In spite of a decade-plus of significantly loose monetary policy applied the world over, global economic output remains feeble. It is predicted that global GDP will register at a paltry 3% this year – the lowest annual output since the 2008 financial crisis. In fact, 177 economists recently were surveyed about this and more than three-quarters said the global economy will keep sinking despite continued lowering of interest rates worldwide. This week’s Touchpoint has more on that poll and other items of interest for retirement savers, including important information about a strategy that offers real potential for recession-proofing your portfolio: buying gold.
- One of the greatest fears people have about a global recession is that the economic weakness will be so prevalent and deep that central banks will have to resort to the most extreme policy measures imaginable to catalyze any improvement. And it’s unclear if even that will do any good. According to results of a recent Reuters poll detailed at Yahoo Finance, 71% of 177 economists surveyed said that despite the continued slashing of interest rates worldwide, they are expecting a “deeper global economic downturn” rather than any kind of strengthening. In a recent note to clients about this projection, Janet Henry, global chief economist at HSBC, wrote pointedly, “More central banks around the world, led by the Fed and the ECB, are cutting rates. Fiscal stimulus is imminent, too, but yield curves still seem to be signaling recession.”
- Olivia S. Mitchell, executive director of Wharton’s Pension Research Council at the University of Pennsylvania, tells CNBC.com that millennials should expect to allocate nearly half of their earnings toward savings in order to stop working at what has become the standard retirement age of 65. The reason? The performance of popular assets long-term savers traditionally have relied on to build their nest eggs is expected to be greatly diminished for the foreseeable future. According to the CNBC article, Morningstar is projecting that equities markets will provide savers with average annual returns over the next decade of no better than 1.8% per year – before You may not be a millennial, but the challenges faced by that demographic can be seen as a proxy for the difficulties facing all age groups as they prepare for retirement in the current era.
- Santander Consumer USA Holdings Inc., one of the nation’s largest originators of subprime auto loans, has announced that loans it made as recently as last year are now defaulting at the fastest rate since 2008. In a related article, Yahoo Finance notes the quick failure rate of the loans suggests that borrowers on shaky ground now may be heading over a financial cliff in significant numbers. Although auto loans are not an intrinsic part of capital markets in the same way home loans are, their rapidly increasing failure rate still can be a signal of a growth in the number of distressed consumers overall, and therefore another measure of the economy’s weakness.
- If the nation’s economy descends into recession in the near future – as so many experts are now predicting – will you be able to get by relatively unscathed? If you say, “No,” you’re hardly alone. According to a recent survey by Bankrate, 40% of Americans say they’re unprepared for recessionary conditions. Among the best ways to insulate yourself from the effects of a recession, say experts, are to pay down debt and make sure you have a healthy sum set aside in an emergency fund. Good advice, but nowhere on the list of recession-proofing tasks is anything related to protecting one’s retirement portfolio. In light of the damage suffered by many retirement savers in the last recession, it could well be the case that much more than 40% of the country is at risk of suffering lasting consequences from another downturn – many just don’t realize it. To learn what steps to take to ready your retirement portfolio for recession survival, just as you have readied your household, read Augusta’s latest blog article here.
Recessions are obviously bad news. Fortunately, defending your retirement portfolio from the effects of a sharp downturn in the economy is easy. While popular assets were struggling during the last global recession, gold and silver demonstrated not only resilience but a capacity to sharply increase in value. As a matter of fact, from 2008 to 2011, gold jumped a little over 100% and silver soared nearly 400%. Now that another global economic debacle is looming, the time is right to consider buying gold and silver to help protect your portfolio.