• Rising inflation and slowing growth spark renewed fears of stagflation.
• Stagflation puts the Fed in a no-win situation—fighting inflation risks hurting jobs, but easing up fuels inflation.
• Gold and silver can help protect retirement savings during economic turmoil.

Signs of Stagflation Grow

Investors are on edge as troubling signs emerge in the U.S. economy. The growing threat of stagflation, where inflation soars while jobs disappear, has them bracing for the worst. The Federal Reserve’s latest economic projections contributed to an 8% slump from an all-time high in the S&P 500 index. According to RSM Chief Economist Joe Brusuelas, we may be heading into a period of “stagflation-lite.” A potentially disastrous situation for retirement savings.¹

The Federal Reserve’s Stagflation Warning

The Federal Open Market Committee (FOMC) recently downgraded its economic growth outlook. They are predicting only a 1.7% expansion this year. That’s a 0.4 percentage point decline from its December forecast. At the same time, the committee raised its inflation expectations. Signaling uncertainty in its economic outlook.²

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Fed officials are now facing a dilemma. If inflation doesn’t approach the 2% target, interest rates may stay high for an extended period. The Fed is taking a “wait and see” approach. They want to see how tariffs affect inflation and economic growth.

In theory, a weak economy with rising unemployment should stop inflation. The two shouldn’t coexist. One of the major challenges of stagflation is that it offers no easy fixes. The Federal Reserve has a dual mandate. It aims to control inflation and maximize employment. However, this creates a conflict. If the Fed raises rates to combat inflation, it can slow down economic growth and increase unemployment. Conversely, lowering rates could fuel inflation further.

Chicago Fed President Austan Goolsbee summarized the challenge. He said, “There is nothing more uncomfortable than a stagflationary environment, where both sides of the mandate start going wrong. There is not a generic answer… Is it worse on the inflation side or the job market side? Higher tariffs raise prices and reduce output—that is a stagflationary impulse.”⁴

A Return to 1970s Stagflation?

The current economy isn’t as bad as the stagflation of the 1970s…yet. But some economists say the conditions are starting to appear. The stagflation crisis of the 1970s was driven by oil price shocks and poor economic policies. Similarly, today’s rising national debt and increased money printing contribute to inflationary pressures. The money supply issue today feels more urgent than it did in the 70s. Making the battle against inflation even tougher.

Market Reactions and Strategies

Bank of America recently warned that the risk of stagflation is growing. They told clients to move from risky assets to safer investments. “In recent weeks, some of the economic data has weakened and inflation has stayed sticky, so that’s caused questioning of whether we could be in a stagflationary environment,” said Jill Carey Hall, a U.S. equity strategist at BofA.⁵

JP Morgan’s trading desk warned that the Fed’s new economic forecasts suggest stagflation. Economist Torsten Slok of Apollo Management emphasized the seriousness of the issue. Saying, “the Fed is worried that the ongoing stagflation shock is going to intensify further.” Meanwhile, Bankrate analyst Mark Hamrick echoed this sentiment. He stated, “Recession risks are clearly rising.”⁶

Gold and Precious Metals: A Safe Haven

Investors aiming to protect their portfolios during stagflation should look at safe-haven assets. Gold and silver can help. Unlike stocks, precious metals often gain value during recessions. This happens as fiat currencies lose their purchasing power.

Phil Carr of FXStreet noted, “Precious metals like gold, silver, platinum tend to be big winners in inflationary environments.” Recent data from GSC Commodity Intelligence supports this. It showed a record $4.9 billion flow into gold in February, the highest ever recorded.⁷

Conclusion

The U.S. economy isn’t at the stagflation levels seen in the 1970s, but warning signs are clear. High inflation, slow economic growth, and rising unemployment present a challenging economic landscape. The Federal Reserve is unsure of its next moves. Making it hard to predict how long these conditions will last.

In such uncertain times, protecting your wealth with gold and silver can be a prudent move. A Gold IRA from American Hartford Gold can help safeguard your retirement savings from the effects of stagflation. Call us today at 800-462-0071 to learn how you can secure your financial future with precious metals.

Notes
1. https://www.reuters.com/markets/us/stagflation-radar-us-economy-no-repeat-70s-2025-03-25/
2. https://seekingalpha.com/article/4769977-is-1970s-stagflation-back
3. https://verifiedinvesting.com/blogs/verified-statistics/federal-reserve-sees-higher-inflation-slower-growth-ahead-stagflation
4. https://economictimes.indiatimes.com/news/international/global-trends/us-news-stagflation-on-the-radar-for-the-us-economy-fed-chair-jerome-powells-big-remark-on-1970s-nightmare/articleshow/119477721.cms?from=mdr
5. https://www.bloomberg.com/news/articles/2025-03-24/bofa-dusts-off-stagflation-playbook-for-stocks-as-fed-flags-risk?embedded-checkout=true
6. https://www.audacy.com/wwl/news/national/is-stagflation-rearing-its-head-in-the-u-s
7. https://www.fxstreet.com/analysis/could-stagflation-trigger-golds-next-big-move-video-202503121727

• The Fed left interest rates unchanged, reflecting uncertainty over inflation and growth.
• Gold has hit record highs even with high interest rates, signaling strong demand.
• A Gold IRA offers protection against inflation and recession in times of uncertainty

The Fed Keeps Rates Unchanged in Uncertain Climate

In the face of rising uncertainty, the Federal Reserve has decided to leave interest rates unchanged for the second straight meeting. That uncertainty isn’t just affecting policymakers. It’s spilling over into the lives of everyday Americans. With inflation running hotter than expected and the risk of a recession growing, now is the time for individuals to take steps to protect their savings. Opening a Gold IRA could provide a crucial hedge against both inflation and economic slowdown.

The Fed Holds Rates Steady – But for How Long?

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In its latest meeting, the Federal Reserve decided to leave interest rates unchanged at 4.25% to 4.5% for the second consecutive time. This decision reflects the Fed’s growing concern over the state of the economy and the challenges posed by persistent inflation and slow growth. Despite earlier projections for three rate cuts this year, Fed officials are now signaling just two cuts. While some are even suggesting there may be none at all.

The Fed’s latest economic forecast paints a mixed picture. Policymakers now expect the economy to grow by just 1.7% in 2025. Down from an earlier projection of 2.1%. Inflation is expected to rise to 2.8% by the end of the year. That’s higher than the 2.5% estimate made in December. Unemployment is also projected to increase to 4.4%.²

Fed Chair Jerome Powell acknowledged the growing uncertainty. He stated that “uncertainty around the economic outlook has increased.” While he maintains that the economy remains fundamentally strong, the combination of rising inflation and slowing growth puts the Fed in a difficult position. Lowering rates could stimulate growth but might worsen inflation. Keeping rates high could help fight inflation but risks dragging the economy into a recession.3

Trump and the Fed

The economic policies of President Trump are adding to the Fed’s dilemma. Powell has carefully avoided commenting directly on Trump’s tariff policy. But the effects are becoming harder to ignore. Trade wars typically fuel inflation while also slowing economic activity. A dangerous combination for the Fed that can result in stagflation.

Powell recently admitted that tariffs could delay progress on inflation, saying, “Clearly, some of it [inflation] is from tariffs.” If tariffs push inflation higher, the Fed may need to keep rates elevated longer than expected. But if tariffs slow growth too much, rate cuts could be needed to prevent a recession. This creates a policy trap, where the Fed is forced to choose between curbing inflation or supporting economic growth.

The Trump administration recognizes that economic disruption is possible as they fix and transform the economy. With a long-term view, Commerce Secretary Lutnik even suggested that a recession would be “worth it.”

Wall Street Braces for a Slowdown

The news of a recession sent stocks on a downturn. Powell admitted that there is now a 1 in 4 chance of a recession — a notable increase from previous estimates.

Market analysts are adjusting their forecasts in response to the shifting outlook. Goldman Sachs has lowered its 2025 GDP growth forecast from 2.2% to 1.7% and expects inflation to rise to 3% from the current 2.6%. JPMorgan Chase and Barclays have also trimmed their growth estimates. Barclays now predicts just 0.7% growth in 2024 — a steep drop from its earlier forecast of 2.5%.⁴

Interest rate cuts, once seen as a sign of economic relief, are now being interpreted as a warning sign. If the Fed cuts rates too aggressively, it could signal that the economy is in more trouble than previously thought. On the other hand, if the Fed holds rates too high for too long, it risks triggering a deeper slowdown.

The CME FedWatch tool currently shows a 32% chance of two 25-basis point cuts in 2025. Goldman Sachs anticipates two cuts this year and one more in 2026 — but only if tariffs don’t spark further inflation. Comerica predicts a single rate cut in July. Analysts expect the Fed to take a “wait and see” approach, likely cutting rates in June and December based on incoming data.⁵

Conclusion

As the Fed wrestles with a cloudy economic future, there are steps you can take to secure your savings. Gold has long been a trusted hedge against both inflation and recession. When inflation rises, gold tends to increase in value as the dollar weakens. During economic slowdowns, gold’s intrinsic value and safe-haven status make it a reliable store of wealth when other assets lose value.

Gold recently hit a record high of over $3,000 per ounce in March 2025 despite high interest rates, which usually weigh on gold prices. This shows strong demand from investors seeking long-term security. If the Fed begins cutting rates, gold prices are likely to climb even higher. Holding precious metals in a Gold IRA can provide the stability your portfolio needs.

To find long-term certainty in uncertain times, call American Hartford Gold at 800-462-0071 today to open your Gold IRA.

Notes:
1. https://www.nytimes.com/live/2025/03/19/business/fed-interest-rates
2. https://www.nytimes.com/live/2025/03/19/business/fed-interest-rates
3. https://www.nytimes.com/live/2025/03/19/business/fed-interest-rates
4. https://apnews.com/article/fed-federal-reserve-rates-trump-tariffs-inflation-prices-a9008f1bb081093cd149967e3e637c7b
5. https://www.foxbusiness.com/economy/how-many-rate-cuts-does-market-expect-year

 

• Goldman Sachs and Morgan Stanley lower growth forecasts amid rising trade tensions and inflation risks.
• Tech stock decline erases trillions in market value, signaling investor concerns over economic stability.
• Gold and silver remain safe assets for retirement protection during market downturns and inflation.

Goldman Sachs Slashes Market Forecast

Plunging markets sent a wake-up call to Wall Street. Goldman Sachs slashed its year-end target for the S&P 500 after it plunged nearly 10%. Uncertainty and tariff concerns rattled investor confidence and raised fears about broader economic trouble. Now, retirement savings find themselves squarely in the crosshairs.

Goldman Sachs cut their S&P 500 forecast to 6,200 from 6,500 after the market approached correction territory. The bank cited growing concerns over the U.S. economy and rising trade tensions.¹

Investor reaction highlights just how overvalued and overconcentrated the current market is. Investors had been enjoying steady gains. But the latest turmoil erased nearly $4 trillion in market value. The so-called Magnificent Seven tech stocks—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—plunged 14% in just weeks. Their price-to-earnings (P/E) ratios fell from 30x to 26x. This sharp decline reflects growing investor demand for protection against mounting economic risks.²

Goldman Downgrades Growth Forecasts

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Goldman Sachs didn’t stop with the S&P 500 downgrade. The bank also lowered its U.S. GDP forecast for 2025 to 1.7% from 2.2% and cut its 2026 growth outlook as well. This marks Goldman’s first below-consensus outlook in over two and a half years. A signal that the bank sees deeper trouble ahead.⁴

Jan Hatzius, Goldman’s chief economist, explained the decision. She said that trade policies have gotten worse, and the administration expects tariffs to cause short-term economic trouble.

Goldman warned that tariffs could have several damaging effects. Including: higher consumer prices, tighter financial conditions, delayed corporate investment.

Goldman’s Chief Equity Strategist lowered the firm’s forecast for S&P 500 earnings growth to 7% from 9% for 2025. He said, “Weaker economic activity usually means weaker corporate earnings growth.”⁵

Signs of a Slowing Economy

The economic slowdown isn’t just a forecast—it’s already happening. U.S. GDP growth fell to 2.3% in the fourth quarter, down from 3.1% in the third quarter. The stock market has been on a rocky path higher, but that climb now looks increasingly unstable.

Lori Calvasina is head of U.S. equity strategy at RBC Capital Markets. She noted that the market can likely handle a 5–10% drop. However, she warned that the risks of a deeper pullback have increased. Saying that if things drop more than 10%, they are likely to keep falling to 20%. A drop of that magnitude would signal a bear market and could further shake investor confidence.⁶

Morgan Stanley Also Lowers Forecasts

It’s not just Goldman Sachs raising alarms. Morgan Stanley also cut its U.S. growth outlook for 2025 and 2026, citing the rising “intensity” of trade policy. The firm expects inflation to rise alongside slower growth. A dangerous combination that could weigh heavily on the economy.

Morgan Stanley analysts explained, “If our narrative entering the year was ‘slower growth, stickier inflation,’ we now think ‘slower growth, firmer inflation.’”⁷

Disconnected from Fundamentals

Hedge funds and big investors are pulling back their positions, making the market drop even sharper. This selloff reminds us that the market doesn’t just run on facts and figures. Emotions and big moves can drive it too. A single change in position can set off a chain reaction, causing the downturn to snowball quickly and make the market harder to predict.

Investors are looking for safety, and the higher equity risk premium is adding to market jitters. The S&P 500 is now down 9% from its peak, reflecting growing concern over corporate earnings and economic uncertainty. Whether buyers will step in to stabilize the market or the downturn will deepen remains to be seen.

Why This Matters for Retirees

For retirees and those nearing retirement, the predicted slowdown in economic growth, weaker corporate earnings, and rising inflation pose serious risks. A stock market decline impacts the value of 401(k) plans and other retirement accounts.

For example:

A 20% market drop (bear market) historically takes about four months to recover—assuming no further declines.

Inflation reduces real returns: A 10.5% nominal return with 8.5% inflation yields only a 2% real gain.

Fixed-income assets like bonds struggle during inflationary periods, eroding purchasing power.

Younger investors have time to recover from market downturns. But for retirees, the combination of slower growth, weaker earnings, and higher inflation could erode their savings at a time when they need stability the most.

How to Protect Your Retirement

During times of market swings and economic doubt, physical gold and silver remain steady stores of value. Gold has long been considered a hedge against inflation and market downturns. And it’s showing strength even as stocks falter – continuing to reach record highs on safe haven demand.

A Gold IRA lets you keep physical gold in your retirement account. This helps guard against market swings and inflation. Gold offers a level of security that paper assets can’t match.

Conclusion

If you’re concerned about how the market downturn and slowing economy could affect your retirement, now is the time to act. Moving some of your retirement funds into a Gold IRA can help protect your wealth and secure your financial future.

Call American Hartford Gold at 800-462-0071 to learn more about how gold and silver can help safeguard your retirement savings.

Notes:
1. https://finance.yahoo.com/news/goldman-sachs-cuts-sp-500-year-end-target-to-6200-as-economic-outlook-weighs-on-profit-forecasts-135231633.html
2. https://finance.yahoo.com/news/wall-street-shock-4-trillion-160722946.html
3. https://finance.yahoo.com/news/goldman-sachs-cuts-sp-500-year-end-target-to-6200-as-economic-outlook-weighs-on-profit-forecasts-135231633.html
4. https://finance.yahoo.com/news/goldman-sachs-cuts-sp-500-year-end-target-to-6200-as-economic-outlook-weighs-on-profit-forecasts-135231633.html
5. https://finance.yahoo.com/news/goldman-sachs-cuts-sp-500-year-end-target-to-6200-as-economic-outlook-weighs-on-profit-forecasts-135231633.html
6. https://finance.yahoo.com/news/goldman-sachs-cuts-sp-500-year-end-target-to-6200-as-economic-outlook-weighs-on-profit-forecasts-135231633.html
7. https://www.investing.com/news/economy-news/morgan-stanley-sees-lower-us-growth-higher-inflation-amid-tariff-uncertainty-3914469

• The U.S. dollar’s role as the global safe-haven asset is increasingly under threat.
• Weakening confidence in the dollar and rising economic uncertainties are shifting global dynamics.
• Gold offers a reliable hedge against potential dollar decline, safeguarding your savings.

Dollar Decline

For decades, the U.S. dollar has been the foundation of global finance. Investors and governments see it as a safe haven during crises. But recent analysis from Deutsche Bank is raising an alarming question. Could the dollar be losing that privileged position?

George Saravelos is the bank’s global head of FX strategy. He recently warned that we must seriously consider the possibility that the dollar may no longer be the ultimate safe-haven asset. “We do not write this lightly. But the speed and scale of global shifts is so rapid that this needs to be acknowledged as a possibility.”¹

Saravelos pointed out two key trends. First, the historical connection between the dollar and riskier assets, like stocks, is weakening. This means the dollar is no longer moving in sync with these assets as it has in the past. And two, the U.S. current account deficit is increasing—typically a sign that the dollar is ‘overvalued’.

This is a big deal. The dollar losing its dominant status would have a profound impact. Global markets, trade, and the financial security of everyday Americans would be affected.

Why the Dollar’s Safe-Haven Status is at Risk

Deutsche Bank raised concerns after the dollar index dropped for the second day in a row. Investors were caught off guard after the U.S. imposed tariffs. Tariffs should have sent the dollar higher, but instead, the dollar unexpectedly weakened.

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The reality is that tariffs introduced uncertainty. Investors do not like uncertainty, and that lack of confidence is making the dollar look less attractive.

Then there is the growing account deficit. That’s the growing gap between what the U.S. spends on foreign goods and services and what it earns from exports. This could lead to borrowing more money and create economic problems. A widening deficit suggests that the dollar may be overvalued. And if investors start questioning its stability, they may look for alternatives. President Trump’s tariffs hold the potential to correct that deficit.

What Happens If the Dollar Loses Supremacy?

The U.S. has long benefited from the dollar being the world’s reserve currency. It lets the government borrow money cheaply. It also helps control inflation. Plus, it ensures American companies can operate smoothly around the world. If the dollar’s safe haven status fades, that could change.

A weaker dollar could lead to higher prices for imported goods, hitting American consumers in the wallet. Investors would face more volatility as financial markets adjust to new safe-haven assets. Even the Federal Reserve might have to rethink its policies in a world where the dollar isn’t the automatic go-to currency.

The long-term implications are even more concerning. If foreign governments and businesses use other currencies for trade, the demand for the dollar might drop. This could lower its value. That, in turn, could make borrowing more expensive for the U.S. government. Creating higher interest rates and slowing economic growth.

If Not the Dollar, Then What?

If the dollar loses its traditional role, other currencies will step in to fill the gap. Some analysts believe the Japanese yen is emerging as the new safe-haven currency. That is due to Japan’s strong economic fundamentals and its significant holdings of U.S. Treasury bonds.

There’s also growing momentum behind a potential BRICS currency. The economic bloc—made up of Brazil, Russia, India, China, and South Africa—has focused on reducing reliance on the U.S. dollar. They are considering a new reserve currency backed by gold. The BRICS+ bloc controls around 42-44% of global FX reserves. Their potential influence should not be underestimated.³

If BRICS nations successfully shift away from the dollar, it could upend the global financial order. U.S. influence in trade, sanctions, and economic policy would be weakened. The benefits of dollar dominance—such as cheaper borrowing costs, lower inflation, and unparalleled financial stability—could erode. The U.S. economy would be more vulnerable to external shocks. And remember, economic power translates directly into political power. Losing financial dominance would mean losing America’s ability to shape global events, signaling the end of an era of U.S. supremacy.

Gold: The Untarnished Safe Haven

While currencies rise and fall, gold remains a trusted store of value. In times of uncertainty, investors flock to gold. And we’re seeing that now—its price has been hitting record highs as people seek stability and long-term security.

Central banks, including those in BRICS nations, have been increasing their gold reserves, as they move away from U.S. Treasuries. A sign that they see its enduring value as faith in the greenback fades.

Conclusion

The financial landscape is evolving, and the U.S. dollar’s role as the ultimate safe-haven currency is no longer a guarantee. If its dominance declines, global markets will have to adjust. The effects will be felt everywhere—from trade and investments to everyday prices at the store.

For individual Americans, gold offers a hedge against currency risk. Physical precious metals held in a Gold IRA provide a way to protect savings from an insecure dollar. To learn more, call American Hartford Gold today at 800-462-0071.

Notes:

1. https://www.msn.com/en-us/money/news/ar-AA1AdQ0X
2. https://www.moomoo.com/news/post/49998369/major-change-wall-street-shouts-the-dollar-s-status-as?level=1&data_ticket=1741209301639274
3. https://think.ing.com/articles/de-dollarisation-more-brics-in-the-wall/

• This holiday season, gold is again proving itself a timeless means for financial security
• Gold offers independence, inflation protection, diversification
• A Gold IRA combines wealth-building tax advantages with the benefits of precious metals

A Timeless Asset

More than 2,000 years ago, gold was gifted by wise men as a statement of faith. Today, gold remains a timeless and wise gift, providing economic security in troubling times. As we look ahead to 2025, here are five compelling reasons why gold could be the perfect way to safeguard your financial future.

1. Gold Offers Independence

In an economy increasingly influenced by forces beyond our control, gold stands out as a truly independent asset. The excitement surrounding today’s overheated stock market often feels disconnected from the growing pressures of a rising cost of living. Meanwhile, real estate and the dollar are subject to an inscrutable Federal Reserve agenda. And the rise of a digital dollar is threatening personal financial privacy and freedom.

Gold is not tied to any government or central authority. Its unique properties – including its low correlation with other assets, behavior during various economic conditions, supply dynamics, and recognition by central banks – support this independence. Offering liquidity, privacy, and the ease of transfer— gold is a powerful safeguard against a rapidly changing financial landscape.

2. Hedge Against Inflation

With inflation rates fluctuating, gold remains a proven hedge against the eroding power of the dollar. Inflation has come down from its 40-year record high of 9.1%, but it remains above the Fed’s 2% target. And now, analysts fear inflationary pressures are on the rise. So much so that the Federal Reserve may not cut interest rates at all in 2025. They dread reigniting inflation. Gold’s value tends to rise in response to inflation, offering a stable store of wealth even as paper currencies lose their purchasing power.

Gold’s strong performance in 2024 has reinforced its reputation as an effective hedge against inflation. Despite persistent inflation, gold has surged to new all-time highs, reaching $2,790.07 per ounce in October. Additionally, it increased by 26.85% since the beginning of 2024, significantly outpacing inflation.¹

3. Portfolio Diversification

Modern Portfolio Theory emphasizes the importance of diversifying to reduce risk. Gold historically performs well during market downturns, acting as a counterbalance to stocks and bonds. In 2024, gold has been one of the best-performing assets. Even amid positive performance from risk assets, a stronger U.S. dollar, and elevated bond yields. This stellar performance reinforces its value as a key diversification tool in any portfolio.²

4. Rising Demand in 2025

The demand for gold is expected to grow in 2025. It is driven by strong central bank demand from emerging markets like China, India, and Turkey, along with growing consumer interest in Asia. Geopolitical tensions and economic uncertainties are also boosting safe-haven demand. Major financial institutions, including Goldman Sachs, Bank of America, Citibank, and Commonwealth Bank, predict gold will reach $3,000 per ounce by 2025 or 2026. The World Gold Council shares this optimistic outlook, citing factors such as changing monetary policy, a potential weakening of the U.S. dollar, and increasing investor interest in safe-haven assets.³

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5. Tax Advantages of Gold IRAs

A Gold IRA offers several tax advantages that can help grow your retirement savings. With a traditional Gold IRA, your funds grow tax-deferred until withdrawal. Contributions may also be tax-deductible, reducing your taxable income in the year you contribute. For those with a Roth Gold IRA, qualified withdrawals in retirement are tax-free, provided certain conditions are met. You can also roll over funds from other retirement accounts into a Gold IRA without incurring immediate taxes, if done correctly. Additionally, a traditional Gold IRA may allow you to pay taxes at a lower rate in retirement. Gold IRAs can also help reduce inheritance taxes, making it easier to pass wealth on to your heirs. With Gold IRAs, you get the dual benefits of diversification with precious metals while maintaining IRA tax benefits.

Conclusion

This holiday season, consider the wisdom behind the gift of gold. Whether you’re looking to diversify your portfolio, hedge against inflation, or invest in a secure future, gold offers unparalleled benefits. To learn how you can gain the advantages of a Gold IRA, call American Hartford Gold today at 800-462-0071.

Notes:
1. https://tradingeconomics.com/commodity/gold
2. https://www.gold.org/goldhub/gold-focus/2024/11/lets-tally-rally
3. https://investinghaven.com/forecasts/gold-price-prediction/
4. https://fortune.com/img-assets/wp-content/uploads/2024/11/GOL_charts_111824.png?w=1440&q=75

 

• The Federal Reserve issued its third and final rate cut for 2024
• Lingering inflation, dropping stock markets, and high interest rates are increasing investor uncertainty
• Gold and silver held in a Gold IRA offer long term protection from the Fed’s monetary policy

Fed’s Final Cut

In its third and final rate cut of 2024, the Federal Reserve reduced interest rates by 0.25 percentage points. This marks the conclusion of an aggressive cycle of rate hikes aimed at curbing record-high inflation. However, despite this move to stimulate the economy, stock markets responded negatively, continuing a 10-day losing streak— the longest since the 1970s.

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Stock Market Reaction

Stocks had been hitting record highs earlier in the year. But the recent rate cut did little to stop its current slide. The Dow Jones Industrial Average had its biggest drop since August and its longest losing streak since 1974. Similarly, the S&P 500 and the Nasdaq have also fallen, with losses intensifying as the day progressed.

Traders had hoped the Fed would continue aggressive rate cuts in 2025. But the expectation of more rate reductions was quickly dampened by the Fed’s cautious outlook.

Bond Yields and Inflation Concerns

After the cut, Treasury yields rose, signaling market expectations of higher inflation. Rising bond yields typically make bonds more attractive to investors compared to stocks. A shift from stocks to bonds can lower stock market performance. And fuel the ongoing market decline.

Future Cuts Uncertain

The Federal Reserve signaled they are almost done with rate cuts. They’re forecasting just two cuts in 2025, down from four. Their goal is to balance low inflation without sending the economy into a recession. Their projection suggests interest rates could drop to 3.4% by 2026, eventually reaching 3%. However, these forecasts might as well be guesses as fresh data brings new predictions. “As we think about further cuts, we’re going to be looking for progress on inflation,” Powell said. He noted that inflation has remained relatively flat over the past 12 months.²

Unemployment and Inflation Projections

Earlier this year, the U.S. was grappling with rising unemployment and falling inflation. Now, however, things seem to have flipped. Inflation has started to rise again, and unemployment is expected to decrease. The Fed has raised its inflation projections for the end of 2025 from 2.1% to 2.5%. Powell has made it clear that while inflation has slowed, prices are still rising. He said the Fed can only slow the rise of prices. Only a recession would actually lower them.³

Rate Cuts in Trump’s Economy

President Trump has promised more growth through tax cuts, deregulation, and tariffs. Such growth would likely cause more inflationary pressures. This puts the Fed in a delicate position. They may need to raise rates again to control inflation. Only to lower them again to avoid a recession.

This lack of a long-term, disciplined policy approach contributes to economic uncertainty. And heightens the risk of stagflation— a situation where inflation rises while economic growth slows.

The Fed’s Neutral Rate Goal

Powell’s pursuit of a “neutral rate” exposes a lack of clear direction. A “neutral rate” is one that neither stimulates nor hurts economic growth. “We’re pretty sure it’s below where we are now,” Powell said. “But as we move further, there will be more uncertainty about where that is.”⁴

Conclusion

Inflation is still lingering, and interest rates are at their peak for now. Americans can expect little to no relief from high borrowing costs. Mortgage rates and credit card interest rates are unlikely to decrease significantly in the immediate future. And as the Trump economy takes hold, inflation could rise again, causing further strain on household budgets.

In times of economic uncertainty, one way to protect your wealth is through physical precious metals, such as gold. Gold has historically served as a hedge against inflation and market volatility. While the stock market may continue to struggle under the pressure of high interest rates and rising inflation, physical gold offers long-term protection for your retirement funds, especially in a Gold IRA. To learn more about how gold can help safeguard your nest egg in these uncertain times, call us today at 800-462-0071.

Notes:
1. https://www.reuters.com/graphics/INTERESTRATES-AUTOMATED/US-10-YEARS-202412/mypmbqdqlvr/chart.png
2. https://www.wsj.com/articles/transcript-fed-chief-jerome-powells-postmeeting-press-conference-bb0d39dc
3. https://www.nytimes.com/live/2024/12/18/business/fed-interest-rates
4. https://www.investors.com/news/economy/federal-reserve-meeting-december-final-rate-cut-sp-500/