Inflation is rearing its ugly head again. And that could spell trouble for the FTSE 100.
The latest official figures from the ONS show UK inflation rising to 3.5% in September, up from 3.1% in August. Stock markets don’t tend to enjoy prolonged periods of stubborn inflation, particularly when interest rates stay higher for longer.
So what if the FTSE 100 goes nowhere for the next five years?
It’s a scenario I’m taking seriously. But I see two ways to potentially make money anyway: picking individual stocks that can outperform and reinvesting dividends to compound returns.
Gold and silver might seem unlikely places to look for shelter right now. Silver has plunged more than 50% from its January peak near $120 an ounce, while gold has fallen from above $5,500 to around $4,100.
But I wouldn’t write off precious metals just yet. Central banks are still accumulating gold, partly to diversify their reserves away from the US dollar. And if inflation remains stubborn, I think the long-term case for owning hard assets remains compelling.
One FTSE 100 stock I like is Fresnillo (LSE: FRES), which produces both gold and silver.
Its third-quarter update, released today (21 October), highlights the challenges. Silver production fell 11.6% year on year to 10.3m ounces, while gold output dropped 10.7% to 135,100 ounces. Lower ore grades and reduced processing volumes were largely responsible.
Nevertheless, the miner maintained its full-year production guidance. And despite weaker output, it more than doubled its interim dividend at the half-year. Reinvesting those payouts could help compound returns over time.
But falling production, volatile metal prices and the wait for longer-term projects to contribute are real risks.
I wouldn’t treat Fresnillo as a safe haven in its own right. However, for investors willing to tolerate volatility, I think it’s a stock worth considering if the FTSE 100 enters a prolonged period of stagnation.
Commodity giant
Another FTSE 100 stock I believe could do well in an inflationary regime and is worth a look is Glencore (LSE: GLEN). Its shares have surged around 60% over the past year, although the ride has been anything but smooth.
The latest half-year results were extraordinary. Adjusted EBITDA jumped 86% to $10.1bn, while net income reached $4.4bn.
Admittedly, much of this reflects favourable commodity prices and exceptionally strong trading conditions. Marketing profits alone surged 142%, benefiting from disruption across energy markets. Such windfalls won’t necessarily last.
But what really interests me is copper.
Copper pipeline
Glencore produced 850,000 tonnes in 2025. It aims to lift that to 1m by 2028 and 1.6m tonnes by 2035. That’s almost 90% growth over a decade.
With demand being driven by electricity grids, data centres and electrification, I think that expansion could transform the company’s earnings potential.
The balance sheet is strong with net debt of $10.2bn, in line with its cap to trigger additional shareholder returns. At H1, the company topped up ordinary dividend with a special payout.
Of course, copper prices are cyclical, major mining projects carry execution risks, and the miner still relies heavily on coal.
But if management delivers on its production ambitions, I think Glencore could generate substantial long-term returns, even if the wider FTSE 100 struggles to make progress.
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Andrew Mackie owns shares in Glencore and Fresnillo.
