should ride the inflation wave without much fear of capsizing, although we will see how the market, which has its own personality, responds.

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