Inflation has been a drag on everyone, whether you’re a consumer, a worker or a corporation. You work harder, maybe even make more money . . . and still you can’t shake the feeling that you’re falling behind.

While consumer prices have slowed down significantly, they’re still increasing at the fastest rate in decades. For companies, wholesale inflation hasn’t dropped below 6% in 21 months now.

Put some real numbers behind that statement and just about everything corporations need to buy in order to support their own operations (from finance to entertainment to technology to manufacturing) is now about 17% more expensive than it was two years ago. Sometimes they pass that cost on to their customers. Sometimes they have to eat the difference.

Revenue on the S&P 500 boomed 10% in 2021 and another 10.3% in 2022, for a compound gain of 21.3% across the two-year period. Nice. But subtract that 17% inflation and it’s no shock that every new dollar on the top line isn’t making it down to the bottom of the profit statement.

Margins have dropped to 11.4% . . . effectively wiping out all pandemic progress to revert to where they were in mid-2019. If you recall, it didn’t feel like the world was ending then. The mood in the market was almost aggressively cheerful.

What’s changed is that as long as inflation persists, costs keep rising. Sooner or later, corporate operations hit a wall where they can’t raise prices any more or capture new customers. At that moment, top-line growth stops and it becomes difficult to expand earnings without cutting costs.

That means restructuring. It’s what happens in a recession and it’s why a lot of people have learned to fear any economic slowdown. When corporate executives get desperate, they pull the plug on R&D and other investments . . . even if it means writing already spent funds off as a loss.

Think of half-finished houses: a waste of time and materials at best, an attractive nuisance at worst. The money that went into them is gone. Ultimately most are torn down so the developer can start over.

And as corporations start over, it often means cutting payroll first. People hired to run those new ventures are no longer necessary. Their salaries stop. They start cutting costs too.

So far, margins are still tracking where they were in 2019. That’s pretty good, which explains why the layoffs haven’t happened. But it only takes about 3 percentage points more wholesale inflation to take margins to their COVID low . . . which means the Fed now has a deadline.

If they can’t cut inflation in half in the next six months, that’s when margins crumple. And the pain is never evenly distributed, which is why I refuse to simply buy the S&P 500 and hold on through the rollercoaster of the “random walk.”

Guess what? Real estate margins are actually increasing. There’s a reason REITs commit to returning 90% of their earnings to shareholders . . . they are almost literal cash machines.

Energy producers and utilities alike are also cheerfully passing their own costs to end-level consumers. Yes, their margins are also getting wider. They’re loving this.

And it’s a sign that their operations are a long way from executives having to pull the plug and restructure. There’s no recession going on in the power company . . . or for the refineries.

Technology margins have taken a small hit, but remain extremely robust. They’re laying people off because they want to pivot and make shareholders happy, not because they’re desperate.

Consumer stocks are more of a problem. Except for Amazon (AMZN) and a few select names lower on the food chain, I’m steering clear of this end of the economy. Margins there are never luxurious and now they’re getting almost too thin to work with.

That’s where you see a recessionary pivot. As consumers, it’s not so bad. If you work for these companies, you have a right to be nervous. But thinking like a shareholder means you want management to make the tough calls.

Even in retail, the world is no closer to ending than it was a year or two ago. They’ve survived so far. As long as some parts of the economy keep working, they’ll get through this.

But I’m thinking there are better investments out there. Start with the utilities, which are having a great season. Start with real estate if you want reliable income. Those companies are not going away.