Deflation versus inflation

The current stock market condition at the end of September 2011 was a deflationary environment rather than inflation. The ECRI is indicating a recession ahead. Money availability is tight, and people will not be spending much at all. This situation has caused oil, gold, silver, and copper to fall. The only stock market bets that are dependable are shorts and volatility ETFs like VXX and TVIX.

Normally, when interest is low, stocks will grow. When the Federal government is printing money, stocks will grow also, and this is when gold and silver will be bought as a hedge against inflation. However, the FOMC is not currently doing any more quantitative easing. Since inflation is no longer on the horizon, people will prefer cash and bonds over stocks and precious metals. So, an investor needs to be aware of the macro view of the economy at all times to avoid financial loss.