Stock markets have recently put together an impressive string of gains that has taken the benchmark S&P 500 above previous resistance. Stocks could potentially be headed for an attempt at fresh all-time highs as volatility continues to decline. And why shouldn’t they? The Fed has become increasingly dovish; a U.S./China trade deal may be getting close, and jobless claims are at the lowest level in 50 years.
Against this positive backdrop for stocks, however, lurk a number of issues that could derail risk assets in a major way and cut the stock market in half.
Here are three key points to keep in mind before getting sucked into stocks as they make or complete what could be a long-term topping process:
- U.S./China trade- Ongoing negotiations between the globe’s first and second-largest economies seem to have taken a positive turn and a deal may be reached in the weeks or months ahead. The issue of trade has been a thorn in the side of stocks, but perhaps not to the degree that many think. With a strong, recent run higher in stocks, a deal could pave the way for selling as investors buy the rumor and sell the fact.
- A dovish Fed- Although the notion of an increasingly dovish Fed may give stocks an initial boost, it also begs the question of why the central bank cannot raise rates further. Hint: the economy is not strong enough to tolerate higher rates. Despite low interest rates, this fact will eventually catch up to stocks and risk assets, pushing prices in the process.
- The Risk/Reward is heavily skewed- The stock market has been climbing for a decade now and may not have a lot left in the tank. If you feel that stocks could still double in value from current levels, then, by all means, start buying. An objective point of view might dictate that the risk-to-reward simply isn’t there at current levels as valuations may be unsustainable. It’s far better to buy low and sell high than to buy high and sell lower.
Given these issues, now may be the perfect time to add diversification with asset classes that can potentially outperform during the next major downturn or recession. As the global slowdown turns into a recession, the Fed may be forced into action which will also fuel declines in the dollar. In an environment of declining equities and a falling dollar, there may be no better asset class to turn to than physical gold.
Adding gold to your portfolio has never been easier, and perhaps never more important. Simply pick up the phone and speak with an Advantage Gold account executive today. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation in this key asset class using an IRA account.
Don’t wait for the next major stock market collapse or for a weaker dollar to rob you of even more purchasing power before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: 401k gold, advantage gold, best way to invest in gold, declining dollar, Fed, jobless claims, physical gold, recession, risk/ reward, topping, US China Trade Deal