The stock market has been acting like a dieseling engine all year long, taking one step forward and two steps back, then vice versa. Today, the Dow Jones Industrial Average opens 4½% below its all-time high, which was achieved six months ago to the day. Income tax breaks, still lower unemployment, and higher consumer confidence are being touted as the impetus for the ongoing positive economic outlook. But when the airborne ether wears off, investors are going to be confronted by some hard core realities and unlike previous declines, this one isn’t going to be prolonged, so if you don’t prepare for it now, there won’t be time when it takes hold. What’s the bad economic news?
First of all, household debt and loan delinquencies are increasing at an alarming rate, while the cost of credit continues to increase. And regardless of ‘consumer confidence,’ the reality is that the economy is slowing and with credit running low and expensive it figures that Americans won’t be buying enough goods and services for government to tax and avoid recession. The Big Short pointed out fraud activity flags that were conveniently ignored until it was too late, those flags are up again and the response (or lack thereof) appears to be the same. Meanwhile, the Fed waited too long to increase interest rates and in their current haste have all but guaranteed a recession. Reduced supply and rising oil prices also add to recession concerns.
Most home prices have not yet fully recovered from the 2008 recession, but when home prices begin to fall owners begin to cut back on spending, which is another contributing factor to recession. Stock market crashes frequently precede recessions and the great majority of financial analysts are predicting one within the next eighteen months. Depending on which analyst you ask, the anticipated drop can run between 40% and 70%. So even if this long-in-the-tooth bull market could squeeze off another 10% gain before the drop, is it really worth the risk?
There are plenty of reasons to be concerned about our domestic financial affairs, but when we look at the global financial condition, we find even greater reasons for concern, beginning with American desires for isolation rather than cooperation and talk of tariffs rather than joint ventures. Historically, precious metals have provided valuable protection from recession and a myriad of cataclysmic financial conditions. With the market still within range of its all-time high and precious metals at absurdly low levels, there may never be a better time to capture stock profits and invest more than ever before in physical precious metals. Protect your portfolio and financial legacy, but no matter what, don’t get caught without a chair when the music stops!
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.