Deflation Opportunities Ahead?

Have We Now Entered a Deflationary Era?

The signs have begun to reveal themselves slowly over the past months. And, recently the Stock Markets have joined in to indicate that we may well be entering a deflationary error. These aren't anything new, but, we haven't experienced a protracted period like this in quite some time.

The most famous of the last Century were the period following the 1929 Stock Market Crash period and the severe 1974 deep recession.

What are the clues to this scenario repeating? How about we look at the overall returns in, not just a few, but many markets world-wide over the last year to start. When we do, we find results like those shown on the graphic below . . .

The above graphic shows how International Stock & Bond Markets have performed, and, with the exception of just 3 nations, all have been in the loss column over the year past. This is a strong clue that we're dealing with a global slowdown and not a local one only. In fact, the US is the strongest market still of all the rest shown.

But, as we look a little deeper, we find further confirmation in the commodity and currency markets as well (see the chart below).

Above, we see at a quick glance, 47-Markets of all kinds including Currencies, Commodities and Stock Indexes.

A quick look at the amount of red on the bars shows that losses clearly dominate over gains.

As it turns out, 38 out of 47 markets showed losses (80%).

What does this insight do for us as traders and investors? Well, for the longer-term it means that these 'loss' markets are actually inclined to go down with the deflationary trend. That means they'll provide more profit opportunity on the Short side for trading going forward.

We'll examine this a little closer in upcoming posts.

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