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4 Stock ETFs for 2014’s Battle Against Global Deflation

Take advantage of optimism in dividend and dollar-hedged foreign stocks

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Finally, in my money management practice, I am not overly concerned with an interest rate spike. Janet Yellen, chairwoman of the Federal Reserve, still recognizes the fragility in the U.S. economy and the debilitating nature of deflation. That said, the Fed feels pressure to walk the tightrope between battling deflation and seeking to keep interest rates in a relatively tight range; a huge yield spike in 2014 is unlikely.

It follows that I will stick with U.S. corporations and U.S. stock ETFs that are most capable of handling any deflationary scares. Whereas 2013 may have had a slightly negative impact on dividend growers and dividend yielders due to a rapid spike in interest rates, a more stable rate environment will be kinder to companies that do not necessarily wither in the face of deflation; that is, divided growers and dividend yielders provide a measure of comfort in their coupon-like payments to shareholders, and these companies view dividend cuts as a last resort.

With this in mind, I like both Vanguard Dividend Appreciation (VIG) and Vanguard High Dividend Yield (VYM).

All of the above-mentioned stock ETFs, hedged foreign equity and domestic equity, are demonstrating strong uptrends. Yet I am not a buy-n-hold-n-hoper. If a price on one of my ETFs hits a stop-limit loss order, I may sell all or a portion of the asset. I may do the same if the price falls below a long-term, 200-day moving average.

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