The stock market has exhibited enormous volatility in the last several sessions. It started last Friday, with the Dow Jones Industrial Average dropping over 700 points. The sellers were far from finished, however, and the selling resumed full force on Monday. The opening session of the trading week saw the Dow decline by an astounding 1600 points at one point, before rebounding a bit to end down a whopping 1175 points-the largest point decline on record.
Tuesday looked as if it might be another brutal day for the bulls, as the markets appeared ready to pick up where they left off the day before. Buyers stepped in, however, and the Dow finished higher by 568 points.
There has been widespread speculation about the cause of Friday and Monday’s declines. Some have suggested it was due to algorithmic trading, while others seem to believe that the sell-off was simply profit taking that was way overdue. Other analysts blame rising bond yields as the culprit. Whatever the case may be, the drop fueled a sharp spike in the VIX, with volatility increasing by well over 100 percent on Monday.
Markets tops and market bottoms have often been accompanied with a surge in market volatility, and recent price action certainly points to increasing investor angst. Although some investors may welcome the recent declines as an opportunity to buy in at lower prices, recent market behavior suggests that a topping process is likely taking place.
Consider this a “shot across the bow.”
Rising inflation along with higher interest rates will likely be the stock market’s undoing. Conversely, these same two factors may also be the catalyst for a significant, protracted bull market in gold and hard assets.
Gold could stand to benefit handsomely as inflationary pressures take hold. It could stand to benefit even further as stock investors scramble to put capital to work in alternative asset classes.
Unlike stocks, which have a tendency to decline as rates rise, gold has often done the opposite, gaining in value as the tightening cycle gets under way.
Market dynamics are changing, and those that are paying attention can seize opportunity, while those that simply stay long equities (or stick their heads in the sand) may bear the brunt of the next major market downturn.
It is critical to keep in mind that a stronger economy doesn’t necessarily mean a stronger stock market! In fact, a hot economy can have just the opposite effect: wearing stocks down as free money goes away and as borrowing costs go up.
The perfect storm of rising inflationary pressures, higher yields and a possible top in the stock market make right now the ideal time to consider an allocation in gold.
Adding physical gold to your portfolio has never been easier than it is today, and an allocation in this key asset class may provide significant potential for price appreciation, while also providing a hedge against rising inflation and a weaker dollar.
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 buy and hold gold using your IRA account.
Don’t wait for the current equity onslaught to get worse before taking action. Take steps to diversify and protect your wealth today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, algorithm trading, correction, dow jones, gold, stock market collapse, volatility