Lower Rates for Longer?

Heading into the June FOMC meeting, investors were primarily focused on whether or not the Fed would hike rates again. Following the dismal May jobs report, the likelihood of a June hike declined significantly and the central bank did, in fact, remain on hold. The question then became: Would the Fed hike in July or possibly September?

Things can change quickly in global financial markets and this past week investors have seen a great example of just how quickly things can head south. The aftermath of the Brexit vote by the people of Great Britain has certainly been swift and severe. In fact, according to some analysis, the decline seen in equities between Friday and Monday following the vote was the largest ever.

Given the fact that the Fed cited a possible Brexit as one reason for staying the course on interest rates, it now begs the question of when the central bank could act.

Let’s just say it could be a while…

This is not the first time the Fed has decided to hold steady. Following the central bank’s first rate hike in nearly a decade back in December, it was widely thought that rates would rise in small, incremental hikes throughout the year. In fact, many analysts felt the central bank would end up raising rates four times over the course of the year.

When push came to shove, however, the Fed elected to stand pat. The ongoing economic slowdown in China is one reason cited for the lack of further hikes. While the slowdown in the world’s second largest economy is ongoing, the Brexit vote now appears to be another major roadblock on the path to higher interest rates.

With this historic vote comes a massive amount of uncertainty. Uncertainty over the future of the U.K., the E.U. and U.S. businesses will function in this new environment.

Uncertainty over just how long the process might take and how it may affect other nations’ relationship with the E.U.

Uncertainty over all of the many, many unknowns that surround this key event.

Investors don’t like uncertainty and uncertainty can lead to selling of risky assets. A lot of selling.

The Fed is finding itself in a difficult spot as some improvement in economic conditions in the U.S. is contrary to economic difficulties being seen in China, the E.U. and elsewhere.

The central bank may simply not want to rock the boat at this point.

Global equities have seen a lot of selling since Brexit became reality, and the central bank will likely not want to encourage even more selling by being too aggressive with rates.

Fed Fund Futures now reportedly show the likelihood of a rate hike over the next three FOMC meetings as zero percent, while the odds of a 2016 rate hike are now at less than eight percent.

How quickly things can turn…

Some are even arguing that the central bank is more likely to cut rates now than hike anytime soon.

Stocks and risk assets could potentially be in for a rough ride, and the current bear market could be long­lasting. While low interest rates have propped stock markets up around the globe, we are of the opinion that they will not be able to do so indefinitely.

In our view, now is the time to consider some alternatives, and we see physical precious metals like gold and silver having a very bright future if equities collapse further and the global economy remains stagnant.

Just look at how gold and silver reacted as stocks plummeted like a rock on Friday. As stocks declined by several percent, gold and silver saw a rise of several percent.

We think there could be more of this to come ­ a lot more.

Explore some alternative asset classes now before equity markets see more value erased. Consider an allocation in physical gold, silver or other precious metals. These key metals have been considered a reliable store of wealth and value for thousands of years, and have the potential to provide a meaningful hedge against economic and geopolitical uncertainty.

Acquiring and holding physical gold and silver has never been easier and more convenient than it is today, in fact, you can even buy and hold these precious metals using your IRA account.

Let us show you how…

Speak with an Advantage Gold account executive today about building a portfolio of physical precious metals. Don’t wait for higher gold prices or lower stocks before taking action to help secure your financial future. All it takes is a phone call. Call us today at 1­800­341­8584 to get started. 

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