This past week the markets made more or less new all-time highs. Yet this is a dangerous illusion potentially. In fact September is a notoriously bad month for stocks in the U.S., and in mid-term election years it is even worse. This particular year provides even more pitfalls than usual.
It serves as yet another reminder of why you can not put your hope and trust in stocks and the equities markets (or any market for that matter). What you do know and can say with 5,000 years of certainty is that gold offers insurance and protection during market turbulence. Now is the time to diversify your portfolio and understand what is a Regal Assets IRA. One of the things to think about when you do is the storage factor for your precious metals.
Statistically September Is the Worst Month For Stocks In the Markets
September has never been a good month for stocks. In fact this is the toughest month when stocks often arrive near or at historical highs. The optimism is misplaced. September has the unfortunately true reputation of being statistically the poorest month in any given year for equities.
Even star-struck analysts in love with the longest running bull market ever admit that the S&P 500 could soon face challenges ahead. One of these is the American mid-term elections. Others include a new $200 billion worth of American tariffs for Chinese products and the inevitable retaliation, the strengthening dollar, rising turmoil in emerging markets, and the debt problems that continue to seriously threaten Italy and Italian banks.
Those years where midterm elections have been a factor are special. CFRA argues that their returns have proven to be volatile. Looking back through 1946, the S&P 500 boasts a track record average of minus one percent for September. This chart below shows the grim September statistics that markets have struggled to shed.
Some analysts will point out that in those midterm election years, the markets have typically finished stronger, notching gains of 7.5 percent average by the end of the fourth quarter.
It is too soon to get your hopes up that this will be the case this year however. As the Bank of America Merrill Lynch Head of Global Economics Ethan Harris astutely points out, there are a range of worrisome international disputes that are all hanging over the markets and threatening to reach a dramatic climax exactly this fall. Some of these he cites are possibilities of car tariffs on other nations like the EU countries, Chinese import tariffs, another down to the wire budget deadline battle in Congress, sanctions on Iranian oil taking effect and driving up world oil prices, and the uncertainty surrounding a November midterm election result.
As Ethan Harris points out:
“The risk calendar gets quite big this fall. September is part of it, but it’s really the whole fall period.”
Another Interest Rate Hike in September Could Rock Markets
One thing clearly threatening markets is the Federal Reserve. Most market participants now expect that they will increase interest rates yet again. It is the after-meeting September 26th statement as well as comments out of Chairman Jerome Powell that will inform markets of the chances for another rate hike in December. According to Chief Macro Strategist David Ader of Informa Financial Intelligence, Powell did not show so much dovish attitude in the Jackson Hole meeting as many assumed. He warned:
“The odds for a December hike are now higher than they’ve been. I suspect we’re going to get a Fed that’s going to indicate it’s going to hike again. There are real risks for the stock market that go beyond the mere fact it’s September.”
Then you have analysts like the Americas Chief Investment Officer David Bianco of DWS who looks for an outright stock selloff in the fall. He warned:
“We think a five to nine percent dip is likely this autumn, but worse than that is also a possibility given the uncertainties.”
If that is not a stern enough warning, Bianco forecasts that the next five percent move in the S&P 500 will be lower as he penned in his research note. There are so many risks according to him, and they start with the interest rate hikes of the Fed, which seems hellbent on causing the next slowdown with their too-late, too-much policy.
Stronger Dollar Hurting U.S. Companies Prospects Overseas
The Fed always does this. They create a self-fulfilling prophecy that destroys the U.S. and world economy. Every few years, it is time for them to interfere again. Consider that one of the side effects (unintentional or otherwise) of the interest rate hiking of the Fed is a stronger U.S. dollar. This has created a serious negative result in the world, which threatens the U.S. and its equities markets as it comes back around again. Sadly we have been here before, repeatedly.
The higher valued dollar has forced a crisis on the emerging markets. Countries like Turkey, Venezuela, Brazil, and Argentina to name a few were already suffering from a slowdown because of the strengthening dollar. The tariff and trade war between the United States and China is only making a bad situation worse.
A stronger dollar has been one side effect of Fed rate hiking, and it’s already had a negative impact. It has led to the Turkish lira collapse and a bear stock market in China, long the world’s driving growth engine. The dollar is likely to continue climbing with the self-perpetuating risk-off actions of traders driving up the greenback. The Fed seems determined to ignore rising risks around the world, such as the dangerous and very real possibility of a no-deal Brexit, the Italian budget mess, and what will surely be a bitterly contested presidential election in Brazil.
For example, Argentina is now in full blown panic mode. As the Argentinian currency totally collapsed last week, they were forced to go hat in hand to the IMF for an early loan payout. This made the situation in Argentina so much worse. Its financial suffering crushed many other emerging markets. This pain is only likely to go on in the coming weeks too.
All of These Proverbial Chickens Are Coming Home To Roost
Lest you think that the Argentinian crisis is one of those faraway South American problems with no bearing on the future of American investments and markets, consider this. The Argentinian 100 year bonds they sold this past years so happily were invested in heavily by American investors and U.S.-based hedge funds too. At the time, everyone though it was the cleverest thing that they had ever seen! Imagine lending your money to a country for 100 years (that has defaulted half a dozen times approximately in the last hundred years) at an incredibly low interest rate.
A final alarm bell sounding is that the VIX volatility index is warning investors to use caution. In what is typically a weak month in the markets, the VIX sat as low as 12 during August. It is especially a risk given that there could soon be 25 percent tariffs on imports from European cars, which the administration has proposed. The tariffs have merely been placed on hold as negotiations progress. Harris says it best when he warns about all of the many risks for your retirement portfolio going on for the fall:
“If I’m going to rank the risks this fall, trade wars are one. Iran oil sancitons are two, then the European crisis is three. You have the Italian budget, due at the end of September, which is a very contentious thing, where the government promised a budget the European Commission is very likely to reject. I think you’ve already seen a foretaste with the Italian bond yields spiking up and staying higher.”
If you are still not convinced that the proverbial other shoe is about to drop with equities markets, there is always Brexit and the rising, disturbing possibility of a no-deal with the U.K. hard crashing out of the European Union. While analysts like Harris think that it needs a large shock out of Europe to impact the United States, he quickly admits that a failed Brexit deal would be such a magnitude event.
This is why you have to safeguard your portfolio with gold. Now you know why you need a Regal IRA. The last thing to consider is what assets go inside of a Regal IRA. It is high time you realized it while gold prices are still reasonably priced.