It’s been an amazing ride this year for precious metals as Gold gains 25% and Silver 35%—and the year is not over yet. Except for the high tech sector, Stocks have floundered across 2020 to this date. Sales are down, profits down, productivity suffering.
We know the many trials, tribulations, and downright torture we’ve all endured through the COVID 19 Pandemic. Sadly, it looks like there’s more on the way.
This awful ride has been financial, spiritual, emotional, and socially damaging to all Americans. From a financial standpoint, the March Stock Market Crash was reversed only by massive market intervention by the Federal Reserve.
Despite the sharp 30% crash of the S&P 500 back in March and after the unexpected recovery, we’re only looking at 8% gains for the large cap index. The DOW index is still wandering around with flat to small loses for 2020 (shown above in black as DJIA.)
Gold Is The Dependable Safe Haven
By contrast, Gold gains of 25% this year are impressive and exactly what we should expect. Gold remains a safe haven in times of fear and economic uncertainty. We would point out that in the worst day of the market crash, Gold was only down a few points for the year— and quickly rebounded.
Let’s focus on why Stock investors panicked and how that led to a Stock Market implosion.
The COVID-19 pandemic-induced market instability and a Stock Market Crash in March.
Lockdowns shut down the economy in areas where America spends money— retail, furniture, restaurants, bars, airlines, cruise lines, travel, lodging, sightseeing, sports venues, live events, motion picture industry, movie theaters, Disney parks, casinos, and small businesses. Of course, Amazon, Walmart, and critical businesses have done great.
Lest we forget…
Fortune magazine reports, “Nearly 100,000 establishments that temporarily shut down due to the pandemic are now out of business.”
Yelp data shows 60% of business closures due to the coronavirus pandemic are now permanent.
Thankfully, many businesses are open again and struggling along praying for a vaccine, praying for a miracle. In reality, we’re deeply in a recession and Trump will not be in office. Any successful vaccine will take six to nine months to distribute to Americans and gain control of COVID. The rest of the world will suffer from Covid past 2021 into 2022– that assumes we are successful finding a safe, effective vaccine.
Elections Matter, Really Matter
Politics are another big worry for markets. Love him or hate him, Trump policies rapidly grew the U.S. economy, created energy independence, and put millions of Americans (most notably minorities) back into the work force.
With the stroke of a pen, a new President can eliminate all the positive changes made through Trump’s Executive Orders. Nowhere will this be more damaging than to the oil and gas sector. Just watch!
With a new White House, American corporations will be locked into a long period of uncertainty— especially after Biden all but promised more COVID lockdowns, higher corporate taxes, and increased regulations.
Another huge unknown, is if more aid will be coming for the unemployed, small business owners, airlines, and travel. Is another $2 Trillion of stimulus coming? How much? To what industries? How soon? We don’t know.
COVID 19 Wave 2 Has Arrived
We fear that all factors that led to the first COVID 19 Stock Crash in March are coming around again like a boomerang. COVID 19 worries are about to dominate the financial climate.
As COVID 19 cases and deaths are rising rapidly in the Northern hemisphere flu season, let’s review what triggered the March Stock Crash.
• Corporate debt bubble
• Recession fears
• Market liquidity crisis
• Mass hysteria
None of these problems have gone away. Unfortunately, we are left today with these added worries—
- Stock Market instability over 8 months
- Stock market bubble
- The COVID-19 recession worsening worldwide
- Europe back in complete lockdowns
- A possible double-dip recession in 2021
- A New Democratic administration not friendly to business
We do not feel optimistic about COVID Wave 2 today— the coming impact on the world economy, or about possible panics in the U.S. Stock Market.
We are especially troubled by the long-term impact of the massive money creation. We already see the U.S. Dollar falling in response to the $6 Trillion Dollars the Federal Reserve has allocated in response to the COVID 19 crisis.
Money Creation on an Unprecedented Scale
Monetary inflation, an exploding money supply, will produce one or more of these long-term events— reflation, inflation, or hyperinflation. The more fake money created by the Federal Reserve, the worse the risks of bubbles, out of control inflation, and a sharp Dollar decline.
Watch, wait, we’ll see. Meanwhile you might want to increase your holdings in physical Gold and Silver. With Covid 19, the worst is yet to come. This year’s Gold gain of 25% and Silver surpassing 35% could be just the beginning.