Inflation usually relates to an increase of prices of commodities over a certain period of time. Inflation erodes the return on an investment and income. There is no direct correlation between inflation and earnings rate on capital. Earnings have shown no tendency to increase with inflation. If anything, as the corporate debt increases, interest rates will increase too. So, debt has become the real problem of a company.
Having said that, there is no guaranteed way of using common stocks as a hedge against inflation. The only thing guaranteed is that average market value of a stock will not grow at any uniform rate.
There can be other alternatives for hedging against inflation like real estate. Evidently, even real estate is subject to fluctuations as being experienced in the US. Serious problems can be avoided by buying real estate with a margin of safety in a right location.
Conclusion is that, an investor can't put all his eggs in one basket and must have some kind of insurance against inflation.
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