On Yahoo’s The Daily Ticker, analyst Henry Blodget states, “I think there’s a decent chance that the stock market will crash in the next year or two – maybe dropping 30% or more”.
These comments seem to be in line with many other experts who feel that the stock market is peaking and on the verge of an imminent collapse. Blodget goes on to say that even if the stock market does not crash that it will more than likely deliver poor returns over the next ten years. He specifically states that he expects returns around 3% per year which would be a big drop from typical stock returns of around 10% per year.
Blodget states a number of reasons why he feels this way, including the facts that: stocks are expensive relative to earnings and earnings are much higher than normal.
“It’s not crappy enough that I’m dumping my stocks,” Blodget says. “I expect bonds and cash to deliver lousy returns over the next 10 years too – maybe even worse than stocks. And I’m scared we’ll eventually get some rapid inflation, which stocks should provide some protection from (unlike bonds and cash). But I’m not expecting the double-digit gains we’ve had from stocks over the last few years to continue much longer.”
Without cash and bonds to turn to for stability, investors will be seeking other safe havens if the stock market reacts as Blodget and other analysts fear. Physical gold has historically been used as a hedge against inflation and falling stock market. The Street’s Jim Cramer has stated that physical gold should make up at least 5% of an investment portfolio, primarily as a hedge against inflation.
With gold prices still at relatively low levels ($1,328 an ounce at the time of this article), now might be a good time to look at padding your portfolio with the yellow precious metal.
Source: The Daily Ticker