Could a Tax Overhaul Doom Stocks?

If you have ever invested in financial markets before, chances are good you have heard the phrase “Buy the rumor sell the fact.” This is an interesting market dynamic in which a market rallies based on a catalyst such as higher expected earnings, lower rates or new legislation, only to reverse course once that catalyst is actually implemented. Looking at the stock market and its string rise in recent months, you have to wonder if that dynamic will be seen again.

Stock strength has come from various sources, including earnings, robust appetite for risk, stronger economic activity and ongoing low rates. The notion of major tax reforms has almost certainly played a major role in the market’s rise in recent months, as lower corporate tax rates could potentially spur even stronger economic growth, employment and investment.

The question then becomes whether or not stocks will continue their ascent once any legislation is passed. Although there is nothing saying that the market could not keep going higher, the strong tendency by investors to buy the rumor and sell the fact could definitely come into play. Tax legislation was a major campaign promise by the Trump administration, and if it is able to fulfill that promise then investors will likely start looking for the next major driver of higher stock prices.

Whether the administration is able to accomplish more or not, the possibility of recession is growing. The market has been moving higher for a decade now, with few pullbacks of any significance. The Fed is also trying to normalize monetary policy at the same time, and any missteps by the central bank could put the brakes on economic activity and the stock market rally.

The bottom line is any way you slice it, the likelihood of a stock market correction-or even complete reversal-seems to be on the rise. Now is the time to take that into consideration and to plan for the end of the stock market bull.

One of the best ways to plan ahead for a stock market reversal is to diversify with alternative asset classes that have little to no correlation to equities or bonds. One such asset class is physical gold.

Adding gold to your portfolio has never been easier and more convenient than it is today. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our account executives are here to answer any questions you may have, and can even show you how to incorporate this key asset class into your holdings using your IRA account.

The bull market in stocks is getting longer and longer in the tooth with each day, and regardless of what the catalyst may be, the possibility of a major reversal or even collapse could be rising quickly. Don’t wait for it to happen before adding diversity to your portfolio with an asset class that has tremendous upside potential.

Gold could represent an excellent long-term value at current prices. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.

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