The way things are looking right now, the U.S. economy is in huge trouble. But if there’s one positive (and that’s a big “if”) to the unnatural levels of control government and the central banks hold over the economy, it’s that they can manipulate sentiment just enough to prevent a hard crash or even economic collapse.
Of course, that’s only if the powers-that-be aren’t intentionally crashing the economy. Again, that’s a very big “if.”
Between the ongoing banking crisis, inflation, and the debt ceiling battle, plus at least a dozen “minor” issues that would have been considered major in a sane financial world, it’s understandable why current sentiment among economists range from pretty bad all the way to apocalyptic. The only economists pretending like things are okay are partisan hacks like Paul Krugman.
Will the economy recover before it collapses? Nobody knows for sure, which has investors flummoxed. There are certain smart moves to make ahead of recovery and certain other moves to make ahead of collapse. According to many economists, only two investments make sense to both the optimist expecting recovery and the pessimist expecting collapse.
According to Kitco, gold and blue chips are worth considering in the current scenario [emphasis added]:
The situation is contradictory, which is why one should not relax and be prepared for possible shocks. In this sense, some investors already opted to liquidate a large part of their positions, while others shifted their focus to European and Emerging Markets (EM) markets, or simply switched to defensive instruments.
As for the latter, gold and blue chips are worth bearing in mind. If the data suggests that inflation continues to move in the right direction or the Fed decides to “go positive”, both assets could benefit. In the opposite case, they could serve as so-called “safe havens”.
The best thing an investor can do in this kind of situation – is focusing on maximizing their diversification approach. If Michael Wilson of Morgan Stanley is right and the earnings forecasts look “too optimistic” to reflect the real situation, markets could have yet another reason to worry.
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