by Sean Kelly
As the world grapples with crisis and chaos, America shrugs.
We’re living in a time of good economic vibrations.
We’re currently enjoying the longest expansion in history which started back in June of 2009 and has rumbled 128 months, smashing the previous record of 120 months (March 1991 to March 2001). We’re also sitting in the longest bull market ever which is now just a month shy of its 11th birthday.
Imagine that — we have not felt truly bearish about the stock market since 2009.
Wall Street’s run has been exasperating, particularly lately. The Dow hit 22 record closes last year, 15 in 2018, 5 in 2017, and 25 in 2016. This month alone, the S&P 500 has hit both an all-time closing and an intra-day high. And according to Fidelity, their millionaire’s club has swelled by some 441,000 as sky-high stocks have turned a record number of Fidelity retirement accounts into well-heeled ‘rainy-day’ funds.
Americans are anything but fearful. According to Gallup, U.S. economic confidence is the highest since 2000. In a recent University of Michigan survey, consumers mentioned feeling wealthier now than at any other time since 1960. And Americans rate the current economy, the best overall since the 1990’s.
As China’s economy has been besieged by the coronavirus, the eurozone has suffered its slowest growth in 7 years, Japan has been pushed to the brink of recession, and world debt has reached an all-time high — it should come as no surprise that America shrugged.
U.S. investors are not making the connection between a synchronized global downturn and the health of the U.S. economy.
The world economy is critical to the countless American corporations that operate abroad as well as foreign companies with offices in the U.S. that contribute to U.S. job growth, economic output, and market capitalization. Overseas supply chains are vital to U.S. business and foreign investment, whether in the American markets or American corporations, is very much influenced by global factors. As a result, many retirement and savings accounts are exposed to risks associated with financial uncertainties and slowing growth in countries halfway around the world.
During the 1992 presidential election, Bill Clinton’s campaign director, James Carville, famously posted a sign at Clinton headquarters that read, “It’s the economy, stupid,” as a stark reminder that America was facing a recession and that the markets, the Fed, and global conditions were contributing to the overriding economic malaise. In 2020, the same elements are in play except the financial fallout has yet to wash ashore — but when it does, only those with an aggressive risk management strategy will be prepared.
In his new book, Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos, author James Rickards warns that,
“The dizzying heights of the stock market can’t continue indefinitely–especially since asset prices have been artificially inflated by investor optimism around the Trump administration, ruinously low interest rates, and the infiltration of behavioral economics into our financial lives. The elites are prepared, but what’s the average investor to do?”
With the Europe stagnating, China stumbling, and the U.S. election sowing the seeds of deep political uncertainty — investors are taking strong positions in gold.
A world brimming with economic, political and monetary uncertainty requires a global safe haven which is why central banks around the world hold gold in their reserves. Gold is an international monetary standard and an ideal hedge against weakening economies, floating exchange rates, and global market volatility. And let’s not forget the lower-for-longer rate environment that has turned borrowing upside down and savings inside out, making gold an indispensable store of value and a critical counterweight to ever-expanding market bubbles.
Gold becomes more valuable during times of heightened market risk and rising geopolitical turmoil. Yes, “it’s the economy stupid” – the global economy, and we’re reminded time and time again why gold is the world’s most famous and most preferred crisis-resistant asset.
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