This past week the word came from the largest U.S. investment bank known around the world as Bank of America Merrill Lynch that that the longest running bull market in American history is dead. These are ominous words if they are true, as so many American consumers and investors are still fully invested in the equities’ markets. It is a dire warning from a well-regarded and highly respected financial institution not only based in the United States but closely followed by global analysts and economists.
This is the latest reason for why you should take steps to protect your investment and retirement portfolios today. Gold offers insurance and protection during market turbulence like no other historically proven, reliable safe haven asset can begin to claim. It has a longer track record than recorded history. Now is the time to start thinking about what assets go in a Regal IRA. As the sudden collapse of a decade ago in the Global Financial Crisis taught us all — tomorrow may be too late.
Is the “Great Bull Market” Dead as Bank of America Merrill Lynch Warns?
Bank of America Merrill Lynch came out strong this week when they issued their latest forecast and report on the future of what they call “the Great Bull Market.” This is the market which followed the Global Financial Crisis and Great Recession. Bank of America states that what killed this great bull is the massively excessive debt, increasing interest rates, and dragging economic growth that is slowing in their latest BOA Merrill Lynch analysis.
Instead of this historic rising market, there will be one that delivers lower returns. The majority of such returns that the market gives up will cluster in those assets that languished in the recovery period of the last decade. These are the findings of Chief Investment Strategist Michael Hartnett of BoAML who wrote a widely ranging note that investigated the current stock markets 10 years following Lehman Brothers’ collapse. Harnett warned that:
“The Great Bull Dead: end of excess liquidity – end of excess returns.”
Hartnett does have a point where liquidity is concerned. Central banks have been pumping away non-stop over the last decade. They have flushed $12 trillion (in a wide range of quantitative easing programs) through the world markets. This has included an almost unbelievable 713 interest rate cuts around the planet according to the research of Merrill Lynch.
It should come as little surprise that the United States’ central bank the Federal Reserve has led the quantitative easing charge over the past ten years. They quickly lowered the interest rates to zero and then held them hostage at this unnaturally low level for seven long years. This was only the beginning though. More dangerous still was their vast expansion of the central banking balance sheet. They catapulted it to over $4.5 trillion, a level from which it has hardly come down even with the Fed rolling off these asserts gradually. This chart below says it all:
The Stimulus Had Its Massive Impact In the Form of A Wildly Galloping Stock Market
The effects of the historically unparalleled stimulus caused a 335 percent launching of the broader markets (as measured by the S&P 500) from the scary lows in markets roughly a decade ago. Yet as investors and analysts are gradually starting to realize, the party is over in the markets. With continuously rising interest rates and the asset purchase program not only ending but reversing, all of the artificial stimulus that boosted equities and bonds’ markets is about to reverse. It will now flow the other way in earnest. Hartnett calls this “significant changes” that are coming to markets.
It explains why BoAML’s Hartnett is busy telling investors they should concentrate their investments on “inequality, innovation, and immortality” which will give advantages to both technology disruptors and pharmaceutical firms. He also suggests trying to buy value stocks (ala Warren Buffet), international markets beyond Canada and the United States, and rising commodity inflation trades. Gold is exactly one of those commodity inflation plays. Take seriously the advice of Hartnett who tells you:
“The Fed is now in the midst of a tightening cycle, ignoring structural deflation, focusing on cyclical inflation. Until this Fed hiking cycle ends we suspect absolute returns from financial assets will remain slim and volatile.”
Consider yourself warned.
Terrible Side Effect of the Global Quantitative Easing Programs
Unfortunately the side effect from the global quantitative easing programs was to encourage an incredible and historically unprecedented increase in the world’s debt. This has ballooned from $172 trillion before the Global Financial Crisis to more than $247 trillion today. China’s cumulative debt load has roared higher to reach $40 trillion total, an increase of an eye-watering 460 percent.
Meanwhile the total worldwide government debts have risen by 73 percent to $67 trillion. American government debt has roared from under $12 trillion to $21 trillion, an approximately 80 percent rise from the spectacular collapse of Lehman Brothers back on September 15th in 2008. It was the Lehman implosion that tripped off the sudden and unexpected crisis so severe that it nearly overthrew the world economy and global banking system.
The real danger here is that the present day investor has forgotten how it feels when the Fed sets out on a relentless mission to normalize fiscal policy. In only the few years since they began such normalizing, they have boosted interest rates fully seven times (from December of 2015). This is only the beginning though. The Fed is planning to increase it still another two times even before the end of 2018, per Hartnett.
Another danger is that the subsequent two interest rate increases from the Fed could lead to a perilous situation called an inverted yield curve. In this, government issued bonds have yields that rise over longer term interest rates. Such an inverted yield curve has predated all of the prior seven recessions in the U.S. Hartnett sees this as a real clear and present danger:
“Yet the Fed is now saying ‘this time is different’ and a flat/inverted curve won’t stop them hiking. A much more hawkish than expected Fed is the most likely catalyst for fresh losses across asset markets.”
Unfortunately for equities’ markets, the fed does not see it that way.
What Has Fueled The Most Recent Leg of the Never Ending Bull Market?
This most recent part of the bull market run that has kept financial markets on this seemingly unstoppable path a little longer came from the tax cuts of last year. While this did help to push corporate profits higher and to encourage yet another festival of stock share buybacks that will likely be over $1 trillion for only 2018, there was another negative side effect to it. U.S. government debt has risen to eclipse $21 trillion as a result.
While the U.S. still appears to be doing well (according to equities markets), this is an illusion of polarization per Hartnett from Bank of America Merrill Lynch. The U.S. has departed from the reality of the rest of the world markets which are struggling in many regions. Remember too that the past two fiscal stimulus cases finally led to “currency overvaluation, domestic overheating, and massive schisms in global markets.”
A final warning from Hartnett is to watch the bank stocks. When they start to retrench it will mean that the negative feedback from the tightening of the Federal Reserve has finally brought down the longest lasting bull market in the history of the country. The question will be this: after 10 years out from the financial crisis, are Americans forgetting the lessons of the 2008 crisis?
The date of the next financial crisis is only a question of when and not if. Now you know why you need a Regal Gold IRA. The next things you need to consider are the proper and legal storage of IRA gold and the gold IRA rollover rules and regulations.