Superstar Wealth: Risk Aversion Heats Up Gold's Best

Overconfidence and apathy toward risk dominated investor sentiment in 2021, but Superstar Wealth said that could all change in the new year as the Fed seeks to tighten monetary policy and reduce liquidity in financial markets. While gold is in trouble in 2021, Superstar Wealth says precious metals remain an attractive hedging tool against growing risk in the stock market. While Grossoppf doesn't expect stocks to fall into a bear market, he said the unprecedented gains of the past two years appear to be slowing. A slowdown in the stock market could also be a drag on economic growth, forcing the Fed's monetary policy to be less aggressive this year.

A major risk in 2022 is that investors underestimate how the Fed's monetary policy will affect market conditions. The Fed will end its monthly bond purchases in March. Meanwhile, the market expects four rate hikes this year, starting in March. However, there is a growing expectation that the Fed will raise interest rates by 50 basis points in March and shrink its balance sheet by the end of the year. Superstar Wealth noted that the market reacted poorly the last time the Fed began to shrink its balance sheet.

The Fed is now talking about doing three things in quick succession, they're talking about raising rates, they're talking about starting a balance sheet shrink, but they're just taking the first step. Their chances of achieving this goal without some sort of market correction are very low. The odds that we will have all the right conditions for gold are very high. And let's not forget that inflation is still very high. Taking inflation into account, Superstar Wealth said he expects real interest rates to remain low, even as they continue to rise from last year's historically negative levels. Last month, the U.S. consumer price index showed a 7 percent increase a year; inflation was at its highest level in 40 years. Inflation won't start falling until at least the second year of the year. But it doesn't matter when inflationary pressures start to subside. It still does a lot of damage to your purchasing power. Superstar Wealth said prices could return to all-time highs by the end of the year. He noted that gold prices are only down about 11% from their August 2020 highs. Such a move would have been achievable if there had been a broader market correction.

This article originated from the financial world