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I’m guessing most of us believe financial markets will have a long way to go to recover from the pandemic. But government leaders and health professionals recently expressed guarded optimism that the worst of the pandemic could be behind us shortly. And markets right now are up roughly 25% from their 52-week lows reached last month. Does all of this indicate key financial indexes are in the process of gaining back what they’ve lost? Is this the beginning of the coronavirus recovery? Or is this just a brief rally in the midst of a chronically poor economic climate? One of the world’s most recognizable billionaires, Mark Cuban, believes market conditions will get worse before they genuinely improve. In his opinion, the eventual economic toll of the pandemic could be huge – something quarantined Americans can’t yet appreciate. This week’s Touchpoint begins with a closer look at why Cuban is so pessimistic about a quick recovery.
- Financial markets have jumped sharply in recent days. The benchmark S&P 500 index is now roughly 25% above the 52-week low it reached just two weeks ago. The question is, are the buyers who are roaring back into risk assets jumping the gun? Billionaire entrepreneur Mark Cuban thinks so. He appeared last week on CNBC’s “Closing Bell” to share his thoughts about people who are buying the markets now. “I just don’t think they are really factoring in what we are going to see on the other side,” he said. Cuban suggested no one can know the eventual “cumulative effect” of the economic carnage countless individuals and businesses have suffered. “We really don’t know how companies are going to rehire those they’ve furloughed or laid off,” he remarked. In this week’s Touchpoint video, Augusta economic analysts Devlyn Steele and Clint Doll delve deeper into the puzzle of just how markets will come back amid massive unemployment.
- Goldman Sachs is among many firms that believe the Federal Reserve’s commitment to dollar-weakening quantitative easing will send gold soaring. Judging from what gold prices did last week, it appears Goldman’s faith in gold could be well-placed. Gold futures finished last week at their highest level in 7 ½ years. On Thursday, the Federal Reserve announced additional initiatives to support the economy, and gold responded by climbing 4.1%. For the week, gold surged around 7%. Jeff Wright, executive vice president of Canadian miner GoldMining Inc., says the present “takeaway for gold is ‘extreme bullish.’” Wright’s optimism is rooted in the government and Fed efforts to get the economy back up and running quickly. “The price [of those efforts] will be a long-term weak U.S. dollar, which is good for gold,” says Wright. MarketWatch has more.
- Last Thursday, the Fed announced it would be rolling out another $2.3 trillion in monetary policy initiatives. To many observers, the big news in that statement was not the amount. It was the Fed’s declaration that it would be expanding its list of eligible asset purchases to include junk bonds. A few weeks ago, the Fed indicated it would be providing substantial support to the investment-grade corporate bond market. However, this venture into purchasing debt securities rated below investment-grade is truly remarkable. It suggests the central bank sees its job as supporting markets, no matter what. Stocks remain the only securities the Fed is not buying directly – yet. Peter Boockvar, chief investment officer at Bleakley Advisory Group, voiced his concern to CNBC. Boockvar notes that the central bankers usually consider themselves a lender of last resort. “They’re now the lender of all resorts,” he said. “Going below investment grade into the high-yield junk area is now a dangerous area they’re headed to.”
- If you hear the phrase “mortgage crisis,” chances are the first thing that comes to mind is the 2008 global financial crisis. The infamous subprime mortgage crisis set off a chain reaction that nearly resulted in the collapse of the financial system. What you may not know, however, is that there’s another mortgage crisis brewing. This one has the potential to do even more damage than the mortgage meltdown that devastated the global economy in 2008. Thanks to the pandemic, a rapidly soaring unemployment rate now threatens the stability of the mortgage market in an unprecedented way. Is your portfolio prepared to withstand the effects of another mortgage disaster? What can you do about it? To get details, read the latest blog article from Augusta Precious Metals.
Coronavirus Recovery: How Low Will We Go?
It’s still unclear how long the pandemic economic fallout will last – and how deep it will go. Nearly 17 million Americans landed on unemployment lines over the last three weekly reporting periods. How many more will end up there at the end of this week? And what will the longer-term ramifications be to an economy that continues to see weekly unemployment rise by many millions?
The Federal Reserve clearly is fulfilling its commitment to do “whatever it takes” to stabilize the economy. Against that backdrop, gold climbed 7% just last week. And experts say gold’s outlook for the foreseeable future is excellent. If you’ve seen enough damage to the economy and markets, perhaps you’re ready to learn more about gold’s portfolio-stabilizing potential. Call Augusta Precious Metals at 800-700-1008 or review some of the resources on this website. And if your portfolio is worth at least $100,000, reserve your seat for our live Profit & Protect Web Conference. This one-of-a-kind presentation on retirement protection is hosted by Augusta’s senior economic analyst and Harvard Business School Analytics Program member Devlyn Steele. Hall of Fame quarterback, Joe Montana, saw the same presentation after his financial advisors recommended Augusta as the nation’s best gold provider. He not only became our customer but is now our corporate ambassador.
We look forward to hearing from you.