The stock market has a number of issues to contend with currently if it is to keep moving higher and continue the bull market that began nearly a decade ago. Geopolitical risks-including a potential trade war and even armed conflicts in more than one location-are weighing on market sentiment. Of all of the current risks the stock market may face, however, the biggest potential threat to the equities market could be the Fed.
The central bank has already begun to take steps to normalize monetary policy after years of holding interest rates at or near zero, while also pumping capital into the economy through quantitative easing. Although rates remain far from pre-financial crisis levels, the Fed has suggested that it will continue on a gradual path of rate hikes. Not only that, but the central bank is also currently shrinking its balance sheet.
In a recent article from marketwatch.com, Barry Bannister of Stifel provided his thoughts on Fed-related risks. The article quoted him as saying:
“Years of accumulated policy distortion, a lack of Fed maneuvering room and shock waves from policy are the S&P 500 risks we see, but not corporate earnings or economic growth,” said Barry Bannister, head of institutional equity strategy at Stifel. Bannister has been warning about Fed-related risks for a while, and he recently speculated that if the Fed mishandles the transition to a more normalized policy, that could spark an “unusually rapid” bear market, leading to a “lost decade for stocks,” or 10 years with no positive returns.”
The potential for a fumbling by the Fed could indeed represent a major pitfall for stock investors. Forget about trade wars, sovereign debt, a weaker dollar, or even a tighter regulatory environment for internet companies. The Fed, and its path to policy normalization, could just be the next major catalyst for a stock market collapse.
This notion simply reinforces what many analysts have long-suggested: That the last decade of stock market gains have been artificial, and at some point the bubble will burst. That point is potentially close, if it hasn’t arrived already.
A great asset rotation is likely to begin soon, if not already underway, and investors could run for the exits in droves. Once the price distortions of the last decade become clear, there is no telling just how far stocks could fall. Due to the many risks that the stock market is facing, now may be the ideal time to consider allocations in alternative asset classes.
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 show you how this key asset class can play a key role in portfolio diversification and protection. An Advantage Gold account executive can even show you how to incorporate this important asset class using your IRA account.
Don’t wait for the next major stock market collapse 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, gold, interest rates, lost decade, normalization, stock market volatility