Sell-off on the markets is not over yet
Advice not to make new purchases
Gold price is robust despite headwind
What is happening on the stock markets is currently more like a rollercoaster ride. Too many factors of uncertainty weigh on the markets and repeatedly cause severe setbacks. This can also be seen in the movements of the major US indices. The S&P 500 and the NASDAQ Composite have lost double digits since the beginning of the year, while the Dow Jones Industrial has fallen by almost nine percent (as of the closing prices on May 27, 2022). In an interview with Kitco News, market expert Lobo Tiggre is convinced that it is still not time to give the all-clear. In his opinion, investors should continue to exercise caution.
Shopping list thrown over the heap – but not everything sold
He is now more concerned that a crash could be imminent than he was in 2020, when the outbreak of the corona pandemic led to a drastic sell-off on the markets. As a result, Tiggre himself threw out his entire shopping list as he “didn’t want to put any more cash at risk” at this point. However, there are two ways of dealing with the current situation. One could perceive the possible upcoming downturn as a crash or as a great buying opportunity.
Still, The Independent Speculator’s investment advisor isn’t advising to sell everything. He himself would not have divested himself of all his investments because, despite the bleak prospects, there is still a possibility that sentiment will change again and the markets will rise instead. As an investor who has sold everything, you would then miss an opportunity.
Various drivers of the crash
According to Tiggre, one of the drivers of an imminent downturn could be investors, who believe they know what is about to happen. “They think they have the tighter one monetary policy priced in by the Fed. They think they know what’s coming, but we’re in unfamiliar territory, nobody knows what’s coming, not even me.” So he assumes that the possible stress factors are not priced in enough Raising interest rates by the central bank led to a downturn in the markets. A period comparable to the current stagflationary situation happened in the 1970s, although the starting point was less challenging then than it is today: “The last time that happened, it was a completely different world. We haven’t just recovered from a pandemic, we haven’t been that dependent on each other globally, there hasn’t been a new iron curtain being lowered because of war in Europe. [] Accordingly, to assume that the Fed can raise rates and heal inflation so easily is a pipe dream. It’s not going to happen”.
Investment in commodities and blue chips advisable
In view of this difficult environment, investors are naturally wondering what can still be invested in. Here, too, the Independent Speculator CEO has tips ready. The market expert relies on the raw material uranium. Uranium as such should be seen separately from the overall macroeconomic situation, since even if everything were to go down the drain, power plants would still be needed. For this reason he is “very bullish” on uranium. Tiggre even called uranium “the most solid commodity speculation of all” for the next year. In general, however, the investment advisor is bullish on all commodities.
In addition, he advises investors, should the crash actually come, which he is worried about, to get into blue chips. These top companies would then be available at bargain prices. Here, too, Tiggre focuses primarily on commodity companies such as mining groups. Normally, according to the market expert, he would tend to avoid blue chips due to the high price and focus on smaller companies that have greater upside potential. However, an investment at a reasonable price is a “no-brainer” since the standard values are associated with much less risk than the smaller underdogs.
Gold price holds up despite headwind
In addition to the outlook for the stock market, Tiggre was asked by Kitco News anchor David Lin for his views on the price of gold. It has recently hovered around the $1,800 mark, which investors were rather disappointed with. However, the market expert here advises to look at the big picture in order to be able to correctly classify the level of the current gold price. The current environment for the price of the precious metal is very challenging. There is a strong US dollar on paper, investors are shedding stocks and buying bonds instead, although the US Federal Reserve has already announced that it intends to divest bonds, there is a feeling of fear. Such an environment is “bad for gold,” according to the head of Independent Speculator. Nevertheless, the gold price managed to maintain a level of 1,800 US dollars, which is quite remarkable against this background. Even with a view to the last six months, in which the stock and crypto markets have come under great pressure, the shiny precious metal has held its own. According to Tiggre, one could even speak of “outperformance” here.
Inverse relationship between US dollar and gold price
In the interview, the market expert also addresses the connection between the price of gold and real interest rates on the one hand and the US dollar on the other. In the last 50 years, since it was detached from the US dollar, the price of gold has been based primarily on real interest rates. In the environment of recent years, when interest rates have remained flat, however, the market has looked for other factors that could influence the price. For this reason, Tiggre believes, the price of gold has moved inversely against the US dollar in recent months. Since the unchanged interest rates said nothing about the price movement of the dollar, market observers would have looked at the dollar exchange rate directly.
The US dollar is currently looking very strong, at least on paper, which is a drag on the price of gold. In reality, however, the dollar would only appear strong compared to other currencies. However, any consumer in the United States would have realized by now that one dollar is now buying less than it used to be due to inflation. However, Lobo Tiggre himself is rather bearish for the dollar, since the current tailwind for the currency only assumes a “felt security”, but would certainly not last long, which in turn would be good news for the price of gold.
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