The gold market has not seen a lot of upside in recent months, and during that time investors have become increasingly bearish on the metal. The market has had a lot of headwinds to deal with including rising stocks, a stronger dollar, increasing interest rates and strong investor appetite for risk. Stocks have remained stubbornly strong, while the dollar has seen significant upside as inflation and interest rate expectations have increased.
Markets do not typically move in one direction or the other indefinitely, however, and a major asset rotation could potentially be seen sooner rather than later. Any one of a number of issues could spoil the party for stock investors, including a trade war, stock market collapse, higher interest rates and accelerating inflation. It’s no secret that markets like lower rates, and as the Fed continues on its current path towards monetary policy normalization, investors are likely to become increasingly jittery.
Any way you slice it, rising interest rates along with rising inflation can put a major dent into corporate profits. Increased borrowing costs can halt manufacturing efforts, planned expansions and hiring. Companies may be more likely to sit on cash rather than put that capital to work in a rising rate environment. This could then lead to lower stock prices, and a market that becomes vulnerable to a major sell-off or even a protracted bear market.
Although there are numerous potential catalysts for a major reversal in equity markets, rising rates and bond yields are likely to play a major role in the next turn lower for stocks. With the Fed set to hike rates again in September and once more before the end of the year, that point could be arriving sooner than many investors anticipate.
As the stock markets approach a critical inflection point, now may be the ideal time to diversify with alternative asset classes. With stocks at or near all-time highs, and gold almost 50% off of its all-time high, the risk/reward scenario could potentially favor a significant allocation in the yellow metal. The sharp rise in stocks over the last decade has created enormous wealth for some who got into the market early. Gold has the potential to make a similar or even greater move, while also potentially providing a hedge against numerous economic and geopolitical issues.
In fact, long-term dollar weakness, rising inflation and the need for added portfolio diversification would seem to suggest that a significant allocation in this key asset class is not only favorable but necessary.
Adding physical gold to your portfolio has never been easier. Simply pick up the phone and speak with an Advantage Gold account executive. Our associates are here to answer any questions you may have, and can even show you how to invest in this asset class using your IRA account.
Don’t wait for the next great asset rotation to send stocks sharply lower while potentially sending the price of gold sky-high. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, asset rotation, corporate profits, gold, rising interest rates