You Should Be…
You don’t have to look too hard to see that there are strong signs indicating that the five-year bull market may be coming to an end. High-flying momentum stocks have fallen out of favor in recent months and many of them have lost 20 percent or more of their value in only a few months. Now may be the perfect time to lighten up on your stock holdings and put some of that money into precious metals. Here are the reasons why precious metals may outperform stocks in the coming months and years.
Long-time Market Watchers Predicting Decline
From both a technical and fundamental point of view, many seasoned analysts are predicting that the market is dangerously close to beginning a correction that will quickly turn into a bear market. On CNBC’s Futures Now, that aired on May 15, 2014, Ralph Acampora of Altaira Investment Solutions, predicted a 10-15 percent drop in the S&P 500 Index by October of this year. Art Cashin, UBS’ Director of Floor Operations at the NYSE, was concerned about the weak economy going forward. Technical indicators, such as the 50 and 200 day moving average, show that while the market has gone up, the breadth of the gains is diminishing. Fewer stocks are participating in the gains and that is a negative sign.
Consumer Sentiment
The University of Michigan Consumer Sentiment Index (MCSI), in May of 2014, showed that the number had fallen to 81.8 from the previous month’s figure (84.1 in April). The May survey also indicated that annual inflation expectations for 2014 remained unchanged at 3.2 percent. Both numbers are bearish for the stock market and bullish for silver and gold.
Interest Rates are Heading Higher
Janet Yellin has made it quite clear that as long as economic conditions stay the way they are, the tapering will continue until the bond purchasing program ends sometime before the end of 2014. She has also set a goal of about 2 percent for inflation and will start to raise interest rates some time around mid-2014. When interest rates go up, other investment options become more appealing. Investors may sell some of their stock holdings and put the money in things like bonds, certificates of deposit and gold. Selling pressure will drive the market down. Also, as inflation starts to return, precious metals become even more attractive and an increase in demand will likely cause gold and silver prices to rise.
Trouble Abroad
Yes, there is always something bad going on in the world, but it seems that the tensions have risen to new heights in recent years. No one knows if Putin will be satisfied with reclaiming Crimea, or if he will try to annex more of the Ukraine. Economic sanctions have been placed on Russia and Russia has responded by pushing de-dollarizartion. Syria is still a major problem in the midst of the oil-producing region and what about Iran, Iraq and Afghanistan? China’s economy is slowing down while tensions between China and their neighbor’s heats up (Vietnam & Japan) and relationships with the U.S. deteriorate. Escalations on any one of these conflicts should cause gold prices to go up.
If you are worried about all of the signs pointing to a lower stock market, do something about it now. Take action and buy precious metals. Over time, precious metals will go up. It makes sense to allocate a portion of your total investment dollars toward portfolio insurance. Learn how investing in gold and silver will help protect your portfolio – Get our FREE precious metals investment guide today!.