10 ETFs To Play Deflation

As deflationary concerns continue to make headlines among investors, dividend paying investments, interest-bearing investments and cash become more appealing.

Weak economic figures, a decline in money supply and fiscal tightening around the world are a few reasons why falling prices could be in the near future. Other factors that could lead to a drop in prices include tight credit markets, declines in consumer spending and high unemployment – all of which lead to a reduction in the demand for goods. Declines in the demand for goods eventually result in excess supply, which further leads to a decline in prices to bring supply and demand in equilibrium.

A fall in prices can be detrimental to an economic recovery if businesses and consumers become reluctant to spend and decide to hold on to any disposable cash. This decrease in money supply is most devastating to economies that are highly dependent on consumer spending, such as the United States. Other results of deflation include erosion of consumer confidence and amplification of the burden of both household and public-sector debt.

Three Dividend Producing ETFs Worth A Look

With the Federal Reserve determined to keep interest rates at near record lows, many investors are turning to dividend yielding investments to generate income and for good reason. 

In fact, nearly 14 percent of the companies that are in the S&P 500 are paying more in dividends than the average yield being offered in the bond markets.  One reason for this is that companies went into cost-cutting measures during the Great Recession cutting headcount and minimizing inventories.  As a result many companies are sitting on piles of cash and are issuing dividends to distribute the cash out.

Seven ETFs To Play Deflation

As deflationary concerns continue to make headlines amongst investors, dividend paying investments, interest-bearing investments and cash become more appealing. 

Weak economic figures, a decline in money supply and fiscal tightening around the world are a few reasons why falling prices could be in the near future.   Other factors that could lead to a drop in prices include tight credit markets, declines in consumer spending and high unemployment- all of which lead to a reduction in the demand for goods.  Declines in the demand for goods eventually result in excess supply, which further leads to a decline in prices to bring supply and demand in equilibrium.