Q1 wrapped up with more disconnect between the fundamentals and the performance of equity markets. There are plenty of very questionable areas of the economy which are being widely discounted as investors are herded towards the edge of the cliff. The mantra has been to remind everyone that There Is No Alternative (TINA), and US stock market is the only place to invest if you want to make any money. That playbook has been going on for a while, as the focus shifts from monetary policy to fiscal policy. The Trump administration has failed to deliver on any of the promises so far, and it will be interesting to note when the investors’ patience will run out.
Outlook for April 2017
The Fed raised the interest rates as expected in March — a move, which was pretty much priced-in and the Fed’s hand was pretty much forced at that point. The move has left the question of what the rest of the year brings. The tone has been dovish for the rest of the year — promising two more raises instead of the three that was expected. Whether even that’s possible remains to be seen.
I, on the other hand, am more interested in seeing how the debt ceiling debate goes. The US will hit its debt ceiling (again) in the coming weeks and will need to be raised. It is not a question of whether they will raise, but by how much. How far will the can get kicked down the street? The modern monetary system is built on debt and debt ceilings have to keep climbing as the financial system will otherwise collapse. This raise in debt ceiling will have effects on a lot of things of course, as we borrow from future debt-laden generations and will eventually start chipping away at the value of US currency — which is what the Fed really wants — based on their inflation target. According to a recent CBO report, the total US debt is expected to double in the next three decades. All this is of course great news for inflation hedges such as gold and silver, which hold their value as the paper currencies lose purchasing power.
Not only do the precious metals give my portfolio the insurance that it needs, but being in the second year of a new bull market has provided with me some lucrative growth opportunities. Yes, its a volatile sector, but when you invest early on in a bull market, there is more room for error as I investigate and invest in little known companies outside the mainstream space. The exposure has proven to be very good for our portfolio overall as both precious metals have outperformed (Silver up 13.82% and Gold up 8.06% YTD) the broad equity market. When you take the precious metal equities, which are leveraged to the underlying commodity, the returns are even more magnified.
Looking for some investment ideas? Be sure to check out the Top 2017 Investment Picks from the blogging community.
Our current portfolio looks like this:
As it stands, our portfolio diversification is as shown below.
What is your outlook for April 2017? What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below.
Disclosure: Our full list of holdings is available here.