The United States economy is currently in the throes of one of the longest bull markets in its history. Because of recent all-time highs in market prices, many economists have expressed optimism that current trends could last a long while. However, another look at recent numbers by many experts in the field tells a different story. Downturns in prices over the last few days have provoked concern that the bull market may be ending and a bear market may be just over the horizon. If such a turn of events were to transpire, many could see the gains they have made over the last few years completely wiped out. To advise buyers on what they can do in the event of such a downturn, U.S. Money Reserve, a well-known provider of precious metals and expert market knowledge, has released a video with important information to consider.
Recent Upturn
To understand how a typical asset portfolio could be negatively impacted by a bear market, it is first helpful to examine the effects of stock market gains over recent years. On the heels of the 2008 financial crisis, financial markets were in disarray. Pillars of the financial community, such as Lehman Brothers, had recently gone out of business, and a financial system that had previously seemed unshakably stable suddenly seemed vulnerable and likely to collapse. In response to this loss of confidence, stocks plummeted, causing the Dow Jones Industrial Average to lose approximately half of its market value.
Morgan Stanley’s CIO, @MS_CIOWilson , weighs in on where we might be in this rolling bear market and where it could be going in 2019.https://t.co/t2YQGpYhye pic.twitter.com/RvW6citnex
— U.S. Money Reserve (@USMoneyReserve) November 29, 2018
In the years since that downturn, the market has made unprecedented gains. Partly because of a rebounding economy and various other factors that helped staunch losses in the wake of the financial crisis, the market has almost quadrupled in value since its low point in 2009. These gains have not only seen the portfolios of many buyers swell with market value, but have also helped push asset valuations to never-before-seen levels.
Words of Caution
While everyone hopes that the good times of rising stock prices and increasing portfolio sizes will last forever, it is of course true that all good things must come to an end. Such is the word of warning coming from the recent informational video by U.S. Money Reserve. Though the market has celebrated historic highs of late, the company cautions that the national stage is set for a downturn into a bear market that has not been seen for quite some time.
Such a bear market would have the potential to erase a significant portion of the gains that have been realized by buyers since the recovery began following the financial crisis. Not only would many see the market value of their assets diminish, but, without the proper foreknowledge, they may also have trouble finding an appropriate place to store their money to protect it from decreasing prices.
Avoiding the Downturn
One central belief that is often espoused by financial advisors and economists when it comes to bear markets is that buyers should merely ride them out. With such a strategy, buyers would simply stand by and watch the market value of their portfolios diminish, knowing that the market value would return once the bear market ended. While this has historically been the advice given because of the difficult nature of timing the market, many in the financial field hold opinions that run counter to this recommendation.
In the recent video, a U.S. Money Reserve spokesperson highlights some thinking on the potential upcoming bear market that may push investors to believe it would be in buyers’ best interests not to ride out the downturn. Instead, many experts say that this bear market may be different than others in the past and may persist for a prolonged period of time, rather than the year-long maximum that is often typical of a market correction. If such a prediction came to pass, it would behoove buyers to seek out safe-haven assets to protect the market value of their portfolios as the market undergoes its turbulence.
Reasons for a Prolonged Bear Market
A host of reasons presented in the video and accompanying e-book resource point to the validity of a claim that an upcoming bear market could be a drawn-out affair. One major concern is the valuation of stocks and other assets. In a typical downturn, the market may undergo a slight correction, which would put the valuation of assets in line with what might be considered their “true” market value. Theoretically, once this valuation is more appropriate, buyers pile back into the market and reverse the downward trend of prices.
Many economists feel, however, that the current market is vastly overvalued. Along with record high stock prices, home prices have reached levels that now even surpass the housing bubble witnessed before the financial crisis. These indications have given many experts pause when considering the underlying validity of current valuations. If assets are indeed overvalued, when a downturn hits, it may persist for a prolonged period, as the assets will take time to reach their true valuation. While this process occurs, the health of broader financial markets may also suffer.
Role of the Federal Reserve
Another indication of the possible length of an upcoming bear market is the strength of the economy and what has contributed to its arrival at this point. Although the economy and the stock market are not one and the same, they are certainly linked. Stocks in financial markets influence and respond to the market value of companies operating in the broader economy. The economy has been performing well in recent years, but many experts predict that this too may be due for a correction.
The underlying worry about a correction in the economy is that one of the biggest ways the federal government stimulates the economy is by lowering interest rates via the Federal Reserve. When the economy stumbles, the Fed typically lowers rates to encourage borrowing and spending. Although the Fed has been raising interest rates of late, the rates are still lower than they would be if the government had begun these rate corrections far earlier. This means that if the economy were to undergo another downturn, the government may be left without the ability to reverse a recession by lowering interest rates. Again, this could result in a prolonged bear market as the economy stumbles.
Safe-Haven Assets
In light of the above information, many buyers are looking to transition some portion of their portfolios to assets that have typically performed well during financial downturns. One such collection of assets is precious metals, which often perform better than many other assets in the face of economic turmoil. Gold alone has increased more than 350% since 2000 and has traditionally been viewed as a stable store of wealth. In anticipation of potentially difficult markets ahead, converting some assets into precious metals has the potential to help buyers preserve their purchasing power.
U.S. Money Reserve in Brief
The company behind the informational video, U.S. Money Reserve, is recognized as a leader in the field of both precious metals and government-issued coins. The only gold company to be headed by a former director of the U.S. Mint, Philip N. Diehl, the organization provides a unique perspective into the juxtaposition of public policy and personal financial freedom. That perspective has a top-down effect on interactions throughout the company, with account executives taking particular care to assess the personal needs of customers. This focus on customer service has earned the company a host of recognition, including an AAA rating from the Business Consumer Alliance.
Although the United States has recently experienced historic highs in bull market length and market valuation, there is a communal feeling among experts that such results cannot last forever. In preparation for an impending bear market, many experts recommend the transition of portfolio assets into alternative stores of wealth. The recent informational video from U.S. Money Reserve is a helpful look at this situation for any buyer searching out the right course of action for their own market position. Review the video and the above information to help come to an informed decision regarding your own asset needs.
