Is the Fed Starting to Backtrack?

Rising interest rates have been the topic of considerable debate in recent months. The Fed has been sticking to its plan of gradual rate hikes while the benchmark 10-year note yield is solidly above the 3% level.

Higher rates have not gone unnoticed, with everyone from President Donald Trump to Mad Money host Jim Cramer weighing in. Stock investors have also made their opinion clear, with recent declines and increasing volatility being largely blamed on higher rates. So far, the Fed has stuck to its guns regarding its plans for more hikes in spite of increasing criticism. The central bank’s stance could be about to change, however.

Federal Reserve Vice Chairman Richard Clarida recently gave prepared remarks during a speech to bankers in New York. A recent article from cnbc.com quoted him as saying: “A monetary policy strategy must find a way to combine incoming data and a model of the economy with a healthy dose of judgment — and humility! — to formulate, and then communicate, a path for the policy rate most consistent with our policy objectives.”

The Vice Chairman said that rates are a lot closer to neutral: the level at which they neither stimulate nor restrict the economy. The article also quoted him as saying “U.S. monetary policy has for some time and will, I believe, continue to be data dependent in the sense that incoming data reveal at the time of each Federal Open Market Committee meeting where the economy is at the time of each meeting relative to the goals of monetary policy.”

Although his and other Fed officials’ comments may be open to interpretation, it sure does sound like some ground work is being set up for either a pause in rate hikes or possibly even a cut in rates at some point.

Perhaps the economy is not as strong as previously thought. Perhaps the effects of tax cuts and government spending are fading fast. Whatever the case may be, global markets are facing a global slowdown and the Fed may have limited power to fight it.

Stocks have already appeared to tip their hand, and any rallies at this point are likely to be sold into. A halt to further hikes or even a more dovish approach from the Fed could potentially help stabilize equities but may also do some significant damage to the dollar. Either way, alternative asset classes like gold could stand to benefit significantly as a great asset rotation gets going.

Given the current economic and geopolitical backdrop, now may be the ideal time to build a significant allocation in alternative assets-and physical gold should be at the top of the list.

The yellow metal appears to be in the beginning stages of the next major bull market, just as stocks appear to be on the verge of a protracted bear market. Stocks could still have a long way to fall regardless of what the Fed does or doesn’t do, so the time to act is now.

Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and how it may play a key role in your portfolio. Our associates are here to answer any questions you may have, and can even show you how to build a significant allocation using your IRA account.

Don’t wait for the next leg lower in stocks before acting. Take steps to build and preserve your wealth today. Call Advantage Gold at 1-800-341-8584 to get started now.

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