Gold Is the Play as Confusion and Volatility Reign
Gold Is the Play as Confusion and Volatility Reign by Jason Simpkins – Outsider Club
If there’s one word to describe market activity in 2018, it’s “volatile.”
Forgive me for the stat barrage but…
The S&P 500 saw just eight swings of 1% or more all of last year.
In just the first four months of 2018, it’s experienced 28 such moves — 15 increases and 13 drops of 1% or more.
Meanwhile, the Dow has experienced FIVE of its 15-biggest point drops in history. That includes TWO 1,000-point plunges in early February.
However, the Dow has also enjoyed FOUR of its 20-largest daily point gains ever this year, headlined by a 669-point surge in March.
So what gives?
Well, given the longevity of this bull market and a reversal and Fed policy, some of this volatility was to be expected.
This was always meant to be something of a transition year, with the Fed and other central banks pulling away the punch bowl that’s lubricated the market for the past nine (!) years.
But there’s something else, too, and that’s political uncertainty.
Now, let me say this upfront: I don’t care what anyone thinks of Donald Trump as a president or a person. I’m not here to play politics.
You may think Donald Trump is a genius who likes to keep people off balance or you may think he’s an incompetent boob with an unclear or misinformed vision for the country. Or maybe both perceptions, in their own way, are accurate.
It doesn’t really matter. What matters, though, is the lack of certainty.
Back in March, President Trump said he wanted to leave Syria.
“I want to get out,” he said. “I want to bring our troops back home. I want to start rebuilding our nation.”
But in the immediate aftermath of that statement, members of Congress and the defense community feverishly campaigned to change Trump’s mind. And on April 13th, the U.S. and its allies struck the country with missiles in retaliation for a chemical attack.
In the interim, the president found time to tweet this out:
Again, you may think this is clever, or haphazard, but it’s certainly not clear.
Nor is the president’s thinking on economic issues, such as tariffs or the TPP.
After pulling the United States out of the Trans-Pacific Partnership last year, calling it a “rape of our country,” Trump last week openly pondered rejoining, only to walk those musings back just hours later.
Trump came out guns-blazing on tariffs a few weeks ago. Then the markets plunged, and Larry Kudlow, Director of the National Economic Council, came out to stress that “nothing concrete has actually happened” and that actual policy was still very fluid.
“It’s a long process,” he said. “So far, no tariffs and no action have been enacted.”
Kudlow also said exemptions would be made on a “case-by-case” and “country-by-country” basis. This directly contradicted the White House, which just days before said there’d be no exemptions.
Just this week, the White House scrambled to explain away a new raft of Russia sanctions that U.S. Ambassador to the UN Nikki Haley said would be coming.
“You will see that Russian sanctions will be coming down,” said Haley on Sunday. “Secretary Mnuchin will be announcing those on Monday, if he hasn’t already.”
But within 24 hours, White House officials were out in force disputing that claim, with Kudlow saying Haley “got ahead of the curve.” Now, no new Russia sanctions are expected.
And these are just a few examples. This has been going on ever since Trump was elected. Bold proclamations are frequently made, but not always followed through on.
As political strategy, that may be bold or bumbling, but as far as the markets are concerned, it’s jarring. And I don’t necessarily mean among retail investors, I mean among hedge funds and banks.
Tariffs, trade wars, and sanctions can affect trillions of dollars in capital flow. And no firm on Wall Street wants to be left twisting in the wind. The fact that they’re chasing headlines is a big reason why we’ve seen so much volatility this year.
And it’s only going to get worse, because in the background of all of this is Robert Mueller’s Russia probe and the run-up to the 2018 mid-term elections.
So strap on your seatbelt.
And buy gold. Everyone else is.
Both gold and silver have been gaining. And the popularity of gold-backed exchange-traded funds is at its highest level since 2013.
Better still, Nick Hodge recently uncovered an enormous gold find that could end up being the biggest in American history.
That play could gain some real significant leverage to the gold price’s multiplying returns.