Stocks No winners here, as stocks of nearly every description become mired in a deflationary morass. The outlook remains grim until the economy can be restarted. Bonds Treasury bonds are big winners as interest rates fall and investors rush to quality. Investors in high tax brackets may also consider the highest-quality municipal bonds, although they may be very volatile. Other investments Only the safest investments can withstand the downward spiral.
Cash looks mighty attractive since a dollar buys more tomorrow than it does today.
But real estate is a losing proposition. A Deflationary Boom This is the kind of deflation experienced by the United States during its Industrial Revolution. As seen in the accompanying charts, assembled by James Paulsen of Norwest Investment Management, below, the manufacturing economy expanded dramatically while prices fell steeply. Consumers and businesses kept buying, so the economy grew. In today's economy, some analysts say, technology industries are already in such a phase.