While the U.S. is stuck with an anemic inflation rate, investors can ride out a deflationary environment through certain assets and exchange traded funds.
According to the Bureau of Labor Statistics, the total national rate of inflation was 0.2% in August, reports Jeff Cox for CNBC.
Only the West had a positive Consumer Price Index for August, so excluding the West, the national rate of inflation would have been -0.19% in August.
The deflationary pressure was mostly a result of lower energy prices, which have declined 9.5% annualized in the West, 14.5% in the Midwest, 18.3% in the East and 17.1% in the South.
Additionally, while the economy has expanded and employment rates have risen, wage growth remains stagnant.
“Our economy has made good progress toward full employment, but sluggish wage growth suggests there is some room to go, and inflation has remained persistently below our target,” Cleveland Fed Gov. Lael Brainard said in a speech. “With equilibrium real interest rates likely to remain low for some time and policy options that are more limited if conditions deteriorate than if they accelerate, risk management considerations counsel a stance of waiting to see if the risks to the outlook diminish.”
Meanwhile, ETF investors have a number of options to play during a deflationary environment. For starters, during deflationary periods, cash is king. If the U.S. dollar continues to strengthen against foreign currencies, ETF investors can capture the movement through the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) and the actively managed WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU).