There is no shortage of potential headwinds when it comes to stocks. The potential for a larger war over trade, a stronger dollar, higher inflation and a more hawkish Fed could all potentially weigh on equities and risk assets.
There is another issue currently at work, however, that could possibly prove to be the catalyst for an end to the bull run in stocks. This issue is likely unknown to the majority of investors, but could play a powerful role in the stock market’s demise. This issue is the bubble of today, not unlike the mortgage bubble of 2008.
The corporate bond bubble could be the next major issue confronted by investors. It is important to keep in mind that the current expansion is arguably getting very long in the tooth. In fact, some analysts have been calling for a major slowdown for some time now. At this point, it wouldn’t seem to be a question of “if” but rather of “when.”
During a bull market, when optimism is running high and investors are more willing to take risk, liquidity becomes a key driver. Liquidity is the market’s best friend, until it suddenly vanishes like an odor in the wind. As liquidity dries up, it can play havoc on markets leading to increasing market volatility.
This could prove to be the case with the corporate bond market as the expansion is likely in its final leg. Credit spreads could begin to widen-perhaps dramatically-and liquidity could begin to dry up. Such a scenario would not only affect the bond market, but would likely spread to stocks as well. Higher corporate borrowing costs could increase investor risk, while also forcing companies to scale back on expansion. This, in turn, could put a significant dent into earnings that could fuel sharply lower stock prices.
The potential for a corporate bond meltdown and resulting contagion, along with all of the other headwinds mentioned above should be enough to cause investors to really take a closer look at their portfolios. As the end of the current expansion gets closer and closer, now may be the time to consider added diversification with alternative asset classes.
With rising inflation, numerous geopolitical issues, a long-term downtrend in the dollar and the possibility of the next recession being deeper and longer than the last, what better asset class to add right now than gold? Not only does the yellow metal have significant price appreciation potential, but it may also potentially serve as a hedge against rising inflation, a weaker dollar and other economic and geopolitical issues.
Adding this critical asset class to your portfolio has never been easier than 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 to accumulate a significant allocation in this asset class using your IRA account.
Don’t wait for the next major market collapse before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, bull market, corporate borrowing, credit spreads, Fed, gold, liquidity