I just noticed that in 2026, the market is changing the game. Soon, inflation and deflation will be issues that heavily impact our portfolios. I see signs of deflation increasing more and more. It's not just a temporary price drop, but a continuous adjustment of overall price levels, reflecting deeper problems.

Many think that falling prices are good, but in macroeconomics, it's a warning sign that people lack purchasing power or are afraid to spend money. If left unchecked, it could lead us into an economic recession.

It's important to distinguish the terms clearly. Inflation and deflation are two completely different things. Disinflation is when prices are still rising but at a slower rate, such as inflation dropping from 5% to 2%. True deflation is when prices are actually falling, with negative rates like -1% or -2%. This difference is crucial for investment planning.

Looking back, the Great Depression is the scariest case study. Prices in the U.S. fell by a cumulative 27% from 1929 to 1933, with the money supply contracting over 30%, and unemployment soaring to 25%. It collapsed in a chain reaction. Japan is another example that makes us fearful. After the bubble burst in 1990, they remained in a stagnation state for over 30 years. Land and stock prices plummeted, and Japanese companies focused more on debt repayment than investment. The Japanese became accustomed to waiting for prices to fall, leading to permanently sluggish consumption.

What worries me is Thailand’s current situation. GDP is projected to grow only 1.5-1.6%, the lowest in 30 years. The aging society is increasing rapidly. This group consumes less. Household debt exceeds 85% of GDP, constraining purchasing power. Income is used to pay debts instead of spending. All these point in the same direction.

The vicious cycle of deflation is the most frightening. When people start believing prices will fall further, they delay purchases today. Sales decline, businesses have to lower prices, cut production, and lay off workers. Unemployed people have no money to buy, sales drop further. This cycle continues. In deflation, debt becomes a demon. The real value of debt increases. If you owe 1 million baht and your income drops by 3%, that debt becomes an even heavier burden.

The stock market will trend downward. Profits of listed companies are likely to decrease, stock prices fall, and real estate declines as well. The risk of bad debts increases.

So, what should we do in this kind of situation? During inflation, we hear that cash is trash, but in deflation, cash is king. Government bonds, especially long-term ones, become a strong fortress. When the central bank cuts interest rates to stimulate the economy, bond prices soar. The real returns become very high.

Holding cash or parking funds in money market funds preserves the principal and keeps ammunition ready. When the crisis ends, you’ll have cash to buy good assets at cheap prices. Defensive stocks—utilities, healthcare—are suitable now. People still need to eat and use essentials. Electricity and water are necessities.

Gold remains attractive. Although it’s known for hedging against inflation, it’s also a safe asset during crises. Gold prices in 2026 are expected to remain bright, supported by central bank purchases and falling interest rates.

For those who want to speculate during this crisis, short selling is a good tool. During deflation, the stock market tends to decline. Instead of buying and holding, you can open short positions to profit from falling prices, or trade bonds and gold with deep understanding.

In summary, 2026 will be a test for those who are prepared. Understanding that inflation and deflation will determine our financial fate is no longer a distant issue. Portfolio adjustments, accumulating gold, or employing suitable strategies will help us not only survive but also thrive while others panic.