Stocks are taking it on the chin in early action Tuesday, with the Dow Jones at one point in early action trading lower by over 400 points. The ongoing escalation in trade relations between the U.S. and China has set the tone for the day, and investors appear to be increasingly aware of the risks that a full-blown trade war could pose.
In the latest salvo, U.S. President Donald Trump has said he would consider additional tariffs on another $200 billion worth of Chinese goods if China retaliates against previous tariffs. The issue of trade has become increasingly heated, with both sides now seemingly engaged in a tit-for-tat spat that has no end in sight. Without any meaningful dialog in the weeks and months ahead, who knows just how far each side is willing to go to try to gain an advantage.
One thing does seem to be for sure, however: A large-scale global trade war could shave a significant amount of productivity from global GDP, and could potentially set the global economy back a great deal at a time when it appears to be quite vulnerable.
Although this has fueled some upside in the dollar index, there is no telling how high the currency could climb. If China were to gain an advantage on trade, it could potentially fuel a return of weakness in the greenback. Regardless of what the dollar may or may not do, however, investor appetite for risk is likely to take a major hit, and stocks along with it.
The potential shift towards risk aversion comes at a time when the bull market in stocks already appears to have gotten quite long in the tooth. In fact, it seems more and more analysts are now looking for a topping process to begin, if it hasn’t already.
In a world full of increasing geopolitical risks, rising inflation and the end of “cheap” money, diversification is more important than ever. The higher stocks go, the harder they may potentially fall. Investors who have seen significant gains in recent years could see those gains evaporate within a matter of months or even weeks.
Regardless of the catalyst-whether it is a trade war, higher rates, rising inflation or other geopolitical issues-a significant asset rotation could be seen in the weeks and months ahead. As investors run for the exits in stocks and other risk assets, much of that capital could find its way into perceived safe havens such as physical gold.
That is why it is so important to act now.
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 simple and convenient it is to build an allocation in this key asset class using your IRA account.
Don’t wait for the next major stock market collapse before taking steps to help protect your portfolio. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, china, GDP, gold, tariffs, trade war