In the past week, stock markets have finally met their match in the form of steadily worsening geopolitical news, especially that coming out of the Korean Peninsula. As the rhetoric grows increasingly bellicose there, world stock markets are clearly responding at last. The over half year long run has run into a seemingly impervious brick wall.
This geopolitical uncertainty that could quickly descend into stock market chaos around the globe calls for gold in your retirement portfolio. Gold is the only time-tested and historically proven safe haven asset which will offset a declining equities portfolio while simultaneously being easily transportable and salable in any country in the world for any currency. Get yours now before the mad stampede into the yellow metal becomes a full scale panic. Could you possibly need any more reasons for why a gold IRA? It’s time to finally learn what gold goes in an IRA.
Geopolitical Threats Rock the Wildly Overbought World Equities Markets
The week ending Friday, August 11th proved to be the worst one for the S&P 500 benchmark American index since back in March. The European stocks also plunged by their greatest amount since President Trump won the election. European credit also suffered from its most severe slump in an entire year.
The Fear Gauge better known as the CBOE Volatility Index is warning you to prepare your portfolio for a major market selloff and remained higher by nearly 50 percent for the week, which represented its highest and most dangerous warning levels since January of 2016. Gold attained two month high marks and the currency markets were roiled with the Japanese yen temporarily smashing through 109 for each dollar.
Gold reacted to as you might expect. the future prices increased to $1,296.80 per ounce at one point, representing the highest level in two full months. It looks like yet another scary August where the market volatility has dramatically increased at the same time as many of the traditional investors have slipped out on vacation. Many of them wisely set up contingency plans before they left. The chart below shows how the market stress gauge has at last turned positive for the first time since April, a troubling sign for stocks and investors:
The dangers and worries of the stock markets have not been lost on the biggest and most savvy investors on the planet. A few of them have begun warning the world that this is probably a smart time to cut the amounts of risk in any investment or retirement portfolios.
The leader of the biggest hedge fund in the globe, Ray Dalio of Bridgewater Associates has not only suggested that investors should cut back their stock exposure significantly, he has further recommended putting a solid from five to ten percent of total assets into gold as the best safe haven hedge to the considerable present day economic and political risks.
Norway’s Sovereign Wealth Fund is Similarly Sounding the Warning Bells
Dalio is not alone of the major leading investors of the world moving out of the markets and socking those profits away into gold bullion. The legendary largest sovereign wealth fund on earth, found in Norway, has recently expressed much of the same concern and decided to take profits off the table and money out of the markets. They are being even more proactive than Dalio it would seem.
Apart from pulling profits out of the markets, they are also reducing their credit risk by purchasing shorter maturity time frame debt. Norway’s sovereign wealth fund has been aggressively riding the market rally for years now. Yet they have just declared this past week that the so-called big active bets have been shorn of their luster for the domestic wealth fund.
Their Government Pension Fund Norway which manages $28 billion (or 22 billion krone) of their enormous wealth fund is the country’s domestic counterpart to their international global sovereign wealth fund that controls over five percent of all stocks on earth. They are cutting their risk while they still can. As the Chief Executive Officer Olaug Svara stated in a Tuesday interview:
“It’s been a long cycle. We’ve had good results in both our stock and bond portfolio with our long-term view. Pricing makes us think that it’s natural to realize some profits.”
The translation— please don’t let our selling of stocks cause you to sell your stocks too, which would lower the prices at which we intend to sell still more stocks in the coming months and quarters.
This particular part of the fund is managed by Folketrygdfondet. They handle the nearly $30 billion in assets for the Finance ministry and only invest this part of the fund in Norwegian stocks and other Nordic assets. For the second quarter, they managed to return a solid two percent yield. The portion of the portfolio in stocks, around 60 percent of the fund’s total assets under management, gained a more impressive 2.7 percent gain. They chalked this up to their counter-cyclical investing strategy with:
“To be counter-cyclical is part of our investment strategy. To go against the market is a big reason for our excess returns. Buying more when risk premiums are higher in the market.”
Meanwhile it was the domestic part of the Norwegian sovereign wealth fund that returned a measly one percent thanks to continuously narrowing credit spreads throughout the quarter. They keep nearly 27 percent of their fixed income assets in covered bonds, while holding around 24 percent of them in investment grade bonds and a full 22 percent of these assets in the Nordic area government notes. The Deputy Managing Director Lars Tronsgaard explained these lack luster returns with:
“It means that the risk premiums aren’t very high. We’ve made an adjustment where the credit risk is lower than we would’ve had if risk premiums had been high, because the outcome is perhaps bigger on the upside than on the downside — it’s a natural adjustment.”
The fund admits that despite the already low returns on these credit investments, they are eager to reduce further their credit risk. They will accomplish this in their fund by purchasing shorter dated maturity debt and by migrating to sectors which are lower risk. Still, the fund admits that such a process will require time and not happen all in a quarter even:
“We can’t do it in one quarter. Perhaps its too early but we must do it like that.”
If geopolitical disaster and ensuing economic retrenchment affecting the major equities and bond markets is just around the corner, they may be too late in starting their move to safety.
What Dalio and the Norwegians Are Saying Should Motivate You Into Gold
If the largest hedge fund manager in the world along with the biggest sovereign wealth fund in the world are counseling private investors to cut risk, to reduce exposure, and to move to gold and other safer sectors, you should take note and make personal adjustments to your retirement portfolio yourself.
With its negative correlation to stocks and other equities, gold is the ideal hedge against long overdue financial market pullbacks. Gold offers insurance and protection during market turbulence, as it has for over 5,000 years of human history now. Relearn how to invest in gold today to help you learn how to win over your financial adviser on gold in your portfolio.