• Investors are leaving an overheated stock market in record numbers
• They are driven by fear fed by years of high interest and inflation rates, political chaos, and geopolitical conflict
• Physical precious metals, especially in a Gold IRA, can diversify and protect retirement savings from stock market volatility

Investors Beat a Retreat

Economic data is pointing to some concerning trends underlying the current stock market rally. According to the numbers, US stock market is shrinking. Just as billionaires did months ago, regular investors are pulling their money out at a near-record pace.

Seen as an omen of economic trouble, Americans are strategically moving their assets to safe haven physical precious metals.

Fear is currently driving the market according to CNN’s Fear and Greed Index. The fear is fed by years of high interest and inflation rates, political chaos, and geopolitical conflict. Morgan Stanley said, “Summer 2024 may prove volatile with momentum stalling.” The market already big swings as traders react to unexpected economic data. The presidential election is only going to increase the volatility.¹

Investors are losing their taste for risk and are retreating. Bank of America said their clients have been net sellers of stocks for five weeks in a row. They sold off $5.7 billion more in stocks than they purchased. That is the highest outflow since last July.

A sign that the market is in retreat is the shrinking number of public companies. JPMorgan CEO Jamie Dimon said,” The total [of public companies] should have grown dramatically, not shrunk.” He expressed concern about the implications by following up with, “This trend is serious.”²

Americans Squeezed

The retreat may go beyond simply avoiding risk. Some Americans are being squeezed out of the market. Rent, gas, food, and childcare cost 15%-40% more today than they did just three years ago. Inflation is causing 46% of US middle class workers to slash contributions to their retirement funds according to a Primerica survey. ³

The survey continued to find that 67% say their income is falling behind the cost of living. Average paychecks have risen but fallen short of the higher cost of living. As result, 36% are using credit cards to keep up with expenses. Credit card debt is now at record highs. The problem is worsened because higher interest rates have made debt increasingly expensive. With credit cards maxed out, Americans are being forced to rein in even essential spending. ⁴

The pausing of retirement contributions can have long term ramifications. American are going to be finding themselves unable to retire comfortably, if at all. The Primerica survey revealed almost 80% of respondents don’t think they’ll be better off next year. Meaning the retreat is likely to continue.

A Strategic Retreat

American may be pulling out the market to secure their gains. Or they may be forced to cover their expenses. Whatever the cause, exiting the market now might turn into a fortunate decision.

Richard Bernstein is the chief investment officer of the RBA hedge fund. He says the mega-caps stocks are overvalued and risk a big correction. As of now, the top 10 stocks in the S&P 500 make up 35% of the benchmark’s total value. That is the highest percentage ever recorded. And Goldman Sachs economists said the market looks to be the most overvalued since 1932.

⁵

Bernstein predicts the losses from a correction could rival the dot-com crash. After the boom in internet stocks, the Nasdaq Composite dropped 78% from its peak. Tech stocks continued to struggle over the next 14 years. A “lost decade” in the stock market followed, with the S&P 500 losing 1% from 1999 to 2009.⁶

Bernstein said, “Fundamentally, it makes zero sense. The bond market is saying corporate profits are going to be strong … but the equity market with this incredibly narrow leadership of seven companies is saying that it’s an apocalyptic earnings outlook. I think the stock market’s in a bubble and the bond market is right.”⁷

Time to Diversify

Modern portfolio theory stresses diversifying your assets when the stock market is overvalued and on the verge of crashing. Converting assets into physical precious metals is a time-tested diversification strategy. Gold has historically maintained its value during economic downturns, offering a safe haven against inflation and recession.

Conclusion

As money becomes tighter, each decision about saving for your retirement carries greater weight, necessitating assets that can preserve wealth. Unlike stocks, which can plummet during market corrections, gold typically retains or even increases in value, providing stability and protection for your portfolio. By including gold, you mitigate risk, ensuring a portion of your nest egg is safeguarded against the volatility and uncertainties of a financial crisis. And by opening a Gold IRA, you can gain tax advantages along with the wealth protection benefits of physical precious metals. Call us today at 800-462-0071 to learn more.

Notes:
1. https://www.cnn.com/2024/06/05/investing/premarket-stocks-trading/index.html
2. https://www.cnn.com/2024/06/05/investing/premarket-stocks-trading/index.html
3. https://moneywise.com/retirement/middle-class-workers-are-slashing-or-cutting-contributions-to-retirement-funds
4. https://moneywise.com/retirement/middle-class-workers-are-slashing-or-cutting-contributions-to-retirement-funds
5. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6
6. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6
7. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6

 

 

• Gold’s record-breaking ascent is fueled by numerous drivers
• Excess money printing, geopolitical conflict, central bank purchasing and fears over the national debt are giving gold tailwinds
• Now is an opportune time to add protect portfolio value with physical precious metals

Gold Prices on the Rise

In recent months, gold has been reaching new all-time highs as it continues its upward trajectory. With numerous factors behind the upswing, now is an opportune time to protect your retirement funds with physical precious metals.

Multiple Drivers Impacting Gold Prices

Gold’s current rise is not just an economic blip; it’s backed by multiple strong drivers:

Significant Money Printing: Since 2020, there has been a substantial increase in money printing, which is now starting to take effect on the economy. From 2020 to 2024, the M2 money supply increased from $15 trillion to $22 trillion. This has decreased the purchasing power of the dollar by 25-30%. People are turning to gold as a store of value as the oversupplied dollar depreciates.

Geopolitical Conflict: Ongoing major conflicts around the world are spurring safe haven demand and contributing to the upward pressure on gold prices.

Central Bank Purchases: Central banks are buying gold at the fastest rate in 55 years, further driving up demand. They seek to fortify their own economies with gold by hedging against inflation, moving away from the dollar, and securing against potential sanctions.

National Debt: Crossing $34 trillion and climbing fast, the national debt is at crisis levels. But the government is unwilling to cut spending. Already costing more than defense, the cost to service the runaway debt could strangle all government services, including Social Security. Americans are buying gold to protect against inevitable inflation and collapse.

Gold as a Response to Economic Uncertainty

Given these factors, it’s no wonder that investors are flocking to gold. Gold offers stability in times of economic uncertainty and has historically been a trusted store of value. The increasing cost of gold in terms of dollars reflects the declining trust in the US dollar and government policies.

Investment banks are predicting even higher gold prices by the end of the year and beyond. Experts believe that if we see any rate cuts or economic instability, gold prices could soar even higher. Interest rate cuts could push gold to $2,700 an ounce. Meanwhile, some analysts say further bank failures or election chaos could see gold reaching $3,000 an ounce or higher.

Considering Silver

For those looking for a more accessible option, silver is also worth considering. Currently valued at around $28 an ounce, silver has significant upside potential. It’s investment and industrial demand are at historic levels while production deficits are unable to keep up. It’s not just a less expensive alternative to gold but also a valuable hedge in a recession or rate cut environment.

Conclusion

Gold has stood the test of time as a reliable store of value. It isn’t just a safe haven; it’s a smart diversification tool. It acts as an insurance policy against currency devaluation and economic instability. In today’s volatile economic environment, having a portion of your portfolio in gold makes sound financial sense.

Contact American Hartford Gold today at 800-462-0071 to learn more about how you can secure your financial future with a Gold IRA.

• The threat of a banking crisis caused by the failing commercial real estate sector is increasing
• Academic and Government research points to a growing number of banks vulnerable to failure
• Americans are seeking to shelter their assets in physical gold and silver before the chaos erupts

Bank Risks Increase

High interest rates and plummeting demand have put the commercial real estate sector on the edge of collapse. As overexposed regional banks teeter on the brink of crisis, studies show large banks are also at risk. Things look like they are going to get worse before they get better as the prospect of a full-blown banking meltdown emerges. Americans are seeking to shelter their assets in physical gold and silver before the chaos erupts.

Regional banks have been at increasing risk from the collapsing commercial real estate (CRE) market since the Fed started their aggressive rate hikes. The risks stem from the repricing of CRE loans at higher rates as the real estate cycle turns. Banks are stuck holding mortgages and construction loans that are underwater compared to plunging property values.
Now, that risk seems to be spreading to larger banks.

¹

While not to the extent as regional banks, big firms are exposed to CRE risk from direct loans. But they are also at risk by indirect lending to Real Estate Investment Trusts (REITs). REITs are firms that buy and operate commercial real estate, selling shares to investors who want to gain exposure to the space.

However, these vehicles are often debt dependent. They are vulnerable to high interest rates. With higher-for-longer rates depressing revenue, investors are antsy to get their money out. With the rise in redemption requests, the REITs have tapped the banks for more credit. The number of REIT credit lines extended is increasing faster than other forms of borrowing. The lenders are putting themselves in a dangerous position if a crisis hits.

A new study says the greater exposure to commercial real estate debt increases overall systemic risk. When commercial real estate REITs heavily draw on credit lines during widespread financial stress, it can seriously impact the largest banks. This means that the overall risk from commercial real estate is likely much higher than what the banks’ direct exposure suggests. REIT loans raised the largest bank’s exposure by about 40%.²

More Banks at Risk

A Florida Atlantic University study found a growing number of banks facing failure due to the exposure to commercial real estate. They identified that 67 of the largest US banks have CRE loans exceeding 300% of their total equity capital. Regulators consider that level excessively risky. ³

The study cited Flagstar Bank and Zions Bancorporation as the highest risks. Flagstar’s CRE portfolio comprised a stunning 553% of its equity. Zions was 440% of its equity. Both banks rely heavily on uninsured deposits. This makes them extremely vulnerable to bank runs.

“Should another bank fail, depositors may pull money from these highly exposed banks, potentially triggering a banking panic reminiscent of last year,” study authors warned. ⁴

The FDIC Sees Risk

The government is recognizing the growing risk of a banking crisis. The Federal Deposit Insurance Company (FDIC) increased the number of banks on its “Problem Bank List.” It went up from 52 to 63. The number of banks on the watch list is 60% greater than the quarter preceding the collapse of Silicon Valley Bank (SVB). The bank run on SVB triggered a national panic. It helped fuel the collapses of First Republic and Signature Banks.

The FDIC found the amount of exposed assets rose to $82.1 billion. Alongside the increase in endangered banks was an increase in the number of unrealized losses. More than $517 billion in losses are now being held. ⁵

Wall Street Weighs In

Morgan Stanley warned commercial real estate prices could crash 40% in a disaster worse than the financial crisis of 2008.

“More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points,” their analysts said. High borrowing costs and tighter credit conditions could raise difficult hurdles for big real estate investors as they seek to refinance a mountain of loans.

Morgan Stanley says the damage won’t stay contained to the property owners and banks. It will extend to “interconnected business communities, private capital funders and owners of any underlying securitized debt,” they note. “The tech and consumer discretionary sectors will not be immune.”⁶

Conclusion

High interest rates and plummeting demand are devastating the commercial real estate sector. No longer limited to regional banks, its collapse threatens to spark a full-blown banking crisis. The impact of which could undermine the entire financial system in a way not seen since the Great Financial Crisis of 2008. That crisis caused retirement savers to lose up to 50% of their funds. With the writing on the wall, now is the time to protect your portfolio with physical precious metals. A Gold IRA from American Hartford Gold can help secure your financial future. Call 800-462-0071 to learn how today.

Notes:
1. https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iNNwTUUX4yY4/v3/620x-1.jpg
2. https://www.businessinsider.com/commerical-real-estate-crisis-bank-debt-contagion-reits-cre-lending-2024-5
3. https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-loans-put-67-banks-at-risk-of-collapse/492047
4. https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-loans-put-67-banks-at-risk-of-collapse/492047
5. https://dailycaller.com/2024/06/04/regulators-announcement-red-flag-banking-industry/
6. https://markets.businessinsider.com/news/stocks/commercial-real-estate-prices-outlook-crash-financial-crisis-morgan-stanley-2023-4?_gl=1%2A171pvcl%2A_ga%2AMTY0OTQ1MjIyNS4xNjU2NTA4ODQ3%2A_ga_E21CV80ZCZ%2AMTY4MDY5MDY4Ny44NjkuMS4xNjgwNzAyMzc0LjYwLjAuMA..&utm_medium=referral&utm_source=yahoo.com

 

 

• Some analysts see record setting stock prices as a prelude to a bursting bubble, with prices dropping as much as 65%
• Recessionary forces could knock the support out from overvalued stocks
• Americans can prepare for the stock crash by moving into safe haven assets like physical gold & silver in a Gold IRA

Looming Stock Market Crash

To some analysts, record-setting stock prices don’t seem to be climbing to new heights but rather racing towards the edge of a cliff. Facing potential overvaluation and recession, stock prices have been predicted to crash as much as 65%. Americans are cautioned not to let over-optimism and fear-of-missing-out prevent them from protecting their assets from a major market correction.

The warnings of an impending crash are coming from several sources. John Higgins of Capital Economics says stocks are in a late-stage bubble. That means stocks are in for a steep rally before the bubble bursts. He points to the S&P 500 and DJIA hitting record highs recently. “Bubbles tend to inflate the most in their final stages as the excitement sort of reaches fever-pitch,” Higgins warned.¹

Higgins says that today’s hype around AI resembles the dot com bubble of the 90s. When that bubble burst, the Nasdaq lost 77% peak-to-trough in the early 2000s. The overall market saw $5 trillion in value wiped out in a couple of years. According to Capital Economics, the bubble could burst as soon as the end of next year. That would be five years, the length of the dot-com bubble. ²

³

Warnings from Wall Street

Some Wall Street veterans are taking a bearish view of the current stock market rally.

Gary Shilling is an American financial analyst and commentator who appears regularly in publications such as Forbes, The New York Times, and The Wall Street Journal. He correctly identified the US housing bubble in the mid-2000s. Shilling expects a recession to hit by the end of the year. He thinks a weakening labor market will crush investor confidence. As a result, the stock market could fall as much as 30%. “You look at all the kind of speculation that we’ve had out there, it’s indicative of a lot of overconfidence, and that usually gets corrected and corrected violently,” said Shilling.⁴

John Hussman is the president of Hussman Investment Trust. He correctly predicted the sharp downturns in 2000 and 2008. He thinks the S&P 500 is trading at similar extremes last seen in the run-up to the 1929 Great Depression. Hussman thinks the S&P could crash 65% based on a combination of “extreme valuations, unfavorable market internals, and dozens of other factors.” A loss that size would wipe out a decade of gains.⁵

BCA Research strategist Roukaya Ibrahim warned that a 30% correction in the stock market could be sparked by a recession early next year. He thinks overvalued stock prices and slowing growth will send the S&P back down to 3600. Ibrahim points to the April employment report which signaled an economy in decline. “Eventually, the unemployment rate is going to take higher and that’s going to lead to concerns about a recession,” Ibrahim said.⁶

Market Indicators

One indicator going off is the ‘Hindenburg Omen’. It has predicted two previous stock market crashes. The ‘Hindenburg Omen’ indicator considers the percentage of stocks in an exchange making 52-week highs and lows, along with other market breadth metrics, to assess the potential for a market crash.

The indicator successfully predicted the 1987 market crash and the 2008 financial crisis. And it is sounding the alarm again. Now it is going off despite record market highs. Poor market breadth is the cause for concern. Only a handful of stocks are buoying the whole market.

Other signs are showing that the economy is heading towards recession. A recession could crater stock prices.

Top economist David Rosenberg points to the Sahm Rule. Rosenberg famously predicted the 2008 recession. The Sahm Rule is a way to identify the start of a recession using the unemployment rate. It signals a recession if the three-month average unemployment rate rises by 0.5 percentage points or more above its lowest point in the previous 12 months. The rule is about to go into effect. Unemployment ticked higher than 3.9% in April. In addition, manufacturing shrank for the 17th month out of the last 18 months.

The Fed’s “higher for longer” interest rates are also pushing the economy towards a hard landing. Albert Edwards, the Societe Generale strategist, said, “”I believe the Fed is sowing the seeds of yet another policy disaster.” He maintains that decades of near zero interest rates fueled speculative bubbles that kept “bursting in their faces.” And now, he thinks, suddenly high interest rates are going to burst the AI bubble. ⁷

Conclusion

While it may seem that record setting stock prices may never end, forecasters are warning to brace for a crash. The meteoric rise will inevitably fall. The question is how hard and how fast. According to some analysts, everything will be great until it isn’t. Then prices could drop 65%, devastating retirement funds. Now is the time to prepare for a market drop by learning how a Gold IRA can protect the value of your funds. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://markets.businessinsider.com/news/stocks/stock-market-crash-prediction-dot-com-bubble-correction-economy-recession-2024-5
2. https://markets.businessinsider.com/news/stocks/stock-market-crash-prediction-dot-com-bubble-correction-economy-recession-2024-5
3. https://m.foolcdn.com/media/dubs/images/stock-market-bubble-infographic.width-880.png
4. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
5. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
6. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
7. https://www.businessinsider.com/stock-market-crash-recession-warning-signs-interest-rates-fed-edwards-2024-5?utm_medium=ingest&utm_source=markets&_gl=1*1eqjxbf*_ga*MjEyNjU3MzkyMi4xNjYyNDEwODU4*_ga_E21CV80ZCZ*MTcxNjk5ODIzOC4xNDkuMS4xNzE2OTk4MzEwLjU5LjAuMA