Now that new Fed Chairman Jerome Powell has taken the reigns, investors seem to be getting a sense that the central bank is not likely to deviate from its previous course under Janet Yellen. The central bank is still sticking with three possible rate hikes for this year, and the possibility of a fourth or perhaps larger hike are also on the table.
The central bank now finds itself in a very difficult, if not impossible, situation. It has to attempt to control accelerating inflation while also avoiding the shock and awe that could be seen if it raises rates too aggressively. This is effectively like walking a tightrope, and the slightest misstep could have major repercussions.
Another way of viewing the central bank’s dilemma is through the eyes of investors. With inflation clearly moving higher and expectations also being adjusted, the question of whether or not the Fed will be willing to take additional action if necessary is an important one. In other words, if inflation dictates such a move, will the central bank be willing to “rock the boat” and possibly even put an end to the ongoing equity bull market. The answer to that question is unclear, but may very well be answered soon.
The central bank has sounded a bit more dovish in recent commentary, and stocks have now regained over half of the value wiped away during the recent sell-off. Investors seem OK with the idea of three, 25 basis point hikes this year. But what if the Fed signals a fourth hike? What if the Fed hikes 50 basis points rather than the widely expected 25? Such issues could potentially send stock investors running for cover.
On the other hand, however, is another problem: If the Fed is not willing to hike aggressively if needed, changing inflation expectations could spin out of control, and quickly. Heightened price pressures, along with a relatively weaker dollar, could cause significant problems as purchasing power and real returns are eroded.
Either way, a price will be paid, and hard assets like gold could stand to reap the benefits.
Gold has been considered a reliable store of value and protector of wealth for centuries. It is often used as a hedge against rising inflation and as a means of portfolio diversification. Whatever the Fed does or does not do, stocks could be headed sharply lower while inflation moves higher-the perfect storm for hard assets like gold.
If you do not already have a significant allocation in this key asset class, now is the time to consider building one. Adding physical gold to your portfolio has never been easier than it is today, and it can be accomplished by just picking up the phone.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership, and how this asset class may play a critical role in months and years ahead. Our associates are here to answer any questions you may have, and can even show you how to buy gold using your IRA account.
Don’t wait for rising inflation or the next major stock market crash before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, central bank, gold, inflation expectations, janet yellen, jerome powell