According to The Wall Street Journal, the slowing global economy is leading investors to move toward safer assets, such as gold, the Japanese yen, and dividend-paying stocks. Market experts predict that a recession is forthcoming.
“The market mood is very uncertain right now,” said James Bianco, head advisory firm Bianco Research. “There are a lot of things happening at once and investors are not sure what to make of them.”
Since July, rich-country government bond prices have skyrocketed, pushing European yields down. The currency currently performing the best is the Japanese yen, while gold has reached a six-year high, rising faster than the S&P 500 this year.
Although there are still strong arguments that economic growth will continue, investors are beginning to take fears of a global slowdown more seriously and move toward safer assets. The market could also be affected by the Federal Reserve, which is expected to lower interest rates again in order to protect the economy from the fallout of the trade war.
Although lowered interest rates are good for stocks in the short term, many investors doubt that lowered rates will truly lead to a re-ignition of economic activity.
“People would have thought these low interest rates would spur growth, but they’re not,” said Robert Tipp, chief investment strategist at PGIM Fixed Income. “What that’s telling you is that interest rates may still be too high.”
In 2019, both gold and stocks are up over 15%, which may help to explain investor fear. This phenomenon has only occurred twice other than this instance in the past 40 years.
Some investors are turning to gold in an uncertain market atmosphere while others are turning to the somewhat stable U.S. stock market.
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