The Federal Reserve cut the Fed Funds rate today by 25-basis points in a move that was widely expected. Markets had been increasing calls for a rate cut from the central bank, and President Trump has made it no secret he thinks the Fed is on the wrong track and wants lower rates.
Over the last nine years, markets have become increasingly accustomed to the Fed or other central banks riding to the rescue at any sign of market volatility or significant risk aversion. Central banks have been arguably over-generous in terms of quantitative easing, and the Fed is already way behind earlier plans to reign in its balance sheet through quantitative tightening.
The “rumor” of a rate cut and increasingly dovish Fed has been thoroughly bought, but larger market players could now turn around and “sell” the news.
It is difficult to imagine a scenario in which the Fed can cut rates further without a significant decline in economic activity. An ongoing slowdown of any significance would be difficult, if not impossible, for equity and credit markets to ignore. Of course, there is also the idea that central bank activity does not have the same punch it once did. A look at last week’s negative DAX reaction to the ECB meeting is a primary indication of this.
After a decade of ultra-low rates, massive quantitative easing programs and dovish forward guidance, one could make the argument that such central bank policies are largely ineffective.
As the global economy slows further, central banks may throw everything they have at it to combat the recession. This could not only mean interest rates back at zero and/or negative yields but could also mean a fresh round of money printing and lower currency values.
Central banks will eventually unleash significant inflation through their easy-money policies, and asset prices could tumble.
With the risk of a global recession on the rise and the central bank antidote likely leading to hyperinflation on a grand scale, now is the time to diversify with alternative asset classes that may outperform during such conditions. Against the current economic and geopolitical backdrop, there may be no better asset class to look to than gold.
Gold not only has significant upside price potential from current levels, but it may also act as an important hedge against a weaker dollar, rising inflation and other geopolitical risks. The asset class that many consider to be the only true form of money left could play a very important role in the years and decades ahead.
Adding this key asset class to your portfolio has never been easier, and perhaps never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the role it may play as the era of easy money continues. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation using an IRA account.
Don’t wait for lower rates and QE to sink the dollar and your purchasing power along with it. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: bank antidote, central bank, global recession, gold, hyperin, key asset, market volatility, outperform, president trump, quantitative easing, reserve cut, risk aversion