November 2008 was a historical month characterized by many securities and exchange traded funds (ETFs) hitting 52-week lows, or at least flirting with this bottomed-out mark.
To make matters even worse, fears of deflation and the devaluing of the U.S. dollar attributed the continuing drop in value of some of these asset classes. So what lies in the future: deflation or inflation?
Argument for Deflation. It appears that the massive stimulus spending by the federal government to bailout failing firms and restore confidence somewhat broke the deflation death spiral, or at least this is what the majority of investors and traders believe.
Argument for Inflation. Looking at things from a different perspective, the rise in precious metals and treasury-inflation protected securities, which are both tools used to hedge against inflation, indicates that inflation is the theme of the near future, states Gary Gordon of ETF Expert.
The demand for the iShares Treasury Inflation Protected TIPS (TIP) has shot the yield for this investment tool all the way up to 6.3% and is up 6% over the last 3 months.
Additionally, the PowerShares Precious Metal Fund (DBP) is up a whopping 29.3% over the last 3 months.
These are pretty strong indicators that inflation is what is on investor’s minds and they are flocking to safe havens. It is always a good idea to be forward-thinking and not dwell too much on the past. But keep in mind, we can’t predict the future, we can only follow trends – both the aforementioned ETFs have crossed their 50- and 200-day moving averages.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.