Many millionaire investors are afraid of this stock market. A survey of 3,400 millionaire investors (those with at least $1 million in investable assets) by UBS, a Swiss investment bank, found that more than half of them think that there will be a “significant market sell-off” by the end of 2020. They had already moved an average 25% of their portfolio into cash.
Now, we have confirmation that this movement into cash is far more widespread than just the millionaire class of investor. In the weekend edition of December 7-8, 2019, The Wall Street Journal showed evidence that the bulk of investors have pulled out over $220 billion in stock market mutual funds and exchanged-traded funds (ETFs) through the first 11 months of 2019, a record high exit for any full year.
All that money is flowing into cash more than bonds or gold. During the past three years, assets in money market funds (cash on the sidelines) have grown by about $1 trillion, according to the Lipper division of Thomson Reuters, as cited by the Journal’s December 8 article. Money market fund balances are now at their highest level since the 2008-9 Great Recession. Although many big institutions are still in the stock market, the public is afraid of the market and is ready to invest in something else with their pile of cash.
Many big institutions are confident that President Trump will escape impeachment conviction and will be re-elected, but at the same time they warn that the stock market could decline 25% or more if a socialist candidate like Bernie Sanders or Elizabeth Warren were elected.
In such a case, gold is life insurance for the rest of one’s portfolio. In past stock market crashes gold has gone up rapidly as stocks have fallen.
Here are some examples of gold’s increase during stock market crashes of the last 50 years:
- From January 11, 1973 to December 6, 1974, during the Nixon impeachment, resignation and aftermath, the Dow declined 45.1%, while gold gained 178%, rising from $65 to $181, and rare coin prices rose.
- From September 21, 1976 to April 21, 1980, during the “Carter Malaise,” the Dow declined 25.2% while gold gained 322%, from $120 to $506, and rare coin prices rose.
- From August 25, 1987 to October 19, 1987, the Dow declined 36.1% in less than two months ending on Black Monday, but gold gained 5% from $458 and $481, and rare coins were soaring.
- From January 14, 2000 to October 9, 2002, after the “Dot.com” meltdown and 9-11 attack, the Dow declined 37.8%, while gold rose 12.7%, from $283.30 to $319.35.
- From October 9, 2007 to March 6, 2009, during the Great Recession, the Dow declined 53.8%, while gold rose 27.2%, from $736 to $936, and rare coin prices rose.
- From July 5, 2011 to September 6, 2011, during America’s debt crisis, the Dow lost 11.4% while gold rose $400 (+26.8%), from $1,495 to a record $1,895 per ounce.
It’s important to realize that when markets start falling, the money “on the sidelines” starts moving into gold, and some of those selling stocks move into gold as well.
Mike Fuljenz is a member of the Newsmax Finance Brain Trust. He is also the editor of the NLG award winning Michael Fuljenz Metals Market Weekly Report. Discover more by Clicking Here Now.
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