Deflation Lurks On Horizon

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    The challenge that is on the horizon – if it is not already imminently before us – is indeed deflation, says a ‘The View from Burgundy,’ from Burgundy Asset Management. Its research paper,Dealing With Flat Investment Markets – Lessons from Long Expertise in Japan,’ says Japan’s prolonged experience with stagnant markets and deflation has typically been regarded as an anomaly related to poor (or poorly implemented) policy decisions and unique demographics. However, following the financial upheaval that began in 2008, a familiar economic pattern has emerged in North America and Europe that bears striking resemblance to Japan’s experience since the late ’80s. While prevailing trends may create an unfavorable climate for investing at a macro level, they do not necessarily have a universal impact and well-managed companies will continue to perform in hostile conditions, it says. Key factors in handling deflation include investing in companies with a quality business and management that offer product and geographic diversity and which compete on low prices as a main strategy.