What is the best financial investment strategy if we are heading towards a deflationary environment with solid profitability?

- "Increasingly, it seems that the economic environment in the United States and the euro zone will:
• be of a deflationary nature (sluggish growth, low inflation, deleveraging, wealth losses, high savings);
• also be characterised by solid corporate profitability due to the distortion of income sharing."
- "In this environment:
• yields on risk-free bonds and swap rates will be low;
• the performance of equities may be negatively affected by the sluggishness of growth;
• hedging against inflation risk is useless, unless the investment horizon is very long;
• companies' financial situation is becoming good, which will make the investment grade credit market attractive."

Natixis Flash Economics 408 20100824

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