As the pendulum swings from fear of inflation to fear of deflation, investors will begin reassessing their portfolios to find good deflationary hedges. In general, dividend paying stocks are safest place to be – particularly since you’ll be earning relatively more on your dividends than you would if the inflation rate was normal or high.
Here are a few high-yielding dividend stocks (REITs) that could be of interest as deflationary plays:
- Chimera Investment Corporation (NYSE:CIM), Current Yield: 18.53%
- American Capital Agency Corp. (NASDAQ:AGNC), Current Yield: 20.79%
Disclosure: I’m currently invested in both of the above stocks.
Since deflation slowly erodes a company’s earnings power, it often creates a tepid environment for stocks. Inverse ETFs give investors a quick and dirty way to profit from down markets. Here are a few to research more when things get hairy:
- ProShares UltraShort Russell2000 (NYSE:TWM), seeks twice the inverse of the daily performance of the Russell 2000 Index
- ProShares UltraShort Dow30 (NYSE:DXD), seeks twice the inverse of the daily performance of the Dow Jones Industrial Average
- ProShares UltraShort S&P500 (NYSE:SDS), seeks twice the inverse of the daily performance of the S&P 500 Index
- ProShares UltraShort Financials (NYSE:SKF), seeks twice the inverse daily performance of the Dow Jones U.S. Financials Index
- ProShares UltraShort Real Estate (NYSE:SRS), seeks twice the inverse daily performance of the Dow Jones U.S. Real Estate Index
- ProShares UltraShort QQQ (NYSE:QID), seeks twice the inverse of the daily performance of the NASDAQ-100 Index
Note: All of the above are 2X ETFs, which mean they’re leveraged 200 percent. Small changes in the market can create huge swings in the above stocks. That could mean large profits, but it could also mean enormous lossses. Always consult a qualified professional before investing.