This week certainly started with a bang. Rising recession concerns sent the Dow Jones Industrial Average tumbling 1,000 points right when markets opened on Monday, and both the Nasdaq and the S&P 500 fell at least 3%.
These recession fears didn’t come out of nowhere. This week’s sell-off has been mainly attributed to discouraging economic data that was released last week and has been weighing down stocks for days.
If you’re like me and prefer to keep an ear to the ground, you may find that now is a great time to start listening closely—and an even better time to take action and protect your portfolio.
Signs are pointing to a recession, and markets are reacting.
On August 2, 2024, the Labor Department announced that the national unemployment rate spiked to 4.3% in July, the highest rate since October 2021. The Department also reported that the number of new jobs was only 114,000, well below economists’ consensus estimate of 185,000. This news came just a day after the Institute for Supply Management (ISM) released data showing an eight-month low in our nation’s manufacturing.
This data could predict a new recession because both rising unemployment and shrinking manufacturing activity point to a contracting economy. These issues understandably spooked market traders, and the stock market’s so-called “Fear-Index,” the CBOE Volatility Index, jumped over 20 points between Friday and Monday morning, reaching its highest level since stocks crashed in 2020. In other words, traders are increasingly convinced that stocks seem ready to fall even further.
On Monday morning, I spoke with U.S. Money Reserve President and former U.S. Mint Director Philip N. Diehl about the market turmoil.
When major market news happens, I always reach out to our experts for their opinions. Here is what Director Diehl had to say:
“The global bloodletting intensified overnight as financial markets around the world amplified reverberations from last week’s value destruction on Wall Street. And Monday morning’s futures signaled worse to come for U.S. equities today.
“As of this morning, the futures markets show the Nasdaq to be down almost 15% from its recent all-time high, while the S&P is down 10% from its recent record high. The Dow has fallen 5% just since Friday morning.
“Bitcoin, promoted as a store of value in competition with gold, has fallen 32% from its recent high and 25% just since last Thursday. Gold, on the other hand, slipped by only 2% overnight as margin calls forced investors to sell strong-performing assets to cover their short bets. Still, the metal remains positive over the past 30 days, up by 1%.”
Diehl brings up a good point about gold. I’ve long been a proponent of ensuring your portfolio is well-prepared for a potential recession, and gold’s ability to hold steadfast in the face of economic volatility has made it a key part of portfolio strategy for millions of Americans.
In times of market uncertainty and volatility, gold can help bring peace of mind.
Gold prices have risen significantly this year, breaking through to new record highs 15 times since January 1, 2024. Partly driving this increased demand for gold are expectations that the Federal Reserve will soon cut interest rates. Given current economic data, an interest rate cut is looking more likely—and that could push gold prices even higher.
But physical gold ownership is more than its price potential. Gold is also a historically recognized form of wealth insurance—something to include in your portfolio to help protect the savings and wealth you can’t afford to lose. Having gold in my asset mix makes me more comfortable knowing that if the economy goes south, I’ll have the extra layer of protection that only physical precious metals can provide.
