Federal Reserve

Markets Look to Fed as Rate Cut Hopes Fade

Federal Reserve Note

Only about four or five months ago everyone expected that this week would be the week that the Federal Reserve would finally cut interest rates. Rates would fall, stock markets would shoot to the sky, and all would be well again, at least so that line of thinking went.

Instead, we’re looking at yet another Federal Open Market Committee meeting this week at which rates are likely going to be held steady, as stubbornly high inflation has put the kibosh on the Fed’s ability to cut rates. And without any headway on inflation, it could be another four or five months before the Fed is able to even consider cutting rates.

But despite that hope for rate cuts fading, everyone is still looking to the Fed as the savior of the economy. Will that hope end up being misplaced, or will the Fed somehow still pull off the soft landing that everyone is hoping for?

Stagflation Fears Rising

It’s not just inflation that is fueling fear, it’s the fear of stagflation. For most people alive today, stagflation is something we learned from our history books or in our economics classes, not something we lived through.

But for Americans who lived through the stagflation of the 1970s, stagflation was a very real and painful phenomenon. And history may be about to repeat itself.

Looking at inflation rates during the 1970s, it wasn’t a decade of consistently high inflation. Inflation started the decade on a high note, then dropped back, then surged higher, then fell back again, then surged even higher to end the decade.

It’s a pattern that we seem to see repeating today, as the high inflation we saw a couple years ago has fallen, but inflation rates are picking up once again. If the Fed doesn’t get things under control, or if it has to cut rates to try to forestall a recession, it could end up pushing inflation higher, leading to the same kind of see-sawing inflation that characterized the 1970s.

Stagflation was a portmanteau combining stagnation and inflation. And looking at economic performance today, the US economy certainly looks like it is facing stagnation.

Industrial production has been largely stagnant over the past couple of years, with no real signs of breaking higher than current production levels. And the latest GDP data indicated that the economy grew at a less than 2% annualized growth rate in the first quarter of this year, indicating a significant slowing of economic growth.

Clearly not all is well with the economy, and things are starting to grind to a halt. Yet the Fed has to balance the economy’s well-being with the rise in inflation, plus this fall’s Presidential election to boot.

Clearly the potential for miscalculation is high, and the risk of damage in the event of miscalculation is severe. But Fed officials don’t get paid big bucks to sit on their hands, even if sitting on their hands may be the best thing to do in this situation.

The Fed will act, but its actions aren’t guaranteed to help anything, and in fact its actions could end up being counterproductive, particularly if the Fed ends up remaining behind the curve as it has a history of doing.

The real danger is that if we end up entering another era of stagflation, the Fed may be just as clueless today as it was during the 1970s. And if the next decade ends up being as damaging to Americans’ financial well-being as the 1970s were, it could end up causing a lot of pain for millions of Americans.

The One Bright Spot: Gold and Silver

Despite the overall atmosphere of the 1970s as being one of stagflation and economic hardship, there was one bright spot: gold.

While stock markets fluctuated up and down throughout the decade and largely didn’t do much of anything, the gold price grew rapidly. From the beginning of 1970 to the end of 1979, gold’s annualized rate of growth was over 30% per year.

Even accounting for double digit inflation, gold’s real rate of growth that decade was over 20% per year. For those Americans who chose gold to help safeguard their financial well-being, gold’s growth provided some hope in an economy that seemed largely hopeless.

Silver was right up there alongside gold, growing right alongside its more expensive and more famous brother. Together, these two precious metals showed that they weren’t relics of bygone days, but rather the hope of the future and a means of ensuring financial security in the face of economic turmoil, high inflation, and financial instability.

Protect Yourself With Gold and Silver Today

If this decade ends up being one akin to the 1970s, there’s a good possibility that gold and silver might react in a similar manner today as they did back then. Already gold has set multiple all-time highs this year, and silver is picking up to levels that we haven’t seen in years.

If this is how gold and silver are acting before a recession occurs, before stagflation becomes entrenched, how might they perform once the recession arrives, and once stagflation becomes reality? And if they perform as well as many people hope, are you prepared to take advantage of that?

Many Americans today have already made gold and silver a part of their recession planning. Whether it’s buying silver coins and bars to store at home, or buying gold coins through a gold IRA to protect their tax-advantaged retirement savings, more and more Americans are looking to safeguard their financial future with precious metals.

Goldco has helped thousands of those Americans benefit from owning precious metals, with over $2.5 billion in precious metals placements and over 5,000 5-star reviews from our satisfied customers.

If you’re worried about what the future holds, if you’re looking to protect your hard-earned wealth against rising inflation, and if you’re skeptical of the Fed’s ability to get the job done, maybe it’s time you started thinking about putting gold and silver to work for you. Call Goldco today to learn more about the many ways you can add gold and silver to your financial portfolio.

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