A “perfect storm” combination of global trade war bluster and a mass investor exit from tech stocks sent markets sailing lower on Monday.
In contrast, safe-havens like gold held steady in the storm.
NASDAQ shares tumbled to pre-2018 levels, compounding investor pain after a March that delivered painful drops for both the Dow Jones and S&P 500.
A rough start to the second quarter of 2018, indeed.
In fact, Monday was one of the worst days for stocks that we’ve seen in a while:
1. All 11 S&P 500 sectors dropped; eight of them sank more than 2%
2.Amazon plummeted 5% on Monday alone, and is down more than 8% over the last month
3.Tesla fell over 5%, adding to the stock’s harsh 22% drop in March
4.The NASDAQ has erased its 2018 gains and is just shy of official correction levels
What could be next? Technical indicators have investment experts worried.
On Monday, sliding stock shares dropped so much that the S&P 500 closed below its 200-day moving average for the first time since June 2016.
Why is that date so significant? June 2016 was a huge month, in which the UK voted to depart from the European Union and shocked the world.
Sadly, it seems the crisis today is here in the U.S.A.
America’s leading tech stocks and our global trading partners are under scathing fire from the current administration, which itself is under fire from many sides.
Facebook is losing favor fast as its CEO Mark Zuckerberg seems to be losing control over our nation’s online privacy. Bellwether stocks such as Tesla have hit critical operational walls recently and made costly blunders that have shaken investor confidence.
It is worth remembering… April is generally the strongest month of the year for the Dow! It is unusual to be facing these kinds of headwinds now.
If markets are struggling during this period, then how will they perform during the less favorable months ahead?
We’ll find out soon. That’s why we urge every investor to get ready now.
WHAT DOES THIS MEAN FOR GOLD PRICES?
Bloomberg Intelligence commodity strategist Mike McGlone is confident a gold rally is in the cards.
McGlone believes that signals from the Federal Reserve’s recent policy, rising inflation combined with a declining dollar favor stronger gold.
McGlone writes, “gold is poised to break above resistance… supply and demand trends – along with a declining U.S. dollar – remain favorable for gold.”
Moreover, Mike McGlone says gold buyers should not be concerned about the current slate of 2018 interest rate hikes at this time. According to McGlone, the only reason the Fed is raising rates is because of rising inflation. Inflation has historically provided strong support for higher gold prices.
TRADE WARS GET REAL: GOLD SEES SUPPORT
Capital Economics’ commodities economist Simona Gambarini thinks rising trade tensions will lead to investors into safe-haven options like gold.
She writes: “The global economic impact of the tariffs announced by the Trump administration will be small in our view… but the implications for the financial markets, including gold, could be much bigger.”
Gambarini thinks U.S. dollar performance is a key trend to watch.
Gambarini writes, “In the event of a full-blown trade war, the dollar could continue to make headway against emerging market currencies, while simultaneously weakening against its developed market counterparts. In this event, we can expect investors to rotate out of risky assets into safe havens, with gold a key beneficiary.”
A REMINDER: GOLD PROTECTS WITH PHYSICAL ASSETS
Gold bulls are finding that 2018 offers plenty of reason for optimism. Owning physical gold in uncertain times can be a wise and sensible strategy.
While stocks are crashing around our ears, bullion is wrapping up its third quarterly gain, a feat not seen since 2011!
Former Fed Chairman Alan Greenspan calls gold “a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”
Regardless of your opinions about the current administration, there is no doubt that safe-haven demand for gold should get a boost from the continuing media circus in Washington.
Higher stock market volatility is here, and stock prices are still at nose-bleed levels. All retirement investors need to think outside the box and consider investments other than stocks and bonds.
Act now to diversify your portfolio with a safe-haven asset that has proven its intrinsic worth for centuries.