Retirement investors were dealt a painful blow on Monday when the Dow Jones dropped 600 points.
“The market is enduring a very serious correction.” – Jim Cramer
Powerful forces are at work in the markets these days, as sharp political, economic and social differences are playing out haphazardly on a global scale.
The effect is also quite hazardous to everyday Americans’ hard-earned savings. Individual investors are getting tossed around like little boats in rough economic seas.
The market’s biggest names – Facebook, Amazon, Netflix and Google’s owner Alphabet – are down over 10% from recent 52-week peaks. Netflix and Amazon are down over 30% from those peaks!
There is plenty of blame to go around.
CNBC commentator Jim Cramer has been critical of the Federal Reserve and its regimen of rate hikes in 2018. He believes they are moving too fast and trying to fix an economy that isn’t broken.
Indeed, there have been plenty of signs in the last week that his warning has arrived too late.
Here are five of the biggest:
1. Crude oil has been getting crushed
Oil has been on a slippery slide since early October, including a 1.5% drop in just the last 30 days. Saudi Arabia just announced major cuts to oil production. OPEC says other cartel members will be following suit.
Last week, oil hit bear market territory and just continued to slide. Why? Cuts to oil production can only mean softening demand from industry and transportation. This has global investors spooked that the global economy is hitting the brakes.
2. Inflation is taking off
Core PPI (Producer Price Index) has gone from 2.5% to 4.5% in the last two years. It soared over 5% temporarily in the summer of 2018! This can only go on so long before manufacturers have to pass on price hikes to customers.
Higher inflation means pain in terms of everyday price hikes on food and other necessary items. But it also means higher interest rates ahead too, if the Federal Reserve tries to fix the problem.
3. Trade clash with China is worsening
Investors remain skittish about the upcoming meetings between President Trump and Chinese President Xi Jinping later this month. These leaders will be at the G-20 summit and fixing trade arguments is high on the discussion list. Despite the best intentions of the U.S. in protecting its interests fairly, onlookers aren’t optimistic that the talks will go smoothly.
4. Rising dollar is dragging on markets
It is ironic, that a strong dollar could hurt America. But after a certain point, a dollar that gets too expensive makes all our American exports too expensive for other countries to afford. That hurts revenues of large global American companies.
5. “Passive investing bubble” could be bursting
Some analysts believe that stocks are priced way too high. One critical reason is the automated buying patterns of passive index funds. This could be pushing prices up in a kind of scary robot stock price feedback loop, since they are forced to buy the S&P 500’s biggest stocks more and more as they rise. The reverse effect could happen if the downturn continues.
All of the above are excellent reasons to keep a close eye on your nest egg.
Don’t you agree?
CENTRAL BANKS ARE STOCKING UP ON GOLD
Central banks are quietly acquiring gold faster these days.
The World Gold Council (WGC) just found that central bank gold buying was up over 20% in the third quarter of 2018, which is the quickest since 2015.
Not surprisingly, a lot of these purchases have been made by unstable countries looking for the safe-haven asset benefits of gold.
Russia, Turkey, Kazakhstan, India, Poland and Hungary have led central bank buying in the last few years.
“The pace of buying has really increased and it’s broadened,” says Natalie Dempster, managing director of the WGC.
That said, demand in the U.S. is also rising fast. In the third quarter of 2018, gold bar and coin demand jumped over 70%, according to the WGC.
Rising demand is another pillar under gold that has investors taking a closer look.
But the classic allure of gold — safe haven status — still remains its most powerful appeal to everyday investors.
HOW TO WEATHER A PERFECT STORM
Everyone wants to blame someone or something else for a volatile stock market.
But you and I know that stock market gyrations are inevitable. Rather than playing the blame game, I hope you are considering how to safeguard your IRA against the nasty shocks to come.
Rising rates, a shaky economy and tricky international trade relations means that there are few safe havens to be found in traditional markets.
But precious metals offer diversification and peace of mind when volatility is on the rise.
Peace of mind can be a very valuable commodity if sleepless nights are on the rise too.
If you’ve been considering gold and silver, now could be the best time in years to take another look.
Our gold and silver specialists are standing by to answer your questions today.
Would you give us 15 short minutes of your time? This could mean a big difference down the road, when/if the next big crash comes.
