The Trade War Becomes a Currency War

August 5, 2019  |  Michael Reilly

Last week’s sell-off picked up steam coming into this morning’s open as markets got rocked yet again.

Last I checked, the DOW had dropped in excess of 700 points as trade tensions with China continue to escalate. 

Overnight, the Chinese government let the yuan rise above 7 against the U.S. dollar for the first time in more than a decade. 

Not only is the Chinese government allowing its currency to weaken, China has directed state-owned companies not to buy U.S. agricultural goods.

The media loves a good headline and there’s certainly no shortage today!  I’ve seen it all – and if you listen to them, a recession is imminent, and both the dollar and the sky are falling…. 

Fact or fiction, one thing is for sure – fear is surging throughout the financial markets and investors are jumping into gold as the U.S.-China trade war has turned into a currency war. 

Gold is surging 1.44% on the day, while the SPX is taking it on the chin yet again, falling 2.80% as of this writing.

(Click any image to enlarge)

You’d have to go all the way back to April of 2013 to see gold at current prices.

And it isn’t only the yellow metal that’s shining bright. In case you haven’t noticed, some of the gold miners have been rocking all year. 

Take a look at these two ETF’s – GDX and GDXJ. The Vaneck Gold Miners ETF and the Vaneck Junior Gold Miners ETF.

These two funds have been crushing the return of the S&P 500 by 2.5X this year – with GDX and GDXJ gaining more than 36% YTD.

And today’s action is pushing them even higher. And as the saying goes – “an object in motion tends to stay in motion”…. 

So for all you investors out there that feel you need to do something during this latest spike in market volatility… Well, cash is still king. But if that isn’t exciting enough for you, you may just consider parking some investment capital in gold or gold related ETFs.

Remember, one of the most dangerous things for any investor is to get panicked during times of market volatility like we’re seeing right now and “jump ship.” At Rowe Wealth, we’re focused on long term wealth building, and letting fear-mongering headlines bait you into bailing out of your long term investments is a sure way to miss out on potential upside once the dust settles.

It can be difficult to keep a cool head when things are looking shaky, which is one reason having a solid investment advisor in your corner is important. A good advisor can quickly assess your current portfolio to ensure you’re not holding securities that have lost strength and fallen into bearish territory.

If you’re an investor with a portfolio valued at least $500,000 you’re eligible for a 100% free evaluation of your current portfolio through Rowe Wealth Management. One of our advisors can quickly run your holdings through a relative strength evaluation and risk assessment test, so you can ensure you’re not missing out on potential gains or risking more than you feel comfortable with.

Click here now to see available appointment times.

Until next week….

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