• Stocks fall on fears of a total banking system collapse
• Financial leaders warn this may only be the beginning of a global meltdown
• Advisors recommend moving wealth into precious metals to protect it

Markets Plummet as Banks Fail

The Dow plummeted 500 points on fears of a total banking system failure. After the rapid fall of three banks in a week, investors are fleeing the shaky sector. Market leaders and credit rating services warn this is just the beginning. Advisors recommend diversifying away from paper and digital assets into precious metals.

Panic is growing as Credit Suisse bank is in danger of failing next. Its shares fell more than 31%, dragging down the European Bank sector. US big bank shares declined in sympathy. Citigroup and Wells Fargo shed nearly 6% and 5%. Goldman Sachs and Bank of America fell around 5.5% and 2.5%, respectively.¹

Charles Schwab, founder of the investment firm bearing his name, lost $3 billion after the SVB collapse. Shares of Charles Schwab dropped over 20% during a massive sell off. Traders fear banks like Schwab, with large bond holdings with long maturities, might be forced to sell everything to cover a rush of deposit withdrawals. And suffer the same fate as SVB.²

The stunning collapse of Silicon Valley Bank and Signature Bank tie back to the Fed’s aggressive rate hikes. Rates rose as the Federal Reserve battled record high inflation. SVB found itself with some $16 billion in unrealized losses from long-dated Treasury’s it held. As yields rose, it eroded the value of those bonds. This created liquidity issues for the bank. SVB had to sell those bonds at a loss to meet obligations.

Financial Leader’s Warning

Financial experts are flashing warning signs. Billionaire Ray Dalio is the founder of Bridgewater Associates. He said the SVB failure shows the growing cracks in the global financial system. “This bank failure is a ‘canary in the coal mine,’” Dalio said.

Dalio believes it signals a new era after central bank rate hikes. He expects more problems in debt and credit markets. The impact of interest rate hikes is “producing this classic dynamic of dominos falling.”³

Blackrock CEO Larry Fink warned banks may need to pull back on lending to shore up their balance sheets. He anticipates stricter banking regulations as a result. And Pershing Square Capital Management founder Bill Ackman says more banks will fail despite US government intervention.

Credit Rating Cut

Moody’s Investor Service cut the outlook on the US banking system from stable to negative. They said other institutions with unrealized losses or uninsured depositors could still be at risk. Moody’s blamed the cut on the bank failures and the need for a dramatic government rescue plan.

The Federal Reserve established a facility to ensure that institutions hit with liquidity problems would have access to cash. The Treasury Department backstopped the program with $25 billion in funds. They guaranteed those with more than $250,000 at SVB and Signature would have access to their funds.

Diversify with Precious Metals

The banking crisis has all but vanquished investor bets that the American economy can avoid a recession. Moody expects the US economy to fall into recession later this year. With the banks failing, investors are flocking to protect their wealth with precious metals. Gold and silver exist independent of the banking system. The Fed may be forced to stop interest rate hikes to squash the spreading failures. A halt in interest rate hikes only strengthens the case for gold. Lower rates and persistent inflation should result in higher prices for gold. Investors should act quickly before the situation worsens. Contact today to learn more about how a Gold IRA can protect your funds.

Notes:
1. https://www.cnbc.com/2023/03/14/stock-market-today-live-updates.html
2. https://www.newsbreak.com/news/2956768322441-charles-schwab-s-fortune-battered-
3. https://www.advisorperspectives.com/articles/2023/03/15/ray-dalio-warns-svbs-collapse-shows-cracks-widening-in-global-finance

• Fed Chair Powell testified that recent economic data may force more aggressive interest rate hikes
• A historic bond yield inversion influenced by Fed policy signals that a recession is imminent
• A prominent market expert predicts the stock market will crash in 60 days

Economic Data Signals a Market Crash

Financial indicators signal that a major economic reversal will occur sooner than later. The most reliable recession gauge worsened as Fed Chairman Powell reiterated the need for higher interest rates. Fed policy led one prominent market expert to predict a stock market collapse within 60 days. If being forewarned is forearmed, investors should take action now to protect against losses.

The Fed’s interest rate hikes are prompting the economic warnings. Stocks rallied as data showed inflation was leveling off. But that rally was short lived. Recent reports reveal that inflation actually increased. This is sparking fears of more highly aggressive rate hikes. Powell didn’t rule out the increases. Instead, he said the Fed isn’t on a preset path. They are making data driven decisions and there are still important upcoming reports. The US jobs report along with the consumer and price indexes are coming out within weeks.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in remarks prepared for delivery before the Senate Banking Committee. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”¹

Powell’s testimony about rate hikes sent a recession warning bell ringing. The 2- and 10-year Treasury’s yield curve is a market-based indicator of economic health. The curve inverted, meaning short term bonds are outperforming long term ones. This indicates a lack of investor faith in the economic future. Inverted yield curves have preceded almost every recession.

The curve first inverted back in April. Now, it has plunged into triple digits below zero, down 106.7 basis points, a level not seen since 1981. And don’t forget, tight monetary policy to fight mounting inflation triggered the 1981-82 recessions. There is typically a one-year lag between the beginning of the curve inversion and the beginning of a recession. Which means we are right on schedule for a recession to hit.

60 Days to Collapse

The time frame syncs with the latest prediction from former Lehman Brothers VP and Bear Traps commentator Larry McDonald. He sees the stock market crashing within a couple of months. He said, “Our 21 Lehman systemic risk indicators that look at equity and credit point to one of the highest probabilities of a crash in the stock market looking out 60 days.”²

A massive failure to hit S&P earnings estimates will spark the crash. Continued high interest rates and rising unemployment will cause the fall in corporate earnings. McDonald argued that for every 1% increase in rates, $50 billion is taken out of the pockets of middle-class families. That’s because such things as housing and car payments go up steeply with each hike.

McDonald hopes that average American investors recognize there are options other than stocks and bonds. One such option is precious metals. Gold and silver hold their value as interest rates rise and stocks collapse. For more information how a Gold IRA can secure your portfolio before a market crash, contact us today.

Notes:
1. https://www.foxbusiness.com/economy/fed-chair-powell-says-interest-rates-are-likely-higher-previously-expected
2. https://www.foxbusiness.com/markets/stock-market-crash-60-days-best-selling-author-lehman-collapse

• The Biden Labor Department changed a rule to allow 401(k) fund managers to prioritize politics over profits
• Environmental, Social, and Governance (ESG) funds support a woke agenda at the expense of profitability
• Republican lawmakers are taking measures to undo the new rule change

The Danger of ‘Woke’ Investing

Congress is taking measures to protect retirements funds from being used to pay for Biden’s ‘woke’ agenda. A recently revised Labor Department rule allows 401(k) fund managers to prioritize politics over profits. The new rule paves the way for 401(k) savings to be put into Environmental, Social, and Governance (ESG) funds. ESG funds generally invest in companies that further a left-wing platform. They oppose fossil fuels, promote unions and affirmative action.

Previously, fund managers were legally obliged to put profit considerations first. They could consider political issues only when two investments posed the same risks and rewards. Biden’s Labor Department eliminated that standard. They said it had a “chilling effect” on ESG sales.

There are financial consequences to the rule change beyond the political. ESG funds typically charge higher fees and often produce lower returns. This is especially true now when oil company stocks are soaring. Meanwhile, ESG favored tech companies are experiencing dramatic losses.

Congress Pushes Back

Republican lawmakers are challenging the measure. Senate Minority Leader Mitch McConnell criticized the new rule. He stated that it would allow the prioritization of “ideological goals” over the best financial returns. In addition, ESG funds are now eligible to be the default fund when a worker doesn’t choose one. The Trump administration banned that. Biden’s rule will push more workers unwittingly into these funds.

“The Biden administration is trying to enact a radical new regulation that would help liberals use their very own retirement savings as financial muscle for political causes they may not even support,” McConnell said. “In effect, we’re talking about letting financial companies garnish the retirement savings of workers without their permission in order to pursue unrelated liberal political goals.”¹

The House has passed a measure that would tank the US Labor Department’s new ESG retirement investing rule. It also tees up a vote in the Senate. The move strengthens a broader GOP effort to roll back ESG mandates for retirement accounts. There are now two federal lawsuits to stop the mandate. Twenty-five Republican state attorney generals are leading one of the suits. The rule will be challenged in court. Experts believe it will probably be struck down.

401(k) investors should remain vigilant where their funds are being directed. No one should have to sacrifice their financial future to fund someone else’s agenda. If that’s the case, then investors must be prepared to act. One option that can protect your savings is a self-directed IRA that gives you control in what you invest in. The Gold IRA from American Hartford Gold allows you to gain the wealth building benefits of an IRA and the wealth protection offered by precious metals. And will never be used to support any agenda. Contact us today to learn more.

Notes:
1. https://www.newsmax.com/newsfront/mitchmcconnell-joebiden-401k/2023/02/28/id/1110506/

• The Federal Reserve meeting minutes show a debate over how high to raise rates
• Some Fed members want rate hikes to go higher, longer due to jobs and inflation data
• Since hikes negatively impact stocks, investors should act soon to protect their funds

The Fed Rate Debate

Right now, there is a heated debate within the Federal Reserve about interest rates. The argument isn’t over whether to raise interest rates. Instead, it is about how high they should be raised and for how long. Whatever they decide, rates are going up in a few weeks and retirement portfolios are going to suffer. Which means there is only a brief window of opportunity to protect yourself.

The Federal Reserve raised its benchmark overnight interest rate by a quarter of a percentage point in its Jan. 31-Feb. 1 meeting. This was seen as signaling a return to a more standard rate-hike size. Especially after a year of consecutive 75-basis-point and half-percentage-point increases. Officials stressed inflation is still too high even as it seems to be trending down. It remains well above the Fed’s 2% target. Fed meeting minutes point to labor markets as the cause. They “remained very tight, contributing to continuing upward pressures on wages and prices.”¹

Most analysts do not see the Fed returning to larger half-percentage-point increases. But they do anticipate the central bank moving rates higher than previously expected. And they see them staying elevated for longer. Several Fed members believe ongoing rate hikes will be necessary.

The previous quarter-point hike received unanimous approval. However, the Fed minutes noted that not everyone was on board. A few members said they wanted a half-point hike that would show even greater resolve to get inflation down. Especially since the core inflation measure is expected to have increased to 0.4% from 0.3%. In addition, recent economic reports showed robust retail sales, stronger-than-expected producer prices and consumer prices that are not slowing by as much as forecast. Fed members are ready to risk recession to bring those numbers down.

St. Louis Fed President James Bullard said, “It has become popular to say well let’s slow down and feel our way to where we need to be. But we still haven’t got to the point where the committee put the so-called terminal rate.” Meanwhile, Fed Chair Powell expressed that their actions will be based on the latest data. “It could certainly be higher than we’re writing down right now,” Powell said. “At the same time, if the data comes in, in the other direction, then we’ll make data dependent decisions at coming meetings.” In simpler terms, the debate within the Fed is far from over. ²

Act Now

The market is attempting to price in the rate hikes. But uncertainty is increasing with hotter than expected jobs and inflation reports. Stocks are struggling for direction. They have already lost more than half of this year’s rally. If history is any guide, markets are poised for a big double drop. First, when the new inflation data comes out on March 14th. And second, a week later on March 22nd when the new rate hikes are announced.

This means there is still time to act before retirement funds get hit. Diversifying funds with precious metals can protect against inflation and high interest rates. Investors are under a deadline to preserve their wealth. Don’t wait while the Fed debates. Contact us today to learn how a Gold IRA can help you.

Notes:
1. https://www.cnbc.com/2023/02/22/fed-minutes-february-2023-minutes-show-fed-members-resolved-to-keep-fighting-inflation.html
2. https://www.bloomberg.com/news/articles/2023-02-22/fed-minutes-to-show-support-level-for-larger-hikes-higher-peak

• Stocks recently rallied on signs that decreasing inflation could prompt a Fed pivot
• Inflation is proving to be ‘sticky’ and may result in interest rates staying higher longer
• Market experts are moving into real assets to preserve wealth during the uncertainty

Data Points to ‘Sticky’ Inflation

The promise of shrinking inflation propelled a rally in risk assets. Yet Jamie Dimon, CEO of JPMorgan Chase, said “People should take a deep breath on this one before they declare victory.” Experts agree that the rally will be short-lived due to ‘sticky’ inflation. Combined with a surprisingly strong jobs report, inflation may give the Fed no choice but to raise interest rates higher for longer.¹

Fed Chair Powell said disinflation has begun. December’s CPI was the smallest year-over-year increase since October 2021. It was at 6.5% on an annual basis, down from a 9.1% peak in June 2022.²

But that isn’t painting the most accurate picture of the economy. The Fed is monitoring a category that’s become known to Wall Street economists as “supercore” inflation. Supercore inflation is service industry inflation minus energy and housing. Supercore inflation surged to a 40-year high of almost 7% last fall. It has only slowed to a 6.3% rate.³

In addition, economists are factoring in the routine revisions to 2022′s inflation data. The new data shows that inflation hasn’t been falling as fast as the original reports had suggested. The chief U.S. economist at Morningstar said, “Based on the revisions to recent historical data, the decline in core inflation now looks less impressive than previously shown.” Overall, the signs indicate that inflation will be more persistent than once forecasted. ⁴

Sticky Inflation and Stock Prices

Analysts expect S&P 500 earnings to decline 3.7% and 3.1% in the first two quarters of 2023. Tim Drayson is the Head of Economics at Legal & General Investment Management. He expressed his doubts about the future of equities. He said, “I don’t see how you can get inflation back to target without a recession, and that means equities will be disappointed either on inflation or on earnings.” Michael Farr of Farr, Miller, and Washington shared this opinion. He said he “certainly wouldn’t be a buyer of the stock market. The risk is higher, and the potential reward is much lower right now.”⁵

Michael Burry of ‘The Big Short’ fame warned that recent rallies remind him of previous irrational tech buying sprees. To him, investors are ignoring the reality of inflation. Burry sees inflation decreasing as we enter a recession. Only for the Fed to pivot and stimulate the economy. This will result in inflation spiking to double digits. Burry isn’t sitting in cash waiting for the market to crash. Instead, he is investing in recession-proof, real assets that perform when the economy suffers, and inflation is high.

The Fed and Wall Street are waking up to the fact that inflation is going to be with us for a long time. Like Michael Burry, investors should look to real assets to protect the value of their portfolios. Precious metals are highly accessible real assets proven to preserve value during periods of sticky inflation. Contact us today to learn how a Gold IRA can help you.

Notes:
1. https://www.yahoo.com/now/jamie-dimon-fears-markets-may-164412929.html
2. https://www.cnbc.com/2023/02/13/a-new-inflation-warning-for-consumers-coming-from-the-supply-chain-.html
3. https://www.marketwatch.com/story/cpi-in-the-spotlight-fed-worried-about-sticky-inflation-f56efd9e
4. https://www.morningstar.com/articles/1137589/january-cpi-report-shows-sticky-inflation-is-back
5. https://www.reuters.com/markets/us/us-stock-rally-faces-uphill-climb-after-mixed-inflation-data-2023-02-14/