Your Investments, Deflation and Demographics

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Greg Powell, CIMA
Greg Powell, CIMA discusses in impact of deflation and your investments

New Fed Chair, Janet Yellen, will address inflation and deflation

There are many issues that the new Fed Chair, Janet Yellen, will need to deal with as she takes office today. One of her big concerns will be inflation and deflation. There are projections the U.S. economy will see inflation with the reduction of Quantitative Easing. Also there is just as much concern over deflation.

The aging population and inflation

Our Portfolio Strategies Team is tracking a trend of an aging consumer base in the United States. Research shows, the older we get, the less we spend. This can drive up inflation. Another factor is how technology is cutting the cost of doing business, which means there are less jobs. This leads to less money to be spent in the economy.

Concern over deflation

The economic impact of the aging population and technology has us also concerned about deflation. Deflation works like this. One week you buy a car and the next week it actually costs less than what you paid for it. When consumers see this happening, they will wait to make purchases. This throws off sales numbers and creates deflation.

What deflation is not telling us

Just because you hear the word “deflation” does not necessarily mean you need to run for the exit doors of the stock market. There are plenty of opportunities regardless of what the economy is doing. These are the kinds of investment strategies and trends we are looking for at Fi Plan Partners.

Using Japan as a case study in demographics and deflation

Japan and deflation
Japan has already dealt with deflation and it’s aging population

We have been using Japan as a case study. Their Baby Boomers generation came of age before those in the United States. Because of this aging population Japan has already had to wrestle with inflation and deflation. There is much we can learn from their experience. An interesting fact is that Japan sells more adult diapers than baby diapers. As crazy as that sounds, we are using this research to develop investment strategies for our clients so their portfolios have the best chance of benefiting from inflation and deflation should they occur.

Greg Powell, CIMA
Wealth Consultant

Greg Powell is President and CEO of Fi Plan Partners, an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting.

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