The highly anticipated Fed policy meeting has now come and gone, with Fed Chief Jerome Powell set to deliver his press conference. The central bank voted by a margin of 9-1 to hold the Fed Funds rate steady. The central bank did, however, still hint at the potential for rate cuts should conditions warrant such a move.
The FOMC removed the word “patient” from its outlook, in a move that could signal a large degree of flexibility by the central bank. Some analysts have suggested that any rate cut from the Fed would be more of an ‘insurance” cut against rising risks rather than a cut made out of current necessity.
The Fed’s so-called “dot-plot” is seemingly providing a degree of confusion.
The 2020 dot was lowered from 2.6 percent to 2.1 percent and the long-run dot was lowered from 2.8 percent to 2.5 percent. The Fed did not, however, provide any clear cut signals of a rate cut this year and officials appear to be in two distinct camps: One that acknowledges current headwinds but thinks they will blow over and another that feels that current headwinds may require some easing to abate.
Of course, several key issues remain up in the air that could have a large impact on any policy decisions. The ongoing U.S./China trade war, for example, could keep growth under wraps, especially if a further escalation is seen. The current expansion is also aging rapidly, and the Fed has still been unable to achieve its desired 2 percent annual inflation target.
Stocks remain near record levels even as the bond market appears to be pricing in a recession.
At some point, something will have to give.
Looking at the bigger picture, regardless of what the Fed does this year or next, the Fed Funds rate is not likely to go much higher, if at all, from current levels. This means that once the next recession does take hold, the central bank will have far less ammunition to combat it compared to a decade ago. Unable to drastically lower rates, the Fed may have to resort to another round or rounds of QE.
There is no denying that at some point, the current expansion will have run its course. The only way to keep it going may be through significant monetary stimulus. Either way, hard assets like gold could stand to gain substantially. A major economic recession and corresponding stock market collapse would not seem to be a question of “if” but rather “when.”
Given the aging expansion, the risk of recession, the potential for lower rates and a weaker dollar, now may be the ideal time to build a significant allocation in gold. Not only does this asset class have significant upside price potential, but it may also provide a key hedge against rising inflation, a weaker dollar and geopolitical risks.
Adding gold to your portfolio has never been easier. Pick up the phone and speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the role it may play in the years ahead. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation using an IRA account.
Don’t wait for the next major recession to take hold before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: annual inflation target, bond market, central bank, fed funds rate, gold, rate cut, trade war