Fall – The Season Of Market Frailty

Overall, August to early October is typically a slow and declining ride for the stock market. Mid-October is frequently a low point in the year-end stretch and it’s hard to imagine that this year’s election options can offer any immediate or substantial relief. Add to that the fact that the number of countries resorting to negative interest rates continues to rise, global GDP continues to slow and US stock market investors are finally realizing that the only things responsible for moving the market up at all are; a narrow band of very successful stocks, a flurry of stock buybacks, takeovers and acquisitions, and the ongoing threat of a Fed increase to interest rates, all of which encourage and provide a perception of growth now, but very little beyond.

Although the Fed has made every effort to leave an interest rate increase on the table for September, slowing growth and employment numbers are going to make implementation all but impossible. The Fed has squandered numerous opportunities to intelligently normalize interest rates over the past three years, but failed to take action. Their burning sense of urgency at this point is understandable, but utterly impossible to apply. We’re headed into a seasonally slow period. Any Fed increase at this point is simply too little too late and the market is in no condition to withstand, let alone benefit, from the stress.

More and more investors are looking to precious metals for both growth and protection during the Fall season and beyond. I expect the market to run true to its August history and post a loss for the month between one and two percent. September could be similar or even a little worse. But the convergence of many global and domestic forces could set up October for a precipitous drop in market values.

On the surface, the market appears to be flirting with all-time highs, but as I’ve said for some time now, the Dow (for example) will see 10,000 before it sees 20,000. Precious metals, on the other hand, continue to pursue and exceed recent highs. Not only will this trend continue, but the pace will accelerate. Do yourself a favor, whatever you feel is a good “normal” portfolio percentage of physical precious metal ownership – Double It!