A number of factors can cause the stock market to become volatile, ranging from war to economic conditions like inflation, according to Kevin DeMeritt, founder and chairman of the Los Angeles-based precious metals firm Lear Capital.
The economy doesn’t necessarily have to be trending downward to cause market upsets; general uncertainty about what direction it may take in the future can also have an impact.
Lower retail sales, gross domestic product and other economic data, for instance, could spark apprehension about consumer spending and companies’ profitability, leading stocks to decline.
High inflation can also have an effect. As Nasdaq notes, the chance of entering a recession is higher when inflation is elevated, which can also contribute to reduced consumer spending. Investors may, in turn, have less of an appetite for stocks that present a fair amount of risk.
“Slowly but surely, through inflation, purchasing power drops,” DeMeritt says. “People become concerned about the volatility in the stock market when you have high inflation.”
A Different Approach
On average, the stock market has provided an annual return of roughly 10%, according to the U.S. Securities and Exchange Commission. Yet the returns investors earn can actually be closer to 6% or 7%, due to inflation’s impact.
Gold, however, has historically performed well during pronounced economic declines. In the first year of the 2009 recession, gold prices increased by nearly 13%. A Lear Capital analysis found premium coins have retained value throughout the past 15 recessions that have occurred in the U.S.
As a result, some investors have chosen to include physical gold and other precious metals in their portfolio as a way of safeguarding it against any sudden dips the stock market may take.
Michael G., for instance, had focused on investing in stocks before acquiring gold, according to one of the Lear Capital reviews on Google.
“I’d never purchased gold before,” he said. “I’m happy I chose Lear. They were patient and helpful with my many questions. There are more options than you think.”
Glenda S. was frustrated with the way her 401(k) was performing — including the loss of almost $3,000, even though she’d frozen the account — according to the Lear Capital review she posted on Trustpilot.
“I was done with this nightmare and heard that gold and silver were good investments!” Glenda said. “I contacted Lear Capital and voiced my frustration and secured my savings in silver — I am very pleased with their service and I look forward to a prosperous future with them!”
In one of the Lear Capital reviews available on Google, Jeffrey L. said he appreciated the assistance a representative from the company provided when he obtained precious metals.
“With uncertainty looming about our economy, I was seeking an option to protect my retirement funds,” he wrote. “[He] was terrific, walking me through the process of purchasing precious metals both to leave a legacy to my family and to preserve my funds. There was no pressure at all — just education and facts, which I used to make an informed decision.”
After contacting Lear Capital about diversifying her investments, Lauren W. contemplated her options for a week, according to one of the Lear Capital reviews posted on Google.
“We discussed a few different options, and I decided to roll over my traditional [individual retirement account] into a precious metals-backed IRA of both gold and silver,” Lauren said. “The process was painless, and Lear took care of all the details. I feel much better having diversified my retirement plans and I owe it to these guys.”
Lear Capital has worked with a number of first-time precious metal investors — including Eric W.
“I wanted to diversify my portfolio, but was hesitant as I did not have much knowledge about the precious metals market,” he wrote a Lear Capital review he shared on Google. “[The representative] at Lear Capital made this investment very easy to understand [and] made me feel confident that I was doing the right thing.”
Brenda V. wrote about her experience adding physical precious metals to her portfolio in one of the Lear Capital reviews on the Trustpilot platform.
“I am quite anxious about the banking/investing/liquidity of the USA and its designation as the world’s reserve currency,” she said. “I contacted Lear Capital to learn about putting some of my savings in precious metals. I had never gone [through] the process in the past. My anxiety level is greatly reduced knowing I’ve done what I can to protect my savings.”
Proactively Addressing Risk
The economy can rise or fall due to a number of factors, which are largely outside of consumers’ control.
While a number of investors would likely prefer to have a concrete view of where the economy and stock market are headed, determining when stocks will fall — or housing or another sector will crash — with absolute accuracy can be nearly impossible.
“You can’t predict any of those things,” Kevin DeMeritt says. “When they happen, it can have a devastating effect — especially if you’re retired [and living] on your assets.”
Investors can, though, potentially hedge against some of that uncertainty by including assets in their portfolio that have a track record of performing fairly steadily over the years, such as gold and silver, DeMeritt says.
“I can diversify in certain ways that will protect my portfolio and help me get through one of those economic cycles,” he says. “Since the year 2000, gold has outproduced the stock market. People have to think about [it like] an insurance policy — [maybe making it] 5%, 20% of their portfolio, [depending on] wherever they are in life — so they don’t get in a pickle if the economy goes upside down.”
