As we close the book on April, many investors are wondering:
Why is stock market growth so stagnant while “alternative” investments like gold and silver are up over 20%?
In a nutshell, financial market uncertainty is rising and fears of recession are growing. In fact, billionaire investor Carl Icahn recently warned about looming recession and laid the blame squarely on Wall Street and Washington. According to Icahn, the Federal Reserve’s recent zero-interest-rate policy has caused major distortions in the U.S. economy.
Icahn argues that low interest rates have led to corporate earnings “mirages” where accountants are boosting earnings (and stock prices) with financial engineering. Rather than build economic growth organically, some companies are buying other businesses to prop up illusory corporate earnings.
Though the stock market has been in a gradual seven-year recovery, companies have not invested in their employees, their equipment and business expansion. Today, businesses are slashing their spending by the largest amount since the Great Recession. Should you be worried about the impact of a coming recession on your retirement?
Yes. But it isn’t too late to act.
Signs of Recession are Unmistakable
Corporate profits, a key barometer of the economy’s health, are under pressure across all industries. Energy companies have been decimated.
In March, the U.S. Department of Commerce reported corporate profits before taxes fell 11.5% by nearly $160 billion dollars from the year before.
Tighter labor markets have also cut into corporate profits. With anti-business rhetoric swirling around the Presidential race, business executives are cautious and pulling back even more on their business spending.
First quarter Gross Domestic Product (GDP) shows the economy grew at its slowest pace in two years. Apple, a technology leader, reported a 13% drop in its second quarter revenue as sales of iPhones fell.
Gold: The Recession-Fighting Asset
Against this backdrop of recessionary fears and turbulent market conditions, it is hardly a surprise that gold prices have risen over 20% in the first four months of 2016, reaffirming gold’s role as a safe haven asset in turbulent times. Silver is up even more: over 27%.
Global demand for gold remains strong from both central banks and private investors. Investors are turning to gold because it diversifies their assets, protects their privacy and offers precious peace of mind when markets move quickly.
Don’t Wait Until the Recession Hits to Protect Your Wealth
Signs of a recession are indisputable.
Why not consider buying gold now to help hedge your portfolio before the economy drifts even further? By acting now to safeguard your wealth, you are doing all that you can to minimize the damage if the economy contracts.
