Over the weekend, China announced tariffs up to 25% on a variety of U.S. imports, including pork, nuts, fruit and wine. The action taken by Beijing is in direct response to recent tariffs announced by the Trump administration. The recent actions taken represent a heightened state of tensions surrounding trade, and may continue to keep investors on edge.
The war on trade could potentially escalate, and regardless of what side of the political aisle you may lean towards, it could have a significant effect on global financial markets. Recent stock market volatility has likely been at least in part fueled-if not totally caused by-the potential for an escalating trade war.
Markets could be on the edge of a very slippery slope, and judging by the recent spike in market volatility, the potential for a much larger-scale sell-off exists. The market’s fear gauge, or “VIX,” spiked by some 85% recently, bringing the market’s streak of nine winning quarters to an end. The fear gauge may be representative of increasing investor angst over trade, geopolitical issues, rising inflation and even a more aggressive Fed.
Stocks could be in the early stages of a long topping process, and such long-term tops often see heightened bouts of market volatility.
In addition to the trade war, investors will be paying close attention to the economic data stream and to any indications from the Fed about a possible change in plans. Stronger economic data could force the central bank’s hand, giving the Fed reason to add a fourth hike or even make a larger hike in one of its policy decisions. If the Fed looks to tighten beyond current market expectations, it could potentially have a significant impact on stock prices.
On the other hand, if the Fed sees fit to keep the path of rate hikes consistent with previous discussions, investors may fear the central bank could fall behind the inflation curve. Inflation has already shown signs of accelerating, and if it moves above the Fed’s desired target of 2% it could also have a big effect on financial markets.
This puts gold and other alternative asset classes in a somewhat interesting position. The gold market could stand to gain whether the Fed becomes more aggressive or not. Higher rates may fuel selling in stocks, while giving investors reason to put capital to work elsewhere.
If the central bank does fall behind the curve and inflation picks up even further, investors could look to allocate capital into asset classes that may provide a hedge against rising prices.
A significant explosion in market volatility could be just around the corner, and regardless of what the Fed does or does not do, stocks could be at or near a long-term top.
This makes now the perfect time to consider a significant allocation in gold and other hard assets.
Adding gold to your portfolio 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 buy and hold this key asset class using your IRA account.
Don’t wait for the next major stock collapse to wipe out billions in wealth, or for inflation to accelerate and eat away at your purchasing power. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, china, gold, interest rate hikes, market volatility, tariffs, trade war