Market Folly, a financial blog that tracks the portfolios of 40+ prominent hedge funds on a daily basis, put out a great article that helps answer the question I have been asking myself lately (and no doubt you have as well) – what are the best investments during deflation? (Deflation Definition)
WHY YOU NEED TO CONSIDER THE DEFLATION SCENARIO
This is a very important question considering the fact the markets now believe deflation is a real threat, though most continue to believe (as I still do) that inflation continues to pose the biggest threat. Nonetheless, considering the fact the stimulus injected by central banks around the world hasn’t produced the desired reflationary effect for the economy – resulting in the fact that we are now into stimulus 1.5 – the deflation scenario has to be considered.
BEST INVESTMENTS / STRATEGIES DURING DEFLATION
Market Folly lists them as follows:
- Cash / US Dollar
- Pay Off Debt
- Buy Long-Term Bonds
- Short Equities
- Buy Dividend Paying Stocks
- Short Housing / Avoid Real Estate
- Short Leverage
- Long Technology
- Gold
- Buy TIPS
For an expanded discussion on each of these items, read the full article here. I highly recommend it.
Regards,
George