Quantcast

Don’t Be Fooled by the Stock Market Rally

'Markets take the stairs up and the elevator down....'

Markets tend to move in cycles. They typically experience cyclical pullbacks after trending higher for a long period of time. Rarely do markets move straight up or straight down.

The stock market has, however, essentially moved straight up since the March 2020 mini-crash. As the market moves higher, an increasing number of “analysts” are calling for even higher equity prices.

Just last week, in fact, an analyst called for the broad market S&P 500 index to double by 2030.

Calls for an 8000 S&P do not seem quite as farfetched as they did just a year ago. That is the power of greed (and wishful thinking) at work.

...article continued below
- Advertisement -

It is no secret that the Federal Reserve has fueled the market’s gains. The Fed cut interest rates down to zero over 10 years ago.

The Fed quickly ran into a brick wall, however, when it attempted to tighten monetary policy in the middle of the last decade. Stock investors began to rapidly show their dissatisfaction with the central bank once rates began to tick slightly higher.

The “taper tantrum” of 2013 demonstrated how important the Fed’s actions were to markets.

Spooked by then-Chairman Ben Bernanke’s commentary about the central bank slowly taking its foot off the QE gas pedal, stock market volatility rose significantly while bond yields spiked.

...article continued below
- Advertisement -

The Fed didn’t get very far on the tightening campaign, halting it in 2018.

And the central bank quickly cut rates to zero at the first sign of trouble in 2020.

Now they’re at their old game again, purchasing billions of assets per month to keep the economy afloat.

Although no one can see the future, it does stand to reason that stimulus-addicted equity markets could see a substantial pullback from current levels if and when the Fed puts on the brakes.

However, the Fed has made it absolutely clear it is comfortable keeping monetary accommodation going and letting inflation run hot for some time.

The central bank may, therefore, keep its pedal to the metal for several months to come (or longer). That could help sustain the ascent in equity prices until investors’ concerns about inflation and rising interest rates trigger a rotation out of stocks.

Gold and silver perform well during stock market turbulence as well as times of inflation, including during rate-hiking campaigns.

A key driver in performance of the monetary metals is negative real interest rates, a condition that exists when the inflation rate is higher than nominal interest rates.

That’s what we have today. And even if the Fed were to start hiking rates again, they will almost certainly remain “behind the curve” such that real rates remain below zero.

Watching the Stock Market

The Fed has blown a bubble, arguably the largest bubble ever, and eventually that bubble is going to pop.

When it does, many of the investors that have seen strong performance during the equity rally will see their accounts suffer real losses.

As the old saying goes: “Markets take the stairs up and the elevator down.” This elevator is likely to be fast – and may even catch the most astute investors off-guard.

Given a reckless Fed and the equity market’s astronomical valuations, now is the ideal time to take steps to protect your investment portfolio and financial future.

Against the current backdrop of easy money, there may simply be no better asset class to turn to than precious metals…Original Source

Stefan GleasonStefan Gleason is President of Money Metals Exchange, the company recently named “Best Overall Online Precious Metals Dealer” by Investopedia. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC and in hundreds of publications such as the Wall Street Journal, TheStreet, and Seeking Alpha.

- Advertisement -

TRENDING NOW

Tennesee Transgender Bathroom Law Allows Students to Sue Liberal Schools

(Headline USA) Tennessee lawmakers have passed a bill that would allow students who are forced to share a bathroom or locker room with a...

Police Officer Placed on Leave After NC Fatal Shooting

(Associated Press) A North Carolina deputy shot and killed a black man while executing a search warrant Wednesday, authorities said, spurring an outcry from...

Social Justice Warriors Sue DeSantis Over Anti-Rioting Law

(Associated Press) A social justice group has filed a lawsuit against Florida Gov. Ron DeSantis and others two days after the Republican signed a...

Simon & Schuster Rejects Employees’ Demands to Spike Mike Pence’s Book

Publishing company Simon & Schuster rejected demands to spike former vice president Mike Pence’s upcoming book after leftist employees began circulating a petition against...

AOC Reintroduces Green New Deal to Combat ‘Racial, Economic, Climate Injustice’

Rep. Alexandria Ocasio--Cortez, D-NY, reintroduced the Green New Deal this week as a bill to fundamentally transform the U.S. economy and promote “racial, economic,...

Black Activists Call for ‘Insane’ Boycott of Home Depot over Ga. Election Law

Georgia leaders representing more than 1,000 churches in the state encouraged leftists to boycott Home Depot, arguing the company didn’t denounce Georgia’s new election-integrity...

Mark McCloskey Considering Senate Run

Mark McCloskey, the St. Louis lawyer who rose to national prominence last summer after confronting Black Lives Matter rioters outside his home, said he...

BLM Rioters: ‘We Are Never Going To Be Satisfied’

Black Lives Matter rioters in Minneapolis and several other major cities continued to make their presence felt throughout American cities yesterday, even after the...

Minutes After Chauvin Verdict, Woke Mob Finds New Martyr in Knife-Wielding Ohio Teen

The fatal shooting of a knife-wielding black teenage girl by police in Columbus, Ohio, came within minutes of the verdict in George Floyd’s killing---resulting...
- Advertisement -