The last several weeks have seen developments on multiple fronts that could potentially shape the next major market meltdown. The Fed’s reluctance to continue shrinking its balance sheet must be at the top of the list.
The writing on the wall has never been clearer: Stock markets cannot maintain current levels and wouldn’t have gotten here in the first place without the massive stimulus efforts of the Fed. In other words, stocks are currently trading at “artificial” levels. Stock valuations have not reached current levels due to strong earnings growth or forward guidance. They have reached current levels due to ultra-low rates and massive balance sheet expansion by the Fed.
The Fed has recently made clear it does not intend – for now anyway – to keep allowing assets to roll off its balance sheet. The Fed seems to finally be acknowledging the notion that the markets could see significant declines and volatility on a grand scale if it continues its recent path. The Fed has not, however, been able to explain just how it will eventually unwind its massive balance sheet.
Stock investors may be breathing a sigh of relief for now, but eventually, the price for massive stimulus measures will have to be paid. Don’t say you weren’t warned when the eventual contraction of the central bank’s balance sheet could send equity markets into a tailspin the likes of which has never been seen before. Stocks could plausibly fall 50% or more from current lofty levels. The carnage will make the Great Recession of 2008/2009 look like a walk in the park.
For investors that were fully invested in stocks before the Great Recession, the damage done as markets plummeted took years to undo. The next time around could be worse, as the decline could be even steeper. Not only that, but the Fed may lack the tools necessary to keep a floor under markets once the next major recession takes hold. This could not only make the drop even more severe but could also potentially lead to a significantly longer bottoming-out process.
Most investors do not have the kind of time necessary to endure such a market collapse. That is why it is so important to be proactive and to take the necessary steps in order to add diversification and not rely strictly on equities to generate any decent returns.
Markets are once again flashing significant alarm signals. For those paying attention and willing to look at the markets objectively, now may be the ideal time to diversify with alternative asset classes that may potentially outperform during the next major downturn. Physical gold should be at the top of your list.
Gold not only has significant upside price potential but may also provide a hedge against rising inflation, a weaker dollar, and other geopolitical risks. It has been a reliable store of value for thousands of years and could see major inflows once the next recession and corresponding equity collapse gets going.
Adding this key asset class to your portfolio has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and how it may play an important role in your portfolio in the years ahead. Our associates are here to answer any questions you may have and can even show you how to take advantage of an IRA account to build a significant allocation.
Don’t wait for the Fed’s great unwind to fuel the next major stock market crash and next recession. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: add gold to my ira, advantage gold, benefits of gold, buy gold, diversify your assets, Fed, hedge against inflation, market collapse, physical gold, weaker dollar