The stock market has been rallying for years now, and the bull market in equities is about a decade old at this point. In fact, the market has climbed some 250% since 2009, and as of right now there are no telltale signs of a downturn-yet.
While investors may be offered numerous explanations for the heights currently being seen in the stock market, the many years of low interest rates along with massive QE have certainly played a role. Investors have seemingly turned their attention to corporate earnings in recent months, and earnings have been fairly good. Can they stay good, however, is the question investors may want to consider.
Why corporate earnings are so good is another important question to be asking right now. The fact is that earnings are good for three primary reasons, all due to the effects of ultra-low interest rates. Consider this:
Companies have been able to borrow money now for years at very low cost. This cheap money has helped fuel hiring and expansion.
Global economic growth has largely been fueled by low interest rates and the liquidity provided by such monetary policy.
Because money has been so cheap, corporations have been able to borrow cash to buy back stock, increasing earnings-per-share in the process.
While the next major crash may not be today, tomorrow, or next week, the chances of a significant downturn should not be ignored as the Fed begins the long process of unwinding its balance sheet and normalizing monetary policy. As global liquidity begins to dry up further, investors may begin to see things quite a bit differently.
The powers of fear and greed are what drives markets, and currently greed is sharply outweighing any fear within the marketplace. For this reason, now is the ideal time to consider adding hedges and added diversification with alternative asset classes outside of traditional stocks and bonds.
Given the possibility of rampant inflation down the road due to years of low rates and QE, now is the time to start thinking about alternatives. In addition, the more fresh all-time highs made in the stock market the more likely an eventual major collapse may become. The dot.com bust and the financial crises of 2008/2009 have already shown what can happen when investors get extremely over exuberant. Given the ongoing low levels of market volatility and seemingly endless march higher in stocks, now is the time to consider such scenarios once again. The past can be a great teacher when it comes to investing, and now is the time to apply what has been learned.
Physical gold can be the perfect asset class to consider at a time like this, and adding it to your holdings has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to begin diversifying with physical gold using your IRA account.
Don’t wait for the next major stock market crash to wipe out billions in shareholder value, or for inflation to take a massive bite out of real returns. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, bull market, cheap money, corporate earnings, downturn, gold, interest rates, monetary policy