According to a report by marketwatch.com, leading indicators declined by .1% in December in what may be viewed as another sign of a slowing U.S. economy. Of note is the fact that the index fell in two of the final three months of 2018, quite possibly due to the current slowdown gathering steam.
The latest disappointing economic report is just another in what has seemingly become the trend of late. Several key components of the economy, especially in the manufacturing sector, have been showing weakness in recent weeks. The lighter U.S. data also comes at a time when China is clearly showing that its economy has slowed. In fact, recent data out of the world’s second-largest economy showed the weakest rate of growth since 1990.
All of this is occurring as the U.S. Government shutdown drags on. Whether the shutdown is the right thing to do or not, the effects on Q1 GDP could be significant if it continues much longer.
All these factors could put the Fed, and markets, in a very precarious position.
The Fed seems determined to continue its path to policy normalization with another two rate hikes penciled in this year. Although that could change, it seems clear that the Fed’s previous rate hikes and balance sheet contraction are already showing some tangible effects. As the global slowdown increases in momentum, however, the central bank could face some very serious choices. The central bank could move forward with its current plans to hike rates further, it could keep rates at current levels, or it could start cutting rates again.
All these scenarios are potentially bullish for gold.
If the global slowdown deepens, markets will decline further as risk appetite falls. Investors are likely to avoid risk assets while seeking perceived safe havens such as gold. This case could potentially keep the Fed at a stand-still or may even cause the central bank to start cutting rates.
On the other hand, if the Fed decides to continue hiking, risk assets are likely to decline under that scenario as well. The markets have already made clear how they will react to higher rates, and an over-aggressive Fed could potentially fuel an avalanche in equity markets and other asset classes as it puts a strangle-hold on the economy.
The central bank has effectively boxed itself in, with no simple solution. As the next recession approaches, the Fed will also lack the tools it had following the Great Depression, as it cannot lower rates as much from current levels. In fact, the central bank could potentially be left with little choice but to begin a QE4 program.
All these dynamics may be viewed as extremely bearish for stocks and very bullish for safe haven asset classes. It may not be a matter of “if” a great asset rotation takes place, but rather “when.” Some would argue that such a rotation is already underway.
If you want to stay ahead of the curve, now is the time to act. Adding diversity to your portfolio has perhaps never been more important than it is today, and physical gold may potentially provide numerous benefits given the current economic and geopolitical backdrop. The gold market is already moving higher, but it is not too late to get started. Recent upside could simply be the very beginning stages of the next major, cyclical bull market. Adding this important asset class to your portfolio has never been easier.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and how this asset class may play a key role in your portfolio going forward. 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 an IRA account.
Don’t wait for the next major stock market decline or for the next major recession to take hold before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, china, GDP, gold, leading indicators, shutdown