• The Consumer Price Index indicated that inflation rose more slowly in March
• Despite the slowdown, inflation is still punishing American consumers
• Even if the Fed slows interest rate hikes, current prices may be the new baseline

Inflation Still Rises, Albeit More Slowly

The most recent Consumer Price Index (CPI) indicated that inflation rose more slowly in March. Not that inflation decreased or even stopped rising. Only that the pace of price increases slowed down. So, while the news was positive for the Federal Reserve, it was no comfort to most Americans who are still struggling with high prices.

The Federal Reserve has set a target of 2% inflation. The current rate is over double that at 5%. CPI climbed 0.1% in March after rising 0.4% in February. The CPI slowdown is attributed to the dropping price of gasoline. After OPEC+ announced a production cut, this drop is predicted to be short lived. The rate of inflation is down from a peak of 9.1% in June of 2022, but the pain of inflation is still echoing throughout the economy.¹

While prices are growing at a slower rate, increases are not stopping altogether. The cost of essentials is still punishing consumers. Food prices, for example, climbed 10% in February and have been rising at double-digit rates since May of 2022. Additionally, rents had their largest one-month increase on record, and day-to-day living expenses are hurting Americans.²

Even as inflation continues to slow, it won’t reverse outright. Only in rare instances do prices decline on an annual basis. And this is not even a given during recessions. The bottom line is that the higher prices that have become a hallmark of the post-pandemic U.S. economy are here to stay.

Bankrate said, “The inflation we’ve seen over the past couple of years has increased household expenses and essentially set a new base, and those expenses are not going to fall in a broad-based way. They just might not go up as fast.”³

Inflation and the Fed

Analysts think the slowing pace of inflation may cause the Fed to slow their pace of interest rate hikes. As the market stress from last month’s bank collapses eases, economists expect the US central bank to raise rates one more time in May. Investors predict another 0.25% hike. After that, they could pause their fastest monetary tightening campaign since the 1980s in June.⁴

The most recent jobs report may hinder the Fed’s rate slowdown. The report showed that unemployment is dropping and over 1 million jobs were added in 2023. This is fanning the flames of inflation even as wage growth is declining. Basically, people are working more for less. This means that the Federal Reserve will likely keep raising rates. It has done so by 475 basis points since March of last year, from near zero.⁵

Rising costs for food, rent, and other daily necessities are taking a toll on household budgets. The Federal Reserve is likely to keep raising rates to combat inflation. Not only are these hikes impacting wage growth and job opportunities, but they are also causing banks to fail and stocks to crash. With no end to inflation in sight, investors should look for means to preserve the value of their portfolio. A Gold IRA from American Hartford Gold is designed to protect your retirement funds from inflation and soaring interest rates. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.reuters.com/markets/us/us-consumer-prices-rise-moderately-march-underlying-inflation-still-hot-2023-04-12/
2. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150
3. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150
4. https://www.reuters.com/markets/us/us-consumer-prices-rise-moderately-march-underlying-inflation-still-hot-2023-04-12/
5. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150

• The collapse of Silicon Valley Bank was the 2nd largest bank failure in US history
• Stocks plummeted as fear of more bank failures shook the foundations of the global economy
• Investors flocked to gold, sending prices of the precious metal soaring

The Collapse of the SVC Bank and the Economic Effects

The collapse of Silicon Valley Bank, the 2nd largest bank failure in US history, sent investors and officials into a panic. Close to 190 banks could face Silicon Valley Bank’s fate, according to a new study.

Most of the money was not insured, as the FDIC only guarantees bank deposits up to $250,000. According to some reports, more than 90% of all deposits fell outside of that threshold, resulting in an “awful lot of people losing an awful lot of money”. It’s highly probable that those people will never see that money again.

Fears of a global financial meltdown like the 2008 Financial Crisis are growing. More bank runs could decimate even insured depositors as the FDIC exhausts its emergency funds.

Stock prices are plummeting as the contagion spreads around the world. Credit Suisse bank had to be bailed out, leaving $17 billion of its bonds worthless. Economic conditions hold a frightening resemblance to the Lehman Brothers collapse that ignited the Great Recession.

That crisis saw the value of retirement funds drop in half after the Dow crashed nearly 7000 points. However, during the same time, physical gold leapt from $650 to a historical high of $1950.

Precious metals are a proven hedge against financial turmoil. Gold exists independently of the banking system. Analysts predict the rush to the safe haven asset will send its price to new record heights. Acquiring precious metals could not only preserve your wealth but potentially earn you a profit as everything else crashes.

Contact us today at 800-462-0071 to learn how you can protect your funds with precious metals or a Gold IRA.

“Tucker Carlson Tonight – Second Largest Bank Failure”
Source: Fox News
Date: Mar 10, 2023
Link to the video: https://www.foxnews.com/video/shows/tucker-carlson-tonight

• Social Security recipients may by surprised with higher taxes this year
• The income threshold determining your tax burden hasn’t been raised in decades
• Beneficiaries can adopt strategies to reduce or avoid stealth taxes on their Social Security

Social Security Benefits Exposed to Higher Taxes

Some retirees could be in for a shock this tax season. Social Security recipients may experience a phenomenon known as “stealth taxes” on their benefits. Taxes are going up because the government hasn’t changed the Social Security income limit since 1984.

The government changed a lot of things in response to soaring inflation. They changed federal tax brackets and contribution limits for retirement accounts. The government also adjusted the size of the standard deduction. In addition, they raised the Social Security cost-of-living adjustment.

One thing they didn’t change was how much money you can earn before having to pay taxes on your benefits. The low-income thresholds are resulting in more and more seniors paying higher taxes.

Here’s how it works: depending on your income, up to 85% of your Social Security benefits can be taxed. The percentage of all tax returns with taxable Social Security benefits grew to 33% in 2017 from 7.4% in 1999. The Congressional Budget Office predicts that it will grow to more than 50% by 2046. This is a troubling trend for many seniors. They view it as discriminatory double taxation.1

Seniors are pushing for the income thresholds to be adjusted for inflation. Indexing the threshold to inflation would greatly reduce the number of people owing extra taxes. In fact, 58% of seniors are in favor of getting rid of the tax altogether. Social Security overhaul is particularly difficult because of a divided Congress. Any overhaul of Social Security needs bipartisan support.2

The SECURE 2.0 Act (SA 2.0) addressed issues around retirement. But it had unintended consequences. For example, SA 2.0 raises the age at which required minimum distributions (RMDs) begin from 72 to 73 in 2023. Advisors consider this a stealth tax increase. Retirees now have almost five more years of growth subject to taxation. This can potentially impact Social Security and Medicare costs.3

Planning for Taxes

Planning can address potential tax implications. SA 2.0 provides more catch-up provisions for those between the ages of 60 and 63. You can make a catch-up contribution of $10,000 to an employer-sponsored retirement plan starting in 2024. Be warned though. Catch-up contributions for higher earners can be forced into a Roth 401k. This contribution would be taxable income.

Adjusting withholdings can help reduce tax bills. Beneficiaries can consider having at least 10% withheld, or perhaps 12%. Relying on income sources such as traditional IRAs or 401(k)s may help delay claiming Social Security benefits. This can result in higher benefits for the rest of a retirees’ life.4

Stealth taxes on Social Security benefits are a growing concern for seniors. Inflation is already making life for retirees more difficult. And a divided Congress means there is little chance of the income thresholds changing anytime soon. Retirees can plan for potential tax implications. Advisors suggest moving funds into a Roth IRA so withdrawals aren’t subject to taxes. A Gold Roth IRA combines tax advantages with the wealth protection benefits of precious metals. Contact us at 800-462-0071 to learn more about how you can protect your retirement.

Notes:
1. https://www.usatoday.com/story/money/taxes/2023/03/16/unadjusted-inflation-taxes-social-security-hurting-seniors/11465773002/
2. https://www.usatoday.com/story/money/taxes/2023/03/16/unadjusted-inflation-taxes-social-security-hurting-seniors/11465773002/
3. https://www.advisorperspectives.com/articles/2023/02/20/beware-of-stealth-tax-increases-in-secure-2-0
4. https://www.cnbc.com/2023/04/05/social-security-benefit-income-may-lead-to-a-stealth-tax.html#:~:text=Not%20moving%20the%20brackets%20or,stealth%20tax%2C%E2%80%9D%20Freitag%20said.

• The Federal Reserve’s monetary policy is blamed for inflation, recession, and bank failures
• States are legislating gold as currency to undermine the Fed’s monopoly on money
• Gold stands to gain in value as more states adopt it as legal tender

States Look to Gold as Currency

From causing inflation, to crashing banks and forcing a recession, the Fed’s monetary policy is leading some states to turn to gold. Following in the footsteps of several other states, an Arkansas bill is proposing to make gold and silver legal tender. This would mean that Arkansans could use gold or silver coins as money instead of just as investment vehicles. State adoption of gold as a currency could have a widespread impact on the US economy.

The Arkansas bill is rooted in Article 1, Section 10 of the U.S Constitution. It states that “No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts.” Advocates say this article allows states to coin their own currency from precious metals. The Arkansas bill would also repeal the state capital gains tax on gold and silver. This would reduce the transaction costs of using them as money. If the bill passes, the people of Arkansas could use gold and silver in everyday transactions.

In 2021, Arkansas repealed the sales tax on gold and silver, which set the foundation for this bill. Repealing those taxes was a step toward treating gold and silver as money instead of commodities. Arkansas is not alone. Utah, Wyoming, and Oklahoma have already passed similar bills. And eight other states currently have legislation pending. 1

A Counterbalance to the Federal Reserve

These bills aim to introduce competition into the monetary system and nullify the Federal Reserve’s monopoly on money. The Federal Reserve creates a monopoly based on its fiat currency. It can easily create money out of thin air without the backing of gold or silver. This devalues purchasing power over time. It also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Proponents are aiming for all 50 states to accept gold as currency. They believe the Fed would be nullified if that happens. As a result, deficit spending would stop, and individual financial freedom would increase.

Former US Representative Ron Paul said, “We ought not to tax money – and that’s a good idea. It makes no sense to tax money. Paper is not money, it’s fraud.”2 Americans are losing faith in the Fed as its policies are inflicting pain on every aspect of daily life. Voters are reaching a tipping point. They are feeling empowered to throw off the Federal Reserve. If that happens, the price of gold will most likely skyrocket. Demand for gold will dramatically increase. And soaring interest rates will no longer hold the price of gold down. Until gold becomes currency, investors can still reap the benefits of owning precious metals. A Gold IRA from American Hartford Gold can protect retirement funds from Fed-created threats like inflation, recession, and bank failures. Contact us today at 800-462-0071.

Notes:
1. https://worldpopulationreview.com/state-rankings/gold-and-silver-legal-tender-states
2. https://blog.tenthamendmentcenter.com/2023/03/arkansas-bill-would-make-gold-and-silver-legal-tender-in-the-state/

• Recent bank failures are second only to the 2008 Financial Crisis
• Continued interest rate hikes are causing bank instability and recession
• Investors seek safe haven assets like precious metals to shield wealth

Bank Failures Threaten to Decimate Portfolio Value

The largest banking crisis since the 2008 Financial Crisis is still shaking the global economy. Economists and investors are worried about the solvency of major banks around the world. They fear that bank failures will keep spreading until the entire financial system is in jeopardy.

The spark that lit the failure was the Fed’s aggressive interest rate hikes. Powell raised rates nine times since Biden took office, with another hike expected next month. The Fed feels compelled to raise rates to tame the record inflation caused by trillions of new government spending.

Each rate hike widens the cracks in the financial system. Tech, real estate, and now banks are all collapsing. Max Baecker, President of American Hartford Gold, said, “Interest rate hikes have eroded the value of bank assets such as government bonds and mortgage-backed securities. Since SVB failed, Americans have moved over $500 billion from smaller lenders into big banks. And that causes more instability.”

The Fed created a perfect trap for themselves. If they keep raising rates, the economy breaks down and a recession is inevitable. JP Morgan said that we’re past the point of no return to avoid a recession. And if the Fed cuts rates, inflation can become permanent, and we may never see an end to rising prices.

There is a level of uncertainty not seen since the Great Depression. In response, investors are flocking to safe haven assets like precious metals. Gold and silver retain their value independent of the banking system and don’t have counterparty risk.

Contact us today at 800-462-0071 to learn how you can protect your funds with precious metals or a Gold IRA.

• JP Morgan Chase stated that avoiding a recession is almost impossible after the banking crisis
• The Fed raised rates only 25 points and shifted their policy in response to the banks
• Leading investors advise moving into safe haven assets before a massive drop in the market

Recession Seems Inevitable

In the wake of the banking crisis, JP Morgan Chase issued a warning that we are “past the point of no return” to avoid a recession. The economy is facing a prolonged downturn for several reasons. Accessing money is harder, banks are feeling worried, and the stock market is heading for a meltdown.¹

Despite the recent rescue of several U.S. banks, markets remain unsettled. Bank of America surveyed global fund managers. They said a “systemic credit event” is now seen as the biggest threat to markets.²

The Federal Reserve announced a rate hike of 25 points. They are conducting a delicate balancing act. They must contain inflation without causing further damage to the banks. The Fed made notable changes in their policy statement. They shifted away from “ongoing increases” to the policy rate to “some additional firming.” Fed officials tried to reassure investors that the “U.S. banking system is sound and resilient.”³

But JPMorgan strategists warn that it may be too little, too late. They said that the banking chaos will likely affect the decisions of the Federal Reserve for a long time. Even if central bankers contain contagion, the damage has been done. Pressure from both markets and regulators is going to tighten credit markets and drive stock prices down.

We could be facing a potential “Minsky moment.” That is the theory that extended bull markets result in major collapses. The US experienced an extended bull market from 2009 through 2020 that was revived in 2021. We seem overdue for a collapse.

Banking Crisis Speeds Economic Collapse

Jeremy Grantham is a renowned investor and co-founder of the investment firm GMO. He warned conditions are amplifying a bursting “everything bubble.” This will cause a recession and plunge the S&P 500 by up to 50%. The current bubble includes stocks, bonds, and real estate. These investments reached unsustainable highs during the pandemic.

Grantham predicts a bear market could persist until deep into next year. He notes that the dot-com crash only caused a mild recession. In this recession, the S&P 500 could slump by around 24% to roughly 3,000 points. But in a worst-case scenario, it could tumble below its pandemic low to around 2,000 points. Graham sees the economy tanking after May. Unemployment will rise, growth will slow, and corporate profits will fall.⁴

The warnings from JPMorgan Chase & Co. and Jeremy Grantham should not be taken lightly. They suggest that the global economy is teetering on the brink of disaster. A recession is imminent. Economic fundamentals can deteriorate for years before they finally bottom out. Investors need to be prepared for what could be a long and difficult period ahead.

JPMorgan analysts advise being cautious on risk assets. Investors should be defensive in portfolio allocation. They suggest that now is not the time to take chances. Geopolitics are still weighing heavily on securities. Instead, investors should pursue safe haven assets that can recession-proof their portfolios. Contact us today to learn how a Gold IRA can protect your wealth during this economic upheaval.

Notes:
1. https://www.marketwatch.com/story/dont-dream-its-over-top-jp-morgan-strategist-warns-of-looming-market-meltdown-as-easy-credit-disappears-c24f80be
2. https://www.marketwatch.com/story/dont-dream-its-over-top-jp-morgan-strategist-warns-of-looming-market-meltdown-as-easy-credit-disappears-c24f80be
3. https://www.cnbc.com/2023/03/22/live-updates-fed-rate-march.html
4. https://markets.businessinsider.com/news/stocks/stock-market-house-prices-bubble-crash-outlook-recession-jeremy-grantham-2023-3

• 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/

Stock Buyback Taxes Could Hurt 401(k) Value

During State of the Union, President Biden proposed a tax that could harm the retirement savings of anyone with a 401(k), IRA or pension plan. He proposed quadrupling the taxes on corporate stock buybacks. Biden and the Democrats see buybacks as an unjust windfall for executives. In reality, they are a pillar of support for the stock market. And when that pillar is gone, prices can come crashing down.

This tax comes at a terrible time. 401(k) plans and IRAs have lost roughly $1.4 trillion and $2 trillion respectively since the end of 2021. Biden tried to pass this tax before in his bloated “Build Back Better” social justice bill. The Congressional Budget Office had determined it would be a $124 billion tax hike.¹

Biden justified the tax hike by claiming that stock buybacks reduced corporate investment. The Tax Foundation found the opposite to be true. “A large body of evidence supports the idea that companies generally only consider stock buybacks when they have exhausted their investment opportunities and met their other obligations.”²

Buyback Benefits

Buybacks have been a major reason behind stock market gains over the past decade. This tax threatens that growth. “Corporate buybacks – a major catalyst for the bull market since the Great Financial Crisis – will likely be dramatically reduced going forward,” warned Bensignor Investment Strategies.³

The benefits of corporate buybacks include:

Increased Stock Prices and Earnings Per Share: When a company buys back its own shares, it reduces the number of outstanding shares. This increases the demand for the remaining shares. The increase in demand drives up the stock price. The reduced number of outstanding shares also results in greater earnings per share.

Improved Financial Performance: Companies buyback their stock when they have excess cash and believe it is undervalued. This shows confidence in their financial future. The appearance of a strong financial position can increase investor demand and raise stock prices.

Increased Dividends: Companies may also increase their dividends after a buyback. Dividends can provide an additional source of income for 401k plan participants. Increased dividends can signal to investors that the company is financially stable. It also shows a commitment to returning value to its shareholders. This commitment can improve corporate governance and lead to better financial performance.

Unforeseen Consequences

This administration will rush to get these new taxes into effect. They need revenue to continue funding their agenda. But not enough research is being done to reveal the impact the taxes will have on stocks, retirement funds, or the economy.

In addition, any new taxes come with new issues of compliance. Years of legal wrangling are inevitable. As noted by global tax law firm Skadden, “Because of how the provision defines a ‘repurchase,’ the excise tax could be triggered in many mergers and acquisitions that do not appear to involve stock repurchases as that term is commonly understood.” The new law creates revenues for lawyers and costs for companies. And those costs get carried forward to the consumer.⁴

These new taxes target the securities found in retirement funds. To protect the value of your funds, you can move to assets that are not targeted by the new law. Precious metals in a Gold IRA can preserve your wealth from the new taxes. Contact us today to learn more.

Notes:
1. https://www.atr.org/dems-stock-buyback-tax-hits-401ks-iras-and-pension-plans/
2. https://www.atr.org/dems-stock-buyback-tax-hits-401ks-iras-and-pension-plans/
3. https://www.marketwatch.com/story/receding-share-buybacks-imperil-pillar-of-support-for-u-s-stock-market-in-2023-11671472890?mod=article_inline
4. https://www.atr.org/dems-stock-buyback-tax-hits-401ks-iras-and-pension-plans/