It's already 2026, and the economic signals are changing. From the problem of high money supply to a new danger called "deflation," which could silently break your investment portfolio.

What is deflation? Simply put, it is a situation where the prices of goods and services continuously decrease. Not just temporary discounts or some products, but a broad decline across the entire economy. People often think "things are getting cheaper, that's good," but in reality, it’s a warning sign that consumers lack purchasing power or are afraid to spend money.

How is it different from disinflation? Disinflation is when prices are still rising but at a slower rate, for example from 5% to 2%. But deflation is a true decrease in prices, with negative rates like -1% or -2%, meaning the value of your money increases while the economy contracts.

Looking back at history, the most famous example of deflation is the Great Depression from 1929 to 1939. Prices in the U.S. dropped by 27%, stock markets crashed, many banks failed, and unemployment reached 25%. Another prolonged deflation was Japan after the bubble burst in 1990. That country entered a period of over 30 years of stagnation, with falling land and stock prices, companies laying off workers, and people hoarding cash waiting for further price drops.

Where does deflation come from? There are two main sources:

First, from a demand contraction. When people fear losing their jobs or their income decreases, they save more and spend less. Businesses can't sell their products, so they lower prices. Banks tighten lending, and money in the system disappears, creating a vicious cycle that’s hard to break.

Second, from improved supply. New technologies like AI and robots drastically reduce costs. Chinese imports flood the market, and energy prices fall—all pushing prices downward.

Thailand is currently facing this problem. GDP is expected to grow only 1.5-1.6%. An aging society is increasing rapidly, with this group consuming less. Household debt exceeds 85% of GDP, constraining spending.

Who gets hurt by deflation? Almost everyone. Debt becomes a monster. If you owe 1 million baht, in a deflationary environment, the real value of your debt increases because your income drops by 3%, but the debt remains the same. Companies’ profits decline, stock markets fall, real estate prices drop.

So, what should you invest in? During deflation, cash is king. Government bonds, especially long-term ones, will rise when central banks cut interest rates. Gold is also a safe haven when distrust in the system grows. Essential goods stocks, consumer staples, utilities, and healthcare—these still sell well because people need to eat and use them.

If you’re brave enough to trade against the market, you can short sell. When the market declines, you profit. You can also speculate on bonds and gold with high liquidity.

Overall, 2026 is a test for those who understand deflation and how to cope. Adjust your portfolio—hold bonds, accumulate gold, or use various strategies. It’s no longer a distant issue; it’s a factor that will determine your financial fate.