The stock market saw major declines on Friday, as the Dow Jones Industrial Average shed over 700 points. Friday’s sell-off, and weekly performance for the indexes, was the worst in some time. Unfortunately, it could be just the opening salvo by stock market bears, and further declines could be ahead.
The current risk-off mentality is likely being fueled by several factors, but rising interest rates are, without question, a major catalyst for declining stocks. On Friday, yields on the benchmark ten year note hit 2.85%, a four year high. It appears that yields are being pulled up to the 3% level, and the further they climb the more stocks may come under pressure.
Not only is the notion of rising yields potentially bearish for stocks, but investors may also be concerned about the speed at which yields have been climbing.
Higher yields give investors-especially those who have been long stocks for some time-reason to pause, or even to start taking risk off the table. Although a 3% yield is not exactly a great return on investment, it does come with little risk compared to equities, especially at this stage of the current bull market. Higher yields can have a dramatic influence on stocks, as was seen on Friday, and further selling could potentially create an ongoing period of risk aversion and asset reallocation.
The sell-off on may simply be the first domino to fall.
As rates continue to push higher, and as inflationary fears intensify, investors will take stock of equity positions, and likely start looking for alternatives as more evidence of a stock market top presents itself.
The gold market could be one of the-if not the biggest-benefactors of rising inflation and rising rates coupled with weaker stocks. In fact, the gold market could be gearing up for what could prove to be a multi-year protracted bull market just as stocks see the equity bull turn to the equity bear.
If you do not have a significant allocation in physical gold, now is the time to consider getting started. Adding this key asset class to your portfolio may potentially provide numerous benefits, including the potential for significant price appreciation while acting as a protector of purchasing power as the value of the dollar is eroded through inflation. Numerous signs are pointing to rising inflation and a reversal in stocks. Now is the time to act.
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 just how easy it is to put the power of gold to work for you using your IRA account.
The writing is on the wall: Higher inflation and higher rates are on the way. Stocks are far more likely to head lower from here than higher. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, collapse, dow jones, gold, interest rate rise, RISK, stock market decline, yield