Inflation remains well above the Federal Reserve’s target level. And recent inflation readings have come in hotter than expected, suggesting that the fight to control rising prices will be more challenging than previously anticipated.

At the same time, there are some signs of weakening economic activity. This shouldn’t be too surprising, giving that the economy was running at full steam throughout 2023 and was bound to cool off at some point.

Regardless, this mix of factors has economists increasingly discussing the possibility of stagflation. Particularly as commodity prices — such as copper — are rising, it raises the odds of an economic period where consumers face stubbornly high inflation while the economy weakens.

This is an unpleasant mix for a large portion of the economy, and it’s particularly bad for consumer brands. During stagflation, consumers have to watch their spending carefully. Impulse buying dries up as folks hunker down. Investors should look to sell these three consumer stocks before stagflation causes their share prices to tank.

Tesla (TSLA)

Is Elon Musk’s magic wearing off? For many years, his electric vehicle company Tesla (NASDAQ:TSLA) has overcome all sorts of criticism. While bears have repeatedly questioned the company’s business strategy, unit economics and product quality among other factors, Tesla has always managed to prove the doubters wrong.

However, Tesla is caught in another downtrend now, and this one might prove harder to fend off.

The electric vehicle industry has been battered by a litany of problems over the past year. Consumer demand has started to let up. At the same time competition has mounted, as rivals like Rivian Automotive (NASDAQ:RIVN) and legacy automakers ramp up their EV and hybrid vehicle capabilities. Government subsidies have also started to run off in some markets.

All this has led to an unpleasant mix where Tesla is struggling to maintain its sales velocity even as it cuts prices. As if this weren’t enough, the international market is now being flooded with a ton of cheaper Chinese-sourced electric vehicles.

Tesla is cutting costs, laying off employees and otherwise trying to adjust to these challenging industry conditions. With TSLA stock still trading at 44 times forward earnings, however, downside here could be immense if stagflation deals another blow to the automobile industry.

Hilton Worldwide (HLT)

Hilton Worldwide (NYSE:HLT) is a hotel operator whose portfolio constitutes almost 1.2 million rooms in total. It has more than 20 brands serving a wide portfolio of the hospitality market — Hampton and Hilton are the company’s largest brands in terms of number of rooms.

HLT stock tanked at the start of the pandemic, falling more than 50% as people worried about the economic ramifications of that shock. But it turned out that the travel industry shutdown was fairly short-lived.

Once the hospitality sector reopened for business, it turned into a full-on boom, as people engaged in so-called “revenge spending,” shelling out far more on experiences than they had previously.

This has added up to tremendous gains for HLT stock. Shares have quadrupled since the Covid-19 lows and are up 43% over the past 12 months alone.

However, it’s time to pump the brakes on this trade. U.S. hotel industry revenues in 2024 are expected to come in 27% above where they were in 2019. Not only is the pandemic recovery fully played out, if anything, the industry has grown more quickly than usual in recent years, thanks to vigorous consumer spending.

Analysts only see the industry growing at a 3.8% per year compounded rate through 2029, by contrast. And if stagflation or a recession hits, the growth could disappear entirely. HLT stock is still flying high for now, but the risks are skewed squarely to the downside as the macroeconomic outlook grows more challenging.

Lululemon Athletica (LULU)

Lululemon Athletica (NASDAQ:LULU) is an apparel company focused on athletic clothing, footwear and accessories. The company built its business upon the yoga market, making women’s workout apparel. Though the company now offers a wider arrangement of clothing items, it is still centered on the fitness scene.

While the company has been publicly traded for 17 years now, LULU stock kicked into high gear in 2017. At that point, shares began its dramatic ascent from a starting point of $60 per share to more than $350 today.

Lululemon has grown its business at tremendous speed, making the stock price’s rally completely understandable. In addition to strong interest in fitness apparel generally, Lululemon benefitted from the pandemic-era surge in consumer spending, along with the rapid growth in the yoga industry.

However, even after the surge in sales and earnings growth, LULU stock is selling for 28 times earnings today. With apparel spending likely to slow due to stagflation and a slowing economy, that makes for a risky valuation right now. As we’ve seen with rival brands like Nike (NYSE:NKE) recently, once growth slows down, share prices can tumble. Lululemon stock is highly vulnerable to any economic weakness.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.