This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Seven ETFs To Play Deflation

NEW YORK ( TheStreet) -- 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. These could lead to a reduction in the demand for goods. Declines in the demand for goods eventually results 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 which are highly-dependent on consumer spending, such as the United States. Other results of deflation include erosion to consumer confidence and amplification to the burden of both household and public-sector debt.

Signs of deflation in the U.S. have already started to emerge. According to the Bureau of Labor Statistics, the consumer price index has been dropping over the last three months. In June, CPI dropped by 0.1%, in May by 0.2% and in April by 0.1% pushing the price index below its January 2010 levels. In general, as CPI declines, deflation looms. Additionally, the Federal Reserve recently reported that consumer credit decreased at an annual rate of 4.5% in May and revolving credit decreased at an annual rate of 10.5% during the same time period. These declines in credit utilization contributed to a 1.2% decrease in consumer spending, a trend prevalent in times of deflation because consumers believe that dollars will be worth more in the future and are postponing purchases.

Generally, cash is the best investment in times of deflation; however, one could also consider investments with a steady cash flow stream that shoot off generous dividends and interest payments. Some deflationary plays, which give diversified access to the dividend-paying stocks like Altria (MO - Get Report), AT&T (T - Get Report) and CenturyLink (CTL - Get Report) include:
  • PowerShares HighYield Dividend Achievers(PEY), which boasts a yield of 4.4%
  • WisdomTree Dividend ex-Financials(DTN), which has a yield of 3.91%
  • iShares Dow Jones Select Dividend Index(DVY), which has a yield of 3.67%
  • SPDR S&P Dividend(SDY), which has a yield of 3.44%.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CTL $25.86 0.00%
DTN $71.43 0.00%
DVY $76.06 0.00%
MO $57.46 0.00%
PEY $13.40 0.00%


Chart of I:DJI
DOW 17,131.86 +47.37 0.28%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,838.6430 +8.1730 0.17%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs