Caterpillar stock offers investors one of the clearest, most straightforward ways to express their views on the global economy. That explains its volatility -- and summarizes why further gains are likely ahead.

It's been a wild week for the company. The stock dropped 6% on Wednesday, after the federal government announced it is looking into potentially anticompetitive conduct in the farm equipment and distribution industry. That seemed a bit extreme, given that this wasn't an enforcement action, and agriculture isn't nearly the biggest industry for Caterpillar. Perhaps investors are looking for excuses to take profits after a run that has taken the stock up 33% even after Wednesday's drop, making Caterpillar the second-best performing Dow stock behind Cisco Systems. Caterpillar shares have tripled in the past three years, which isn't exactly what you'd expect to see from a century-old equipment manufacturer.

But the stars have aligned. Caterpillar has benefited from higher prices for commodities like copper and oil, since it sells equipment to miners and to oil-and-gas companies. There's also artificial intelligence; not only is Caterpillar selling equipment to the companies building data centers, but critically, it sells gas turbines and other equipment needed to power these data centers. More generally, Caterpillar is viewed by J.P. Morgan analyst Tami Zakaria as "the biggest winner of an extended U.S. construction cycle."

These drivers are showing up in Caterpillar's earnings, as well as in its valuation -- so that Caterpillar's price/earnings ratio has risen from about 13 in 2023 to 26 today. But analysts aren't sweating the rise, since they generally believe that the data-center buildout and other secular drivers will lead to sustained earnings growth.

In fact, it's worth noting that 61% of analysts rate the stock a Buy, with the rest at Hold -- there are no sell ratings to speak of, per Bloomberg data. A hidden gem this is not. That said, the stock is down about 25% from its June peak, partially because of concerns that higher rates will reduce customers' appetite for buying and leasing expensive equipment. Raymond James analyst Tim Thein writes that analysts' expectations "have become more conservative in recent months, suggesting a lower bar."

The stock still isn't for everyone. Caterpillar is, by the nature of its business model, heavily reliant on economic growth, and is also now closely tied to the AI trade. This explains why it fell 2% on Thursday amid a tech-led drop motivated by fears that OpenAI might tamp down on spending. In fact, over the past six months, its beta -- a measure of how much it moves alongside the overall market -- is 1.6, making it one of the most volatile stocks in the Dow.

So you have to be pretty bullish on the overall market to consider picking up Caterpillar here. But for investors who think the data centers will keep getting built out and economic growth will remain strong, there's every reason to hang on to this stock through the jitters.