Inflation and interest rates are becoming like those unwelcome guests at your cookout that outstay their welcome. As investors look for opportunities after Labor Day, those guests will be demanding attention again.
Table of Contents
This means that if you were hoping for a reprieve from the year-long market volatility, you have more waiting to do. The good news is that there are several blue-chip stocks that can give you stability in a volatile market without sacrificing the potential for future growth.
Why Stagflation Is a Concern
On Sept. 10, the latest reading on producer prices will be released. That will be followed on Sept. 11 by the consumer price index (CPI). Since 2021, the rate of inflation has exceeded the Federal Reserve’s preferred 2% target. This week’s report will be more of the same.
That’s leading to expectations (and some will say hopes) that the Federal Reserve will raise interest rates at the next Federal Reserve Open Market Committee (FOMC) meeting on Sept. 15 and 16. The CME FedWatch tool puts the odds of a 25-basis point (0.25%) hike at around 60%.
This is where stagflation becomes a concern. Not all inflation is the same. In 2021, the surge in inflation was fueled by significant monetary stimulus that had the desired effect (until it wasn’t) of stoking consumer demand.
This time around, the inflation is largely supply-driven. The burgeoning AI economy is increasing productivity, but perhaps not enough to offset lower demand. That’s a recipe for stagflation.
I’m not predicting that. First, I believe that the Fed won’t raise interest rates for reasons that belong in another article for another time. However, for the purpose of this article, let’s say rates do tick higher. Where should investors look for opportunities? That gets us back to those blue-chip stock opportunities. Here are three names to consider.
Blue-Chip Stock to Buy: Eli Lilly
Healthcare demand doesn’t disappear when the economy stalls, and that’s the core appeal of Eli Lilly (NYSE: LLY) as a blue-chip stock for a stagflation scenario. Patients don’t stop taking prescribed medications because rates ticked higher, which gives Lilly’s revenue a defensive quality that cyclical sectors simply don’t have.
The fundamentals back this up. Lilly’s second-quarter 2026 revenue grew nearly 50% year over year, powered by its GLP-1 franchise for diabetes and obesity treatment. That demand has proven remarkably inelastic even as consumers pull back elsewhere. EBITDA growth topped 90% in the same period, a pace few blue-chip names can match regardless of the macro backdrop.
Lilly isn’t cheap. Shares trade near 40 times earnings, a premium that assumes the growth streak continues. Belief in that future growth means looking at Lilly’s pipeline, which includes oncology and autoimmune diseases.
Another reason to hold LLY for the long haul is that the company has raised its dividend for 12 consecutive years, and its payout ratio sits around 22%, leaving ample room for further increases even if margins compress under cost pressure. For investors worried about stagflation eroding discretionary spending, Lilly offers exposure to a demand curve that bends less than most.
Blue-Chip Stock to Buy: Lockheed Martin
Lockheed Martin (NYSE: LMT) represents a different flavor of stagflation protection: revenue largely insulated from consumer behavior. Defense contractors get paid by the federal government under multi-year contracts, not by households deciding whether to tighten their budgets. That’s a structural advantage when the “stag” half of stagflation starts to bite.
The numbers illustrate why. Lockheed closed the second quarter of 2026 with a record $230 billion backlog, roughly two and a half years of sales already booked. Revenue rose 11% to $20.06 billion, beating estimates, and management raised full-year guidance to $80.75 billion. Rising geopolitical tension and climbing global defense budgets have only added to that order pipeline.
Income investors get rewarded, too. Lockheed has increased its dividend for 23 consecutive years, and shares currently yield around 2.6%. Because the company’s growth is tied to appropriations and contract awards rather than consumer wallets, higher interest rates do less damage to Lockheed’s core business than they do to retailers, homebuilders, or discretionary-spending names.
Blue-Chip Stock to Buy: Visa
Visa (NYSE: V) is the trickiest of the three, and that’s worth being upfront about. Management has said plainly that Visa’s business model, while resilient, isn’t immune to inflation, since higher prices can eventually curb the consumer spending that generates its transaction fees. This is a case where perception and fundamentals genuinely diverge, and investors need to watch both.
So far, the fundamentals have held up better than the inflation narrative suggests. Fiscal second-quarter 2026 revenue climbed 17% year over year, with cross-border transaction volume up 21%. Visa’s capital-light model produces operating margins near 68%, among the highest of any blue-chip stock, which gives it room to absorb a slowdown without the earnings damage a lower-margin retailer would face.
Visa has grown its dividend for 17 straight years, and a $20 billion buyback program signals management’s confidence in cash generation. The risk is real: if stagflation deepens and consumers pull back on spending, Visa’s volume-based revenue will feel it before Lockheed’s contracted backlog or Lilly’s prescription-driven demand does. It’s a blue-chip name to own, but one to watch closely as CPI data rolls in.
Blue-Chip Stocks Help You Prepare For Whatever Comes Next
Stagflation isn’t a certainty, and I still lean toward the Fed holding rates steady rather than hiking this month. But investors don’t need to predict the exact outcome to position sensibly. Blue-chip stocks with defensive earnings drivers — inelastic healthcare demand, government-backed contracts, or dominant market share with high margins — tend to hold up better than cyclical names when inflation and slow growth coincide.
Eli Lilly, Lockheed Martin, and Visa each offer a different route to that stability. Lilly’s growth is tied to patient need rather than consumer confidence. Lockheed’s backlog is contracted years in advance. Visa’s margins give it a cushion even if spending growth cools. None of the three is immune to a genuine stagflation shock, but all three are built to weather one better than the average name in the S&P 500. As the September inflation data and the FOMC decision approach, that kind of durability is what blue-chip stocks are supposed to provide.
Leave a Reply