Are Investors Running Into a Burning Building?

A USA Today report shows that the vast majority of Americans are still spending more than 80% of their time at home. At a time when the new case numbers of coronavirus have begun to plateau, some states and areas are nevertheless choosing to roll the dice and “open up the economy.” Regardless of the current activities, serious economic damage has already been done. So far, the stock market has responded to the initial March plunge, with an irrationality rally. Bullish investors have continued to throw money at it and stubbornly refused to let the market crash. Nevertheless, approximately 20.5 million jobs were lost in April, raising the unemployment rate to nearly 15%., which is already the highest level since the Great Depression. Meanwhile, on a quarterly annualized basis, our GDP has shrunk 4.7%.

In the wake of this pandemic, investors lowered their expectations, but have lowered the bar nearly to the floor, investors are now finding comfort in the fact that as bad as things are, they could be worse. Things aren’t as bad as they could be, seems to be the only impetus to stock investment at this point. Unfortunately, things are probably going to get worse. What we’ve seen to this point is probably nothing more than a dead-cat bounce. Most investors have become a little too quick to assume that a fast-moving v-shaped recovery (which can happen in a thriving economy) is the light at the end of the tunnel. Unfortunately, it’s probably the 5:15 and we’re headed for a train wreck of epic proportions. The bottom line is that the rally is completely irrational. The last two years of our bull market were essentially subsidized by cheap government money, utilized by public companies, to buy back their own company stock, which inflated company stock prices and triggered executive bonuses, while providing absolutely nothing of value to the company moving forward.

The warning signs are plentiful! At the beginning of the year in 2020, before coronavirus concerns, Jeremy Siegel, a professor of finance at U.P.’s Wharton School of Business, who correctly forecast the market to achieve 20,000 at the end of 2015, suggested that uncalled for market euphoria could move stocks to “unsustainable peaks.” Our bull market has been nothing more than a house of cards for years and COVID-19 is in the process of creating a global recession that will plunder our stock market. In addition, Fed and Trump Administration policies are set to exacerbate inflation, which has not been a considerable factor for quite some time, but when it rains, it pours!

With all the dire economic numbers, it’s a good time to re-evaluate the safety, protection, and portfolio percentage of physical precious metals. At the beginning of the year, Bank of America increased their 18-month price projection for gold from $2,000/oz. to $3,000/oz. Keep in mind that they have absolutely no dog in that hunt. Rising metal prices is actually the last thing they or their Merrill Lynch subsidiary would like to see because it indicates devaluation for most other traditional forms of investment. Call the experts at American Bullion for a portfolio safety review, at (800) 653-GOLD (4653).

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.