This has been seen before and will likely be seen again. The Fed raised interest rates on Wednesday afternoon by 25 basis points in a move that was widely expected. The twist, however, may be in the differing outlook on inflation between the Fed and the markets.
One need only look at the latest reading on the Consumer Price Index to see this. On Wednesday, the latest reading on CPI registered a figure of -.1%. Not only was the core reading a full tenth of a percent lower than forecast, but the core reading-excluding volatile food and energy- came in soft as well with a reading of one tenth under estimates.
Major cost areas including housing, medical care, energy and communication were all on the weak side. Year-over-year rates remain weak at 1.9 and 1.7 % respectively. Inflationary pressures just cannot seem to get a solid foothold, and are now in fact trending lower rather than higher.
Although the Fed stuck with its plan for a June rate hike, you have to wonder if consistently weak price pressures may cause the central bank to rethink its plans going forward. And while the Fed did maintain its current stance of another rate hike to come this year, things have not always gone according to plan.
After all, the central bank had not one but four rate hikes penciled in for 2016-so much for that plan…
With a strong and robust economy, inflation should be on the rise-yet it remains extremely elusive.
Perhaps the economy is not gaining traction in the way that markets would have investors believe. Perhaps the next recession is right around the corner. Perhaps the Fed is looking to slightly raise rates so they can turn right around and lower them again in the coming quarters.
It’s no secret that many analysts believe current stock valuations cannot be sustainable, and it’s no secret that the economy is overdue for contraction. It may not arrive tomorrow, next week, or next month, but risks to the economy seem to be on the rise. With those risks comes a corresponding risk of a major stock market reversal. This may not simply fall into correction or even bear market territory, either. The next major stock market meltdown could swiftly and severely wipe out billions of investor value. A drop from current levels of 25, 40 or even 50% could make 2008/2009 look like a walk in the park.
The question is: Is your portfolio prepared?
If the answer is no, now may be the ideal time to consider further diversification and putting money to work in hard assets that are not in “bubble” territory.
Now may the ideal time to consider an allocation in physical metals like gold and silver. These assets may potentially outperform during a major stock market crises, and could be just getting started on a major, multi-year bull run as stocks get ready for what could be a protracted bear market.
Speak to an Advantage Gold account executive today about the potential benefits of gold or silver ownership. Our account professionals re here to answer any questions you may have, and can show you how these assets can play an integral role in your long-term investment goals.
Don’t wait for the next major stock market meltdown or for the next recession to hit before taking action. Explore your options for gold and silver ownership now. Call Advantage Gold at 1-800-341-8584 to get started.Tags: advantage gold, consumer price index, CPI, Fed, fomc, gold, inflation expectations, stock valuations