This week saw an abrupt hiccup in a stock market rally that has run since President-Elect Trump won the election.
Yesterday, for the first time in two weeks:
- U.S. stocks fell off historical and record highs
- U.S. dollar traded at a four-week low
- U.S. inflation recorded its biggest increase in 6 months in October
- Gold traded at a four-week high
Many analysts believe that the recent stock market run up cannot be sustained, and I wholeheartedly agree.
The environment after the election is still rancorous with a new controversial president in the wings. The short-term “Trump rally” has now left stocks priced at a level that only makes sense if the U.S. economy goes on to soar in a way it has not in the last eight years. That’s quite a bet, regardless of how you personally voted!
We wish the President-Elect every success, of course. But now is a critical time to be right on top of your retirement strategy and reassess your diversification.
If you’ve done well in the recent stock market rally, it could be an ideal moment to move a portion of your wealth into safe-haven assets like gold and silver.
WEAK FUNDAMENTALS CAN’T SUSTAIN MARKET FOR LONG
Stock market fundamentals are weaker than believed. Earnings, general valuation ratios and economic data suggest that a 2017 stock market plunge is a very real possibility.
The simple truth is that when earnings collapse, so does the stock market. Leading economic indicators suggest that the U.S. economy may be stalling and a recession could be on the horizon.
After the last financial crisis, the Federal Reserve lowered rates and printed money. Investors seeking yields gravitated to the stock market. Now, the Fed is reversing course and will likely raise rates in December, making bonds more attractive. As investors make adjustments in their portfolios based on this new Fed policy, stocks could see the very crash the Fed was hoping to avoid.
HSBC WARNING: RED ALERT FOR POSSIBLE SELL-OFF
HSBC’s head of technical analysis, Murray Gunn, has issued a red alert for an imminent sell-off in stocks in the light of the price action over the past few weeks. Gunn believes the possibility of a severe fall in the stock market is now very high.
Citigroup’s Thomas Fitzpatrick sees similarities between today’s stock market and conditions before the 1987 crash. According to Fitzpatrick, if the stock market stalls like we saw this week, it is a clear sign that the bears have taken over and are starting to feast.
Quantum Fund founder Jim Rogers has recently warned that a $68 trillion “Biblical” collapse is poised to wipe out millions of Americans in the market. Mark Faber believes stocks are set to endure a gut-wrenching drop that could rival the greatest crashes in stock market history. Economist Andrew Smithers believes that U.S. stocks are now more than 80% overvalued, with risk at a level we’ve only seen before in 1929 and 1999.
Technical strategist Tom DeMark predicts stocks are peaking and could fall by as much as 11%. With stocks at nosebleed levels, DeMark warns investors should exercise caution and heed the warning signs of a coming correction.
Other financial firms have also warned of a stock market selloff. Royal Bank of Scotlandsays the market is showing stress akin to the 2008 crisis and advises its clients to avoid stocks right now.
SLEEP WELL AT NIGHT WITH A RETIREMENT SAFE-HAVEN
The outlook for paper assets remains uncertain. Investors should remember that the principles of diversification are not suspended when the stock market rallies.
When the next stock market crash hits, investors who have diversified into gold and silver will enjoy a level of comfort and peace of mind no paper asset can deliver. And if inflation comes back, experts like U.S. Global Investors CEO Frank Holmes think gold investors will be amply rewarded over time.
The pullback in precious metals could be the temporary buying opportunity you’ve been waiting for. The election of Trump was a vote for uncertainty and if stocks tank and inflation comes roaring back, gold will once again be your bulwark to protect your hard-earned wealth and retirement.