Yesterday, investors got the release of the latest Fed meeting minutes. For those looking for more clarity from the central bank regarding its plans for monetary policy going forward, the minutes were likely a disappointment. In its commentary, the central bank discussed jobs, a lack of inflation and a stronger economy. They also again reiterated another rate hike this year.
While the Fed focused on a number of positives, there are some key negatives that cannot be overlooked. The Fed’s failure to spark meaningful inflation thus far-despite holding rates at or near zero for many years and printing massive amounts of money-would seemingly indicate that perhaps all of the QE that has taken place has been only moderately effective, if effective at all.
And while people may point to all-time highs in stocks as an indication that the economy is doing well, it is also important for investors to understand where all of the gains have come from. The era of ultra-low rates and QE has undoubtedly fueled the rally in stocks, as it has driven borrowing while also luring in investors who simply have no alternatives but to chase returns in equities. At current rate levels, there simply is no other option for those looking to earn any type of return on capital.
Although it has at times appeared that the Fed may become more aggressive with monetary policy, you have to also consider the fact that there really is no reason for the Fed to make any significant moves. Higher rates are meant to control inflation and an economy that is overheating, and you could certainly make the argument that current economic activity does not exactly fall under the “overheating” category.
The ongoing subpar state of the economy, along with little to no inflation could keep the Fed from making any significant changes to monetary policy for a long time to come. In the meantime, stocks may continue to undergo an artificial rise into the stratosphere.
The day of reckoning will come for stocks, however, and it could be the ugliest collapse in modern history. What goes up-especially on the back of massive money printing and artificially low rates-will likely come down at some point. And when it does, watch out below.
The current bull market in stocks is a decade old, and with each new high the possibility of a significant reversal becomes more likely. Now may be the ideal time to consider alternatives that may potentially provide added portfolio diversification, while also providing a possible hedge against inflation, deflation, recession and a weaker dollar.
Now may be the ideal time to consider hard, physical assets like gold.
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Don’t wait for the next major stock market collapse-which could be arriving any time now-before taking steps to protect your wealth. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, Fed, gold, inflation, monetary policy, overheating, Stocks