Investment - Articles - Fidelity say deflation will not have us 'turning Japanese'

 With inflation figures out today showing consumer price index has fallen to minus 0.1% in April, Tom Stevenson, investment director at Fidelity Personal Investing comments:

 “Britain has been flirting with deflation for some months now and, for the first time in 55 years, UK inflation has finally dipped into negative territory. While today’s figure may trigger headlines about us “turning Japanese”, the rebound in oil prices and stability of global food prices means we can expect the dis-inflationary period to be short lived. Households should enjoy the cheaper cost of living and real earnings growth while it lasts. Inflation is expected to pick up towards the end of the year.

 “Investors suffering from the paltry returns that low inflation and low interest rates bring should look to the stock market for better returns. Companies that have pricing power through their brand names are safe havens in a disinflationary environment. Funds such as Nick Train’s Lindsell Train UK Equity Fund, Terry Smith’s Fundsmith Equity Fund are good ways to play this theme. Alternatively, equity income provides yield with the prospect of growth as well via funds like Michael Clark’s Fidelity Moneybuilder Dividend Fund.

 “Fidelity Personal Investing calculates that if a saver had invested £15,000 into the FTSE All Share index over the 10 year period from 29 April 2005 to 30 April 2015, they would now be left with £33,344.26*. If, however, they had invested £15,000 into the average UK savings account over the same period, they would be left with £16,271.25*. The safety of cash is an expensive luxury today.”