It is just around the corner: September 2018.
This coming month marks the ten-year anniversary of one of the darkest chapters of stock market history: the bankruptcy and collapse of Lehman Brothers.
Market memories can be short, but Lehman was no small operation: it was huge. This was America’s fourth-largest investment bank. When it went bust, it was the largest bankruptcy ever in U.S. history!
Shortly after this news, the ripple effect hit fast:
Money-market funds began “breaking the buck,” previously thought near-impossible
Liquidity dried up and whole industries starved for need of capital
The U.S. stock market cratered, dropping 25% in the next 30 days
Today, a similar drop would erase over 6000 points from the Dow, bringing it below 20,000 once again. A sobering thought, to say the least.
Let’s hope this bull market continues to ride. But what if it doesn’t?
Mark Hulbert leaves no room for any other path: he refers to a massive market crash as “an inevitable feature of the market.” He goes on to say “A drop of [2008] magnitude could happen at any time. That’s what market risk entails.”
Hulbert recommends that investors take stock of their gains today and consider their options right away.
“If you can’t stomach much risk, then you should reduce your equity exposure to whatever your tolerance level is,” wrote Hulbert. “And the market being at or near all-time highs is a good opportunity to reduce exposure,” he adds.
Preparedness and diversification are the obvious answer to this threat. It is never too early to get prepared, but it might soon be too late.
REPORT: ECONOMIC TRENDS POINT TO GOLD
The World Gold Council’s comprehensive semi-annual outlook for gold was just released earlier this month. Looking back on the last six months, they identify the recent key drivers of gold as:
A strengthening US dollar
Higher investor threshold for headline risk
Soft physical gold demand in Q1 2018
The events of August are already turning these factors around. WGC market analysts have identified key macro trends they expect will impact gold’s behavior for the second half of 2018:
Positive but uneven global economic growth
Trade wars and their impact on currency
Rising inflation and an inverted yield curve
The World Gold Council report examined these factors against the current price level of gold bullion. Their finding?
“Combined with attractive entry levels, we believe that these trends will increase gold’s relevance for investors in the months ahead.” — WGC, July 2018
What do these factors mean for gold?
1.Gold is attractive in a period of wealth expansion. Periods of growth support jewelry buying and long-term safe-haven savings.
2. Rising market risk and uncertainty lie ahead. Market downturns boost investment demand for gold as a safe haven.
3. Opportunity cost against other assets will be lower. The sky-high prices of competing assets such as bonds, currencies and other assets could swing investor attitudes towards gold.
4. Gold could enjoy increased momentum and positioning. Capital flows and price trends could ignite gold’s performance ahead.
TIME HONORED WISDOM
It’s just human nature.
It is way too easy to get over-confident when we have done well in the markets and our house is getting more valuable too. It is human to think “this time it is different” or “I’ll know when the right time comes to sell.”
Will you know? I work in the markets every day, and I honestly can’t say with confidence when the market will fall and by how much.
Calling a market top is a big burden to lay on your shoulders every day, when conditions in our country and our markets are precarious to say the least.
If you’ve been reading my emails, you’ll know we’re not ones to preach about market timing. We want you to be prepared, whatever comes!
Investment pros like Mark Hulbert believe market crashes are inevitable, so why not get prepared now? Imagine how your family will feel with gold and silver in the safe or IRA when/if the markets plunge by 30% or more?
Get prepared today, and you won’t need to worry. Safe haven assets like gold and silver are a time-honored way of diversifying away from traditional assets while also offering great privacy and physical asset benefits.
It isn’t too late to get positioned for the markets of today. And tomorrow.
