By itself, the simple fact the current bull market is now the second-longest on record is enough to prompt worries of a tanking in the wings.
But there’s much more for investors to be concerned about. A rapidly-strengthening economy has brought with it pronounced inflation worries, so much so that new Fed chairman Jerome Powell has telegraphed the need for as many as four interest rate hikes this year.
And that’s still not all bedeviling stock investors. President Trump’s recent decision to implement hawkish trade measures has further unsettled the markets. Following up on proclamations against steel and aluminum imports, the president recently put both feet in the protectionist water by hitting China, the world’s second-largest economy and perpetual U.S. adversary, with stiff tariffs.
The distinct possibility of a trade war has prompted some professional asset managers to call for a decline in the U.S. equities markets of as much as 40 percent.
Now, in the face of this growing list of challenges for the stock market, one legendary Wall Street firm is explicitly naming gold as an excellent place to be. As reported in an article over at CNBC.com, Goldman Sachs, which made its last bullish call on the metal over five years ago, recently issued a research note declaring gold will “outperform” in the near term. According to Goldman, the “increased risk” of a stock market correction and a move higher in the rate of inflation should add upward pressure to the price of gold in the coming months.
In the note, Goldman analysts said, in part, “Our commodities team believes that the dislocation between the gold prices and U.S. rates is here to stay,” and added that “based on empirical data for the past six tightening cycles, gold has outperformed post rate hikes four times.”
To put it another way, Goldman recognizes that the popular perception about higher rates being unfriendly to gold is largely a myth. The view stems from the idea that as interest rates rise, investors will flee from the yellow metal, which provides no yield, and head into bonds and other interest-bearing assets. However, what really matters when it comes to interest rates and their effect on gold prices is that as rates rise, stock prices tend to decline, and that’s typically very good news for gold.
What’s more, in the current environment, where there’s a bull market that’s been in effect for over nine years as well as an expectation that rates will be hiked aggressively throughout 2018, the possibility of a particularly sharp drop in equities is very strong.
Look to Physical Gold and Silver to Help Protect Your IRA or 401(k)
There’s still time to reallocate your portfolio more favorably toward inflation-protected assets like physical gold and silver, but it’s important to take action now. The markets have begun to demonstrate great volatility as the conditions expected to complicate stock prices – like rising interest rates – are now setting in. To learn more about acquiring gold and silver for the benefit of your IRA or 401(k), I encourage you to call Augusta Precious Metals at 855-976-5436 today and ask to speak with one of our highly-knowledgeable retirement specialists.
Goldman’s recent, pro-gold research summary is written with the expectation of a correction, but make no mistake: With interest rates anticipated to move steadily higher throughout the rest of the year, and President Trump moving full speed ahead with the implementation of protectionist trade policies, a full-blown bear market – a drop of at least 20 percent – is a distinct possibility.
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