Posted By Isaac Nuriani
There are more worrying numbers coming out about the stock market. One number that really sums up the market’s erratic behavior is the CBOE Volatility Index or VIX. That number was at +12.56%. After eight trading sessions, the VIX has leapt up to 31.14%. According to Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research, when the VIX rises above 20, uncertainty is the predominant theme among stock investors. Not surprisingly, when the VIX is above 20, erratic swings in the index are likely.
One of the leading factors contributing to the market’s volatility is China. According to the China Federation of Logistics and Purchasing, China’s official manufacturing purchasing managers index fell to 49.7 in August, down from 50.0 a month ago. A purchasing manager’s index, or PMI, below 50 indicates a contraction in manufacturing activity. While the difference seems minimal, the PMI of 49.7 marks a three-year low and has ignited a broad selloff in stocks, beginning in Asia and Europe before spreading to the U.S.
What about U.S. numbers? They’re not reassuring as the S&P 500 SPX dropped 2.5%, or 48 points. The Dow Jones Industrial Average shed 401 points, or 2.4%, with all 30 of its components trading lower. The Nasdaq Composite isn’t any better: its fallen 105 points at 4,670, putting it into negative territory for 2015. While a correction in the market had been expected, the economic news from China has stirred up considerable fear among investors.
The future of the market is definitely uncertain. Some market strategists, like Robert Pavlik of Boston Private Wealth LLC, believes there’s little relief in sight. There are also worries that the downward trend isn’t a short-term decline, but a long-term downturn. In this climate, investments that people have planned to rely on for the future, like a standard IRA, could be seriously devalued by the market. It’s in times like these that people have to start thinking of alternatives to a traditional IRA such as investing in a gold IRA.
Gold IRAs have a distinct advantage over traditional IRAs in the market conditions we’re experiencing. Standard IRAs are generally composed of stocks and bonds. Factors like rising interest rates and market volatility can seriously disrupt the value of these IRAs because they hurt the value of stocks and bonds. Diversifying your IRA with gold and precious metals can help shield against the market’s effects.
No one is quite sure where the market is heading, but many are seeing a dismal future up ahead. The market’s volatility alone should be enough to make you think about your retirement account. Before the market takes a course for a long-term slide, you should prepare by thinking about diversifying your IRA with gold, the kind of hard, tangible assets that the market or interest rates can’t flush away.
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