The past trading week has been an interesting one. The highly anticipated FOMC meeting has now come and gone, with the central bank cutting the Fed Funds rate by 25-basis points as expected. The Fed did not, however, seem to provide the type of dovish message that the stock bulls were looking for. Stocks sold-off hard following the Fed’s decision.
On Thursday, stocks were set to stage a significant rebound and looked poised to retake all the declines from the previous day. That was until President Trump took to twitter to announce a fresh round of 10 percent tariffs on another $300 billion of Chinese goods. Stocks immediately reversed course and not only puked up their early gains but went well into negative territory for the session.
Stocks are not taking the news of further tariffs well and are sharply lower. Market volatility is expanding and worries over the ongoing global slowdown appear to be intensifying. If the trade war with China is going to continue, the Fed may have no choice but to ride to the rescue. This could potentially mean the central bank is forced to cut rates further, and to cut aggressively.
The problem is, the Fed doesn’t have a lot to work with this time. Unlike the financial crisis of 2008/2009 when the central bank took rates from 5.5 percent to zero, the central bank is embarking on a rate cutting campaign that is starting with rates only at 2.5 percent. The central bank may not be able to create the same type of effect by aggressively cutting rates as it did previously and could be forced to resort to alternative easing measures likely including a significant dose of fresh quantitative easing.
This will accomplish two things: First, it may prop stocks up, at least for a while. Second, it could have an extremely bearish effect on the dollar.
The stock market will, at some point, come crashing down as the effects of artificial stimulus fade. The dollar may also continue a trend lower as other nations seek out alternatives and as the greenback’s status as the global reserve currency of choice deteriorates further.
Now is the ideal time to add alternative asset classes that may potentially outperform during the next major recession. Not only that, but it is also important to add assets that can weather the effects of a weaker dollar and rising inflation. Against the current economic and geopolitical backdrop, there may be no better asset class to look to than physical gold.
Gold not only has significant upside price potential, but it may also act as an important hedge against the next major stock market crash, a weaker dollar and even hyperinflation. The market is already on the verge of a major upside breakout, and that breakout could potentially coincide with a major top in global equity markets.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. 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 the next major stock market crash or for rates to be be back to zero, to crush the dollar before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: back to zero, fed funds rate, FOMC meeting, further tarrifs, ongoing slowdown, rate cutting campaign, stock market, trade war