The Federal Reserve is set to complete its latest policy meeting on Wednesday afternoon. Although no action is expected from the central bank at this meeting, the markets are expecting the bank to reiterate its previous stance. The next action from the Fed is very likely to occur in September, with another possible hike later in the year.
Some have recently, however, called into question the need for another two hikes this year. Recent data suggest that the U.S. economy is humming along nicely, and last week’s GDP data would seemingly reinforce the current state of economic optimism. Inflation is running hotter as well, and the central bank finds itself in the precarious position of having to walk a fine line as it looks to keep the economy going while keeping inflation in check.
Even President Donald Trump has weighed in, and has voiced his opinion that rate hikes could undo much of the progress that has been made in the last year or two.
Whatever the central bank does or does not decide to do, the situation is becoming increasingly bullish for gold.
If the Fed sticks with its current plans of further rate hikes, investors may get anxious and it could potentially bring the aging stock bull market to an abrupt halt.
If the Fed decides to keep its foot on the gas, inflation could continue to run even hotter and potentially overshoot the central bank’s desired target. Both of these scenarios could potentially lead to a major reversal in stocks and risk assets. Higher rates make it more expensive for companies to borrow money that can be used for expansion, hiring and infrastructure. Higher inflation can erode the value of the dollar, also causing costs to go up.
The Fed has a challenging task in front of it, indeed, and it is unlikely that monetary policy can be normalized without ruffling a lot of feathers. Not only is the central bank looking to normalize rates, but it is also tasked with shrinking its enormous balance sheet.
This could lead to a significant asset rotation that could have a significant impact on stocks. It has been reported that some larger investors have already made the move from growth stocks to value stocks, and the next move could potentially be taking a lot of capital out of stocks and putting it to work in alternative asset classes.
With the Fed seemingly having to choose between the lesser of two evils, now may be the ideal time to add further portfolio diversification using asset classes that could have a lot of possible upside under such circumstances. Gold could very well be at the top of the list.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to build a significant allocation in gold using your IRA account.
Don’t wait for the next major stock market collapse or for rising inflation to take a bite out of your holdings. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, federal reserve, GDP, gold, inflation, trump