Which asset does more to offset the negative impacts of inflation?

Stocks are considered a more effective asset to offset the negative impacts of inflation due to their potential for capital appreciation and earning growth over time. When inflation rises, companies often have the ability to increase prices for their goods and services, which can lead to higher revenues and profits. As a result, the stock prices may rise, providing investors with a return that outpaces inflation.

In contrast, bonds typically offer fixed interest payments. During inflationary periods, the purchasing power of these fixed returns declines, resulting in lower real returns for bondholders. Similarly, cash equivalents, which include assets like money market funds and treasury bills, earn nominal interest rates that may not keep pace with inflation, leading to a decrease in real value. Commodities can also serve as a hedge against inflation, as their prices tend to rise when inflation increases; however, they do not generally offer the same potential for significant long-term capital appreciation as stocks.

Thus, among the given options, stocks are favored as they have historically provided growth that can outstrip inflation over time, making them a stronger choice for mitigating inflation's adverse effects on investment returns.