JPMorgan’s chief market strategist says that investors should take decisive steps to increase their gold allocations right now, with the economy likely to stutter, markets slowing and a looming credit crisis on the horizon.
Writing in the bank’s latest Global Markets Strategy update earlier this week, Marko Kolanovic warned that there are many challenges ahead for Wall Street.
He said, “Still-rich equity valuations face increasing risk from high real rates and cost of capital, while earnings expectations for next few years appear overly optimistic. Weakening PMI momentum suggests that Q3 earnings growth is likely to be negative, while softening corporate pricing will lead to a squeeze on margins.
“Delinquencies in consumer loans and corporate bankruptcies are starting to move higher, and this trend is likely to continue absent a cut in rates. The flare up of geopolitical risks adds another headwind and increases tail risks for markets and economic activity. Our outlook is likely to remain cautious as long as interest rates remain deeply restrictive, valuations expensive, and the overhang of geopolitical risks persists.”
Each of these areas of concern, from a credit crisis to a sluggish economy all serve to strengthen gold’s position. Kolanovic says that the bank has already taken major steps to increase its own gold allocations, suggesting investors should do the same. “We additionally increase our allocation within commodities to gold, both as a geopolitical hedge, and given an expected retracement in real bond yields,” he confirmed.
If you haven’t yet followed JPMorgan’s example, there is very little time to waste. Buy gold now.
