Last week marked the first time the Federal Reserve has raised interest rates in a year, and only the second time it has done so in a decade. Although the Fed did not surprise markets at all implementing a rate hike of 25bps, the central bank did appear to sound considerably more hawkish than markets had expected.
Given the fact that a quarter point rate hike by the Fed was pretty much a foregone conclusion, investors turned their attention to the central bank’s plans for 2017. The Fed’s dot-plot now shows three rate hikes in 2017, rather than the two that have been forecasted by numerous analysts.
Why the change in rate expectations?
Well, for starters, the Trump Presidential victory is almost certainly playing a major role in changing expectations. Risk assets have been on the move higher since the Trump victory, and buying has been fueled by the idea of increased fiscal spending and tax cuts. Trump’s plans are considered to be inflationary, and rising inflation expectations are also likely playing a part in the Fed’s thinking.
You must remember, however, that we have seen this before…
It was not long ago that markets were looking for not one but four interest rate hikes in 2016. Whether it was Brexit, China or the election, the Fed kept finding reasons not to raise rates.
Looking at the dot-plot for 2017, just because three rate hikes may be possible does not mean that three rate hikes will actually take place.
It is also worth keeping in mind that even with an “extra” possible rate hike next year, the pace of further hikes is still very slow and incremental, and rates are likely to remain subdued for some time to come.
This could be very bullish for gold and other precious metals…
Finally, all of the recent optimism and euphoria has been largely based on the notion of tax cuts, increased fiscal spending, job creation and more. Whether or not such policies are implemented and what effects they may have on the economy remain to be seen. Markets may be “putting the cart before the horse” currently and could begin to sing a very different tune if economic expectations are not met.
We believe that now is the time to consider further ways to diversify your portfolio, and that as the current bull market ages even further, the chances of a major crash are on the rise.
Perceived safe haven assets like physical gold and silver have been on the decline in recent weeks, as investors chase stocks higher and as equity markets carve out fresh all-time highs on what seems to be a regular basis now.
In our opinion, the more the market rises from what we believe are overvalued levels, the harder it will fall. We believe it is not a question of “if” but rather “when.”
Now is the time to consider some alternatives, before the next major downturn arrives and wipes out billions in investor wealth. Now is the time to consider an allocation in physical gold and silver. These metals are currently at levels that we believe represent an excellent long-term value. We also feel that 2017 could mark a major turning point in these asset classes, with the potential for much higher prices ahead.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold and silver ownership. Our precious metals professionals can guide you through the process of buying and holding physical precious metals, and can even show you how to buy real, physical gold and silver using your IRA account.
Don’t wait for the next major stock market crash to explore your options. Don’t get distracted by all of the “noise” regarding higher interest rates or economic policy. Look into these key alternative asset classes now before prices rise from current levels. Call us today at 1-800-341-8584 to get started.Tags: advantage gold, dot-plot, Fed, fiscal policy, gold, inflation expectation, interest rate hike, trump