Weekly Market Update: Protect Your Retirement Portfolio from Slowing U.S. Manufacturing
The key metric for U.S. manufacturing did not grow in March, data released this week revealed. This statistic followed two consecutive months of declines. Together, it led to the first quarterly production drop within the presidency of Donald Trump. This was especially disconcerting news as observing economists had forecast a minor rise in March’s manufacturing numbers.
For the first quarter of 2019, the factory production metric declined 1.1 percent on an annualized rate as the graphic below demonstrates:
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Reuters commented on the decline with their own explanation, stating:
“Soft manufacturing and slowing economic growth reflect the ebbing stimulus from a $1.5 trillion tax cut package and supply chain disruptions caused by Washington’s trade war with China.”
Other manufacturing metrics were similarly disappointing. In fact for the first time dating back to July of 2017, factory employment declined in March. Industrial production similarly dropped for the month. It fell by .1 percent and missed the Wall Street forecasts for a .1 percent increase.
Capacity utilization also missed estimates. For February, it sat at 79. Analysts had anticipated it improving to 79.1 for March. Instead of going up, it dropped down to 78.8 for the month.
Larry Kudlow has famously said that he does not anticipate another interest rate hike from the Federal Reserve within his lifetime. Meanwhile, President Donald Trump has continued to cry for additional monetary stimulus. Why would they do this?
The answer is: they both understand that the actual economic performance is lackluster. Their goal is to keep the everything asset bubble inflated to the point that the president gets reelected. Economist Peter Schiff from Euro Pacific Capital explained it, with:
“How can Donald Trump be saying on the one hand that we have the greatest economy in the history of the world, on the other hand, we need the same emergency monetary policy we needed in the depths of the Great Recession? That doesn’t make sense… The reason it makes sense is because Trump knows we don’t have a great economy; he knows we have a great bubble… They can’t raise interest rates. That is the problem. The reason they had to stop raising interest rates, the reason Larry Kudlow is so confident that we’re never going to have another rate hike, is because he knows the whole economy would implode.”
As Peter and others have noted, everyone in the room keeps ignoring inflation. The consensus is that inflation is tame or non-existent. Yet the Fed printing money equates to inflation.
In fact, inflation is everywhere you look objectively— including in stocks markets, bond markets, real estate, and also in many different prices. Even if we have not yet seen the inflation through the official consumer price numbers, this does not mean it is non-existent.
Is Your Retirement Portfolio Protected from the U.S. Manufacturing Declines?
A simple way of looking at matters is that if the Federal Reserve returned interest rates to four, five, or even six percent, to more historical levels, the whole house of cards would come falling down. Eventually the Fed will be forced to increase interest rates as inflation will run out of control in the middle of a recession. This scenario would represent stagflation.
Where can you turn to safeguard your retirement portfolio from declining manufacturing production and future of inflation or stagflation? Gold is the answer for the world’s best historically proven safe haven. With its thousands of years in track record, you will be able to sleep soundly at night knowing your retirement account is hedged by the yellow metal, despite what financial markets actually do on a daily basis.
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