3 Stocks That Will Likely Prosper As Inflation Falls

Never say never, but it finally looks like inflation is moderating, if not abating, in 2025.

Core US inflation increased by 2.3% in April, slightly lower than the 2.4% annual rate recorded in March. That's the lowest overall inflation rate increase since February 2021, according to US government figures.

That's good news for both consumers and businesses, both of whom historically benefit from more tepid inflation rates. Life and investing are both easier when prices are stable and more predictable.

"Although it is not our expectation, it is possible that tariffs will not cause inflation to pick up," said David Seif, chief economist for developed markets at Nomura, in comments to Benzinga. "If that's the case, then we'd expect the Fed to be able to cut rates sooner than we expect."

Currently, Seif said he expects to see the next Fed interest rate cut in December 2025.

Other economic experts say evidence supports the growth of more profitable sectors during periods of lower inflation.

"Falling interest rates have historically been a tailwind for equity investors, said Robert Johnson, chairman and CEO at Economic Index Associates. 

In the book “Invest With the Fed,” Johnson and his co-authors Gerald Jensen and Luis Garcia-Feijoo found that from 1966 through 2023, the S&P 500 returned 16.4% when the Fed was lowering interest rates and only 6.2% when the Fed was hiking rates. Additionally, inflation was markedly higher when the Fed was hiking versus lowering rates (4.4% versus 3.1%), so the difference in real returns to stock investors was even greater.

"The best performing sectors in a falling interest rate environment were automobiles (30.9%), apparel (27.3%), and retail (25.8%)," Johnson noted. "In addition, small stocks outperformed large stocks during falling interest rate environments. The smallest quintile of stocks returned 30.1% during falling rate environments while the largest quintile returned 15.6%."

These sectors perform better because they are primarily related to consumer discretionary expenditures. "When the stock market is doing well, people often spend more because they feel wealthier, which economists call the ‘wealth effect," Johnson added.

As Seif indicates, the economy isn't out of the woods yet, not with the tariff troubles percolating globally. But if you're looking for a short-term advantage or a head-start on an extended stock market play, here's a closer look at a handful of stocks that may benefit right away from a milder inflation rate climate.

Here are the three stocks most likely to benefit from slower inflation. 

Duke Energy

Utilities have historically benefited from lower rates. "Investors could be interested in these as potential income replacements," said Hao Dang, investment strategist at Consilio Wealth Advisors. "Their businesses are also debt-funded, so lower rates could make things cheaper to run."

That's where Duke Energy DUK comes in.

The Charlotte, N.C.-based utilities giant is a big energy player. It has a $90.9 market cap with bandwidth – it delivers electricity to 8.2 million consumers and provides gas to 1.6 million customers, primarily in the US Midwest and Southeast. It's also in robust growth mode with expected earnings of $1.26 per share for this quarter, translating into a 6.8% growth rate yearly. Toss a hefty 3.56 dividend yield income into the mix, and investors looking for an element of growth should take a closer look at DUK.

Goldman Sachs

The financial sector is also worth closer examination when inflation is moderating.

"Lower rates typically lead to more deal flow, increased leverage and appetite for private equity activity," said Julia Khandoshko, CEO at Mind Money, an investment technology and financial engineering company.

Khandoshko points to one investment banking titan right now that excels in the deal generation and execution realm.

"In financials, a potential rebound in IPOs and M&A this year makes Goldman Sachs particularly interesting," she noted.

Goldman Sachs GS stock has been sluggish so far in 2025, down 9.8% in the past months, but it bounced back in the past month, with shares up 16.5%. Goldman is a signature name in the finance and banking sector and is highly likely to prosper from more robust mergers and acquisitions and initial public offerings – both hallmark deals in times of tamer inflation.

Goldman has certainly been good to its investors, returning 27.75% on an annualized basis over the past five years and outperforming the stock market by 12.73% over the same time frame.

Amazon

In lower inflation periods, consumers open their pocketbooks and spend more money. In this digital age, there's no more likely place for shoppers to hit "buy" than on Amazon AMZN, the $2.19 trillion market cap behemoth.

The timing may be right to get in on a retail and AI stock that's down 7.15% year-to-date.

"Amazon benefits greatly from the strengths and rapid evolution of the e-commerce sector and high-margin AWS growth," Khandoshko said.

Amazon's stock may be off balance in 2025, but its financials seem squarely in place. Its gross profit of $78.7 billion is almost five times the size of its nearest competitors, and its 8.62% revenue growth more than doubles the sector average of 4.25%.

Additionally, AMZN excels in other business markets. Its cloud computing service, for example, is the largest cloud operation globally, with an approximate 30% market share. In that realm, Amazon Web Services is the crown jewel with revenues of $29.3 billion (up 17%) in the previous quarter and operating income up 22% over the same period.

Tracking a group of 67 analysts shows a $240 target price for AMZN, with a high ceiling of $305.00 per share. The low target price is $195 per share, not far off Amazon's current $200 share price.

One Note of Caution

While it appears inflation is in check, for now at least, investors should keep a close eye on key metrics like the US Consumer Price Index, the Producer Price Index and the Personal Consumption Expenditures Price Index, all of which closely track consumer and business pricing trends.

"Although inflation has eased from its previous highs, the Federal Reserve is being careful about cutting rates," said John Murillo, chief dealing officer of B2BROKER, a global fintech solutions provider for financial institutions. "Just earlier this month, they decided to keep rates steady, which left some investors feeling let down as they were hoping for a decrease."

Murillo says the Fed has a valid reason to be cautious, as the decline in oil prices created the main disinflationary impact year-to-date. "This decline, although helpful for the U.S. economy in general, is very detrimental for low-margin oil producers — like Occidental Petroleum, Marathon Oil, Valero Energy, and other alternative oil names," he noted. "Even now, crude prices have rebounded around 9% since May 5, giving these companies a chance to recover their losses."

If the next reading of the Consumer Price Index (CPI) comes in higher than expected, that may cause the Fed to think twice about cutting interest rates. "Since crude oil is already bottoming out, a higher CPI number could push back any potential rate cuts, as policymakers need to determine if inflation is under control," Murillo added.

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