Posted By Isaac Nuriani
The U.S. stock market continues its wild ride that has spanned much of the summer. Last week saw some depressing trends. Apple’s stock dropped to its lowest level in over six months, depressing tech stocks along with it. Disappointing U.S. economic data and a slump in oil prices didn’t help the situation either.
Now, this week has opened with U.S. stocks closing near intraday highs on Monday, August 10. The Dow Jones Industrial Average closed up 1.4% or 241.79 points, at one point reaching 256 points. Blue-chip index components added to this positive turn: 29 out of 30 of the index components closed higher on the day.
How does one explain this? In part, it may be due to new comments from the Federal Reserve about interest rate hikes. Federal Chairwoman Janet Yellen hinted that rate hikes were due this September based on economic data. On Monday, however, a different message was broadcasted: Federal Reserve Vice Chairman Stanley Fischer commented to Bloomberg TV that he doesn’t expect the hike to come so imminently. According to Fischer, he doesn’t expect a rate hike until inflation returns to the Fed’s target of roughly 2%. In recent months, the inflation rate skidded close to zero and hasn’t breached 2% since 2012.
Talks of interest rates aren’t the only factor for this week’s remarkable start. China put up some worrying numbers last week. Jump to Monday and China’s stock market has shown a promising turnaround, mollifying concerns that China’s equity market is losing steam. China’s economic performance has been weighing heavily on the minds of American financiers. As Tobias Kevkovich, chief equity strategist at Citigroup, has remarked, “China has been the number one concern in the market and if the market believes that China’s not coming apart at the seams, then we’re going to see a nice bounce.”
The U.S. stock market’s bounce back this week is all well and good. That said, it also highlights the continued volatility of the market. Week to week, the market has been all over the place. Economic reports and discussions of interest rate hikes have contributed to the market’s fluctuations. Volatility and unpredictability may not be good for your investments, especially for critical long-term ones like your IRAs.
Individual retirement accounts are particularly susceptible to market volatility and increases in interest rates. Why? Because rising interest rates lowers the price of bonds. Bonds along with stock, comprise a standard IRA allocation. Therefore, the American market’s instability and potential rate hikes may negatively affect the value of your IRA; that is unless you do something about it, such as diversifying your IRA with precious metals.
Gold IRAs can protect against the detrimental effects of rising interest rates on your account. But if you wish to protect yourself even more thoroughly, we believe that buying gold and storing in a highly secure privately owned storage facility is even more effective. This provides a number of benefits. With an Augusta Gold IRA, you avoid many of the costs associated with other types of gold IRAs, such as high management fees. You may also see, touch, and hold your gold by visiting the highly secure, non-government, privately owned storage facility where it is stored. We can hope that the U.S. market maintains its positive trend, but wishing and hoping isn’t what you should be doing with your IRA: you should be preparing.
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