3 May 2024
For Americans living in the Atlantic basin, hurricane season starts soon. Yet, stormy weather appears to be descending on the U.S. economy and the stock market too.
The Federal Reserve got several doses of bad economic news in recent weeks—an uncomfortable combination of slower economic growth and rising inflation. Financial markets took notice. Stocks plunged and gold hit a new all-time record high. For investors, we offer three portfolio moves to consider now to batten down the hatches and help keep your wealth safe. First the numbers.
March Inflation Data Jumps
Americans still feel like prices on everyday goods and services are rising. Recent economic data confirms that is true.
The March Personal Consumption Expenditures inflation data came in stronger-than-expected as the headline number rose from 2.5% to 2.7%. This confirms the recent rise in the March Consumer Price Index, which rose on an annual basis to 3.5%, up from the February 3.2% reading.
The Fed can’t be happy that inflation is going in the wrong direction. This will most likely push out the timing of any interest rate cuts in 2024.
First Quarter Growth Slows
While inflation remains high, economic growth is slowing down. First quarter gross domestic product data revealed a sharply lower-than-expected 1.6% growth rate—well below the 2.5% consensus forecast. That shows the U.S. economy is growing at its slowest pace in nearly two years!
It’s no surprise, Americans are increasingly concerned about the fresh rise in inflation and slowing economy. The latest University of Michigan Consumer Sentiment survey revealed a drop in the Current Conditions sentiment index from 82.5 to 79.0.
Stocks Stumble: Bears Come Out of Hibernation
Meanwhile, stock market bears have come out of their caves from hibernation and they are growling, hungry and mad.
Investors began dumping stocks in April following this spate of worse than expected economic news. Disappointing earnings from big name tech stocks like Meta also dragged down the broader market in April. Meta’s shares plunged nearly 11% and other so-called “Magnificent Seven” stocks weren’t looking so magnificent as Alphabet, Amazon and Microsoft also saw heavy selling.
Gold Prices Touch Fresh Highs
In the midst of the disappointing economic news and stock market selling, gold prices rallied since mid-February in a historic and unprecedented fashion. After surging over 8% in March, gold climbed over 3% in April, touching a new all-time record high above $2,300 an ounce. Physical investment demand for gold bars and coins has been rising in anticipating of even further price gains in precious metals.
Portfolio Moves You Can Consider Now
Just as a farmer tends to his fields in the spring so he can reap his harvest later, taking care of your portfolio now can help keep your capital safe and your money growing. Here are three portfolio moves you can consider now.
Rebalance your investments: Rebalancing simply means selling a portion of your stock allocation and buying more of other asset classes like gold and silver.
Prepare for more stock market volatility ahead: Investing too heavily in the stock market can put you at risk if the stock market goes into a downturn or even a crash. Americans who need cash might have no choice but to pull money out of the stock market at a significant loss.
Diversify with an increased allocation to gold and silver: Gold and silver bullion in physical form is an appropriate asset for a portion of any properly diversified investment portfolio and we recommend investing up to 10% of your overall portfolio in gold, depending on your financial goals and risk tolerance levels.
If you would like to discuss a personalized precious metals investing strategy tailored to your long-term investment goals, risk tolerance and time horizon, call a Blanchard portfolio manager today.
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