by Craig R. Smith
If you thought the U.S. stock market correction of 5% to 9% in October was bad, ‘you ain't seen nothing yet’; according to a growing choir of leading economic voices.
Five trillion dollars was erased globally from stocks and bonds in just one week during the October market sell-off. "October’s Market Rout Leaves Investors With No Place to Hide," reported The Wall Street Journal.
What are some of the 2019 wild cards that could derail the decade-long, artificially-induced bull market on Wall Street? Here are a few examples from our SwissAmerica.com daily blog.
"Despite its discomfort, the market decline we observed in October is only a drop in the bucket toward normalizing valuations. Over the completion of the current market cycle, I fully expect the S&P 500 to lose close to two-thirds of its value from the recent peak," writes John Hussman, president of Hussman Investment Trust.
"2019 is shaping up to be the year in which all the policies that worked in the past will no longer work," concludes Charles Hugh Smith at OfTwoMinds.com. "Central banks have inflated assets into the stratosphere, there's $300 trillion in global financial assets...Unprecedented asset purchases, low interest rates and unlimited liquidity have inflated gargantuan credit/asset bubbles around the world, the so-called everything bubble."
Speaking of bubbles, Interest Rate Observer James Grant reminds us that, “It took the United States 193 years to accumulate its first trillion dollars of federal debt. We will add that much in the current fiscal year alone… With rare bipartisanship, Democrats and Republicans compete to pretend that the country isn't going broke"
Grant wisely identifies the root cause why our nation is going broke; "From Alexander Hamilton to Richard Nixon, the dollar was an IOU, a promise to pay gold or silver at a fixed rate. It subsequently became a thing unto itself, an IOU nothing."
What else could go wrong in 2019? The U.S. dollar will likely resume its century-long downward trajectory as China, Russia and other nations rush to abandon the buck in favor of alternative assets and currencies.
The truth is, today there are so many bubbles seeking sharp objects, we may not even make it into 2019 before something goes terribly wrong. Yet historically, investors repeatedly try riding a bubble to the end... until it pops!
In December, an increasingly hawkish Fed is likely to further sharpen their pin by lifting interest rates for a 4th time in 2018, to prove they’re are more concerned about inflation than the skittish stock and housing markets.
Add rising China trade war worries and growing political gridlock as anti-Trump legislation emerges from leftists in key House power posts. Any way you slice it, investors should expect rising market volatility.
My question is simple: When the next market rout happens, will your money be safely hidden in an asset(s) that can survive and thrive?
When equity markets tremble, smart investors run to the ultimate safe haven; solid gold! Last October when stocks fell, gold prices rose; offering the perfect diversification hedge. When the dollar retreats, gold advances.
As 2018 draws to a close, I encourage you to rebalance your portfolio to include at least a 5-10% addition of physical gold as "wealth insurance" - just in case something BIG goes wrong in 2019. Need help getting started? Call one of our representatives today at (800) 289-2646 to help you make sure you head into 2019 with a balanced and hedged portfolio, or visit SwissAmerica.com.