Stocks For a Deflationary Environment
In a deflationary period, where prices are generally falling, it may be wise to consider investing in stocks that are considered “defensive” or “counter-cyclical”. These are stocks that tend to perform well during difficult economic times and can provide a hedge against market downturns.
Defensive stocks include:
Consumer staples: Companies that sell household goods and essential products, such as food and household cleaning supplies, tend to perform well during deflationary periods because consumers continue to buy these goods even when the economy is struggling. Examples of consumer staple stocks include Procter & Gamble, Coca-Cola, and Nestle.
Healthcare: Healthcare companies, particularly those that produce essential medicines and medical equipment, are often considered defensive stocks because people will continue to need healthcare services even during an economic downturn. Examples of healthcare stocks include Johnson & Johnson, Pfizer, and Merck.
Utilities: Utility companies, such as electric and gas utilities, are considered defensive stocks because they provide essential services that people will continue to need regardless of economic conditions. Examples of utility stocks include Duke Energy, Southern Company, and Dominion Energy.
Real Estate Investment Trusts (REITs): REITs are a type of investment that owns and manages income-producing real estate, such as commercial properties, apartment buildings, and shopping centers. They can be a good investment in a deflationary period as they generate steady income from rental properties and are less affected by fluctuations in the economy.
Bond funds: Bonds, specifically US Treasury bonds, are considered a safe haven investments during deflationary periods, as they tend to hold their value better in a downturn.
Summarizing
Obviously, its worth mentioning that past outcomes doesn’t always guarantee the same future results, as various economic and political environments could be different this time around. However, the historical basis in a generalized concept can be applied always with a caveat approach. Essentially anything that is in the Dow Jones Industrial Average is usually considered a descent bet within an uncertain market, as investors search for yield through divdend payouts, which is usually found in this space.
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