There is only a handful of stocks in the S & P 500 trading higher Thursday, and Club name Procter & Gamble (PG) is one of them. In fact, P & G shares were up 0.6%, among the best-performing stocks in an otherwise ugly session. The reason for the outperformance is rather straightforward: Most of S & P 500 constituents in the green fall into the category of recession-resistant stocks. That is, their core businesses tend to hold up well during economic slowdowns because consumers still need to buy whatever it is they’re selling. Wall Street’s recession fears appear to be accelerating Thursday after the Federal Reserve’s 75-basis point interest rate hike and subsequent commentary from the central bank’s chair, Jerome Powell. That explains why the owner of the Arm & Hammer brand, Church & Dwight , and P & G are up Thursday. That’s why toothpaste and soap maker Colgate-Palmolive and General Mills also are up. It also explains why we have been so steadfast in our belief that investors should use this time to high-grade their portfolio out of unprofitable, non-dividend paying, expensive stocks that have too much economic sensitivity and into profitable, dividend paying, share repurchasing, strong cash flow generating companies that trade at reasonable valuations. For example, on Tuesday, we trimmed our position in Wynn Resorts (WYNN) to buy more shares of Procter & Gamble. P & G management offered an update on how the company and consumers are handling inflation. Inflation is still a problem Procter & Gamble CEO Jon Moeller and the company’s finance chief, Andre Schulten, talked candidly about the currently challenging economic environment at a conference hosted by Deutsche Bank on Thursday. Schulten didn’t skirt around the issue: P & G’s products continue to sell well, but the process to make them and ship them to shelves remains challenging. That’s not exactly surprising, and we think the market was anticipating it based on the way P & G shares have traded over the past few weeks. After all, in April when P & G reported its fiscal third-quarter results , it raised its full-year fiscal 2022 after-tax inflation impact to $3.2 billion. It was the third quarter in a row P & G hiked its forecast for that figure. Now, as then, the question is, when will inflationary pressures for both businesses and consumers ease significantly? Schulten’s comments Thursday morning suggest the answer is definitely not yet. Here’s what he had to say: “While some feedstock costs and spot rate prices have begun to stabilize, upstream labor and energy cost inflation hitting our suppliers and service providers, along with inflation in our own direct costs, are affecting us more this quarter and will have a larger impact next fiscal year. Taken together, the headwinds this quarter are modestly higher than expected on both the top and bottom line. While these are relatively modest deviations from where we thought we’d be, we want to be transparent about where we are trending in this dynamic environment and about our intention to continue to invest in our business.” P & G will provide official guidance in late July when reporting results for its March-to-June quarter, which will close out its fiscal year 2022. At present, Schulten said the company estimates more than $2.5 billion of after-tax “incremental costs” from freight, commodities and foreign exchange in fiscal 2023, next month. Q4 guidance unchanged Despite cost pressures, management said there’s been no change to P & G’s previously issued guidance. “But certainly, the degree of difficulty is increasing to get to those ranges,” Schulten said, particularly on the earnings front. For fiscal 2022, P & G forecasts core earnings per share growth between 3% to 6% compared with its core EPS of $5.66 in the prior year. Schulten said Thursday it “continues to be true” that EPS growth will likely be toward the lower range of that guidance. Management also stressed it plans to grow sales and earnings in fiscal 2023, even as inflationary pressures drag on. “Yes,” Moeller said matter-of-factly when an analyst asked the CEO if that was the plan. One reason Moeller can make that statement confidently — and P & G can still hit its guidance — is because the company has been able to pass through higher costs to consumers by way of product price increases. “We’ve not seen broad pushback on pricing, and we don’t expect that going forward,” Schulten said, noting P & G has announced additional price increases. Sales picture In his portion of the conference presentation, Moeller emphasized P & G’s focus on product innovations — such as a Gillette razor with a built-in exfoliating bar — as a way create “superiority” in various categories. That perception of superiority, in turn, establishes stickiness among consumers and allows for market-share growth, the CEO contended. Moeller offered up another example, this time with Dawn soap, to show how improving products can also help P & G manage its own inflationary pressures. Here’s how Moeller explained that relationship: “When we launched the Dawn EZ-Squeeze innovation, we also upgraded formulas across the entire Dawn lineup while taking a high single-digit price increase. The EZ-Squeeze innovation checks all the superiority boxes: superior product, package, brand communication, in-store execution, and consumer value. With the strength of the consumer proposition, some retailers chose to merchandise EZ-Squeeze with full price and capped displays, enhancing shopper awareness of the innovation while improving in retailer value in the process.” While P & G believes this strategy is successful, Schulten acknowledged that in the current quarter in particular, some external factors weighed on the sales picture beyond just inflation. He specifically pointed to China’s strict Covid lockdowns in recent months, saying they’ve caused “softer market conditions than anticipated when we last gave guidance.” In Russia, the CFO said the pace of shipments has slowed as a “streamlined portfolio” and increase prices hit sales “more significantly than expected.” Some orders also were pulled forward into March because retailers were worried products may not be available, he said. (Jim Cramer’s Charitable Trust is long PG. See here for a full list of the stocks.) 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