While everyone was in a panic after the Brexit vote was announced, things quickly calmed down and investors eventually regained their confidence in the global markets. The question is, did they regain their confidence too soon? Yes, the Nasdaq, S&P 500 and Dow have all regained some of their losses. However, the issues that could lead to a 2016 stock market crash are far from over.
Here are 2 signs that point to a possible 2016 stock market crash:
#1 – Gold Purchasing Trends
When investors are preparing for a crash, one of the first things they do is increase their investments in gold. And that is exactly what has been happening. Since January 2016 some of the wealthiest investors in the world have been flocking to gold. This is because gold is one of the best forms of currency you can own in times of uncertainty.
When paper currency loses its purchasing power, gold will not. It will also protect you from portfolio losses and plummeting stocks.
According to the World Gold Council, 1,290 tons of gold was purchased during the first quarter of 2016. This is a 21% increase over the same time last year.
Even still, it’s the moves of billionaire investors that we should pay the most attention to. In the first quarter of 2016 billionaire investor George Soros’ fund invested in over $250 million Barrick Gold Corp. shares. And if that wasn’t enough, Stanley Druckenmiller, another notable billionaire investor, said his largest currency allocation right now is gold.
These gold purchasing trends should tell you something is going on and we all need to prepare.
#2 – The Feds Aren’t Raising Interest Rates
Another reason a stock market crash may be imminent is because of the Feds unwillingness to raise interest rates.
When the U.S. Federal Reserve raises interest rates it’s a sign that the economy in the United States is healthy. When they don’t, it’s a sign that trouble may be on the horizon. According to Fortune, investors believe there is an 8% chance the Fed will raise rates before the year is over.
Slow job growth and fewer Americans purchasing homes is why the Fed is refusing to raise interest rates. And while the unemployment rate fell to a nine year low in May, job creation came to a virtual stand still.
Home sells also fell by 6% in May. With mortgage rates at near historic lows and Americans still not being able to afford new homes, that’s a sign of just how weak the U.S. economy really is. So here’s the bottom line, start preparing now!
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