The subject of the Fed and its plans to continue with gradual rate hikes has been the topic of considerable debate in recent months. Thus far, the central bank has stuck to its guns and moved ahead with more hikes. In fact, the central bank has another hike planned before the end of the year and currently has three more penciled in for next year.
It’s no secret that the Fed has drawn some criticism. Even President Trump has weighed in on the issue. The Fed has, however, maintained that further hikes are the way to go.
Today, Bridgewater Associates founder Ray Dalio expressed his opinion. In an article from marketwatch.com, Dalio was quoted from an interview with CNBC as stating “We’re in a situation right now that the Fed will have to look at asset prices before they look at economic activity. It’s a difficult position.”
Much of the stock market volatility that has been seen over the last several weeks has been attributed to higher rates. With the Fed likely to follow-through on more tightening, it should come as no surprise that markets may become even more skittish.
The defenders of the Fed certainly have a good argument. Full employment and rising inflation are two major reasons to hike further. The tax cuts and fiscal spending are two more. In a normal environment, further hikes would certainly be considered the right thing to do. But the current environment is not normal. The markets are coming off an extended period of artificially low rates and QE. Those measures were likely a major factor in the stock market rally that is now a decade old. It is quite questionable, however, if stocks can maintain current valuations and earnings in a rising-rate environment.
For those who didn’t believe the stock market rally was “artificial,” let’s just say you are about to find out just how artificial it really is. And it won’t be pretty. Stocks have come a long way in recent years, and could have a long way to fall. Given the current economic and geopolitical backdrop as well as a risk/reward scenario for stocks that no longer makes sense, and you may conclude that now is the time to start diversifying heavily away from equities and risk assets.
With accelerating inflation, geopolitical risks and the potential for a major reversal in stocks, what better asset class to allocate to than hard, physical gold.
Adding this key asset class, which not only has tremendous upside potential but which may also provide a hedge against inflation and a weaker dollar, has never been easier. Simply pick up the phone and speak with an Advantage Gold account executive today. Our associates are here to answer any questions you may have, and can even show you how easy it is to build a significant allocation in this asset class using your IRA account.
Don’t wait for higher rates to fuel the next major stock market crash or bear market before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, bridgewater, central bank, gold, inflation, interest rates hikes, ray dalio, trump