It was supposed to be a bright day for U.S. stock markets. Both China and Europe were higher in previous sessions and U.S. markets appeared early on ready to follow suit. The gains in U.S. equities evaporated quickly, however, and markets are now trading decidedly lower.
Chinese markets have been a major topic of speculation and concern in recent months. The benchmark Shanghai Composite index has lost around a quarter of its value since the beginning of the year. Worries over slowing growth in China have been largely to blame for the stock market’s poor performance, and recent Chinese GDP data did not help. In fact, recent GDP data showed the weakest rate of growth since the Financial Crisis, and investors are clearly paying attention.
Chinese policy-makers may come to the rescue, however, and Chinese stocks came roaring back overnight registering gains of over four percent. Europe took that positive momentum and also traded higher today. Thus far, however, U.S. markets are moving lower.
The S&P 500 index is trading right around its 200 day moving average. The market seems to be having a difficult time at this level, and the tug of war between the bulls and the bears is in focus. The 200 day moving average is an extremely important technical level, as it shows the larger trend within the market. Many investors will simply buy stocks when above this level and sell stocks when below.
A clean and decisive break below this level on the S&P could set the stage for a “sell the rallies” mentality, and further downside could be seen in the market. This could mean that all-time highs have now been reached-at least for the time being- and that a major correction, perhaps even bear market, could ensue.
Despite economic strength, the market does have numerous significant issues to contend with including but not limited to rising rates, a trade war, global geopolitics and fading effects from tax cuts and government spending. A decline in U.S. equities from current levels could be viewed as the smart money showing its hand, and any subsequent rallies may be fleeting in nature.
Given the deteriorating technical backdrop and a backdrop of potential powder kegs, now may be the time to go to a more defensive posture. Now may be the ideal time to add diversification with assets that can not only appreciate in value, but that may also provide a hedge against accelerating inflation and a weaker dollar. Now may be the ideal time to build a significant allocation in gold.
The yellow metal could stand to see a sharp rise in value when the next downturn takes hold and stocks enter a bear market. Recent price action in gold seems to suggest that some investors have already begun to heed the warning.
Building an allocation in gold has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and how this key asset class might play a major role in your portfolio. Our associates are here to answer any questions you may have, and can even show you how to build a major allocation in gold using your IRA account.
Don’t wait for the stock market to decline further, or for gold prices to take off without you. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.
Tags: advantage gold, gold, rising rates, sell the rallies, stock market collapse, trade war