There has been little in the way of market volatility in recent months, and investors appear to be growing increasingly complacent as the markets look to make fresh, all-time highs. Although markets spent some time in correction territory, they have not seen any significant declines for fresh buyers to enter. This could lead to a large amount of FOMO-or fear of missing out. This fear of missing out could take the market to some significant new heights before the bottom falls out.
There has been an interesting divergence in the market place in recent action that is worth noting. Some might argue that the market’s fear gauge-the CBOE’s VIX Index-is not behaving like it should. One would normally expect the VIX to be declining as the market moves higher, yet that typical correlation has been noticeably absent in recent days.
Looking at previous instances of the VIX and the stock market showing such a disconnect, the weeks and months ahead could potentially be rocky for stock investors. Similar market conditions were seen before some major market hiccups, like those seen in 2000, 2007 and 2014. Although it is impossible to say if this time around the same dismal situation will unfold for stocks, it would seemingly give investors another important reason to be concerned. Perhaps the biggest problem, however, is the fact that the vast majority of investors seem to be content riding the current stock market rally in perpetuity.
The more complacent the marketplace becomes, the greater the fall could potentially be once the bears show their teeth. Even moderate declines could potentially trigger a slew of selling that could lead to more selling. Equities could quickly see declines not just of five or 10 percent, but even something in the magnitude of 15 or 20 percent-perhaps more. The market has covered a great deal of ground in recent years, and from current levels has a long way to potentially fall.
The current SP/VIX divergence is yet another warning sign to pay attention to. Add this to other warning signs such as tightening credit spreads, weaker housing and an economy that is already likely at full employment and there is significant reason to be concerned about stock’s prospects in the months and years ahead.
That is why right now may be the ideal time to pay attention to the market’s warnings, and to take action. Now may be the right time to add diversity in alternative asset classes that may potentially gain in value during the next major downturn. Although gold has enormous upside appreciation potential from current levels that is by no means the only reason you should consider a significant allocation in it right now.
Aside from potential upside, the yellow metal may provide an important hedge against inflation, dollar weakness and other economic and geopolitical factors. It is simply an asset class that investors can’t afford to do without.
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 build a significant allocation in gold using your IRA account.
Don’t wait for the next major stock market collapse to happen before acting. The market is providing ample warning and now is the time to take action. To get started, simply pick up the phone and call Advantage Gold today at 1-800-341-8584.Tags: advantage gold, credit spreads, fear of missing out, gold, stock market, vix, volatility