No surprises at Wednesday’s Federal Reserve meeting. The U.S. central bank team headed by Chair Janet Yellen pulled the trigger on the first interest rate increase in 12 months, nudging the Fed’s benchmark rate to a still ultra-accommodating 0.50-0.75%.

In the minutes after the widely expected interest rate hikes:

• Gold prices ticked slightly lower.
• The U.S. dollar jumped higher.
• Treasury yields gained.
• Financial stocks turned broadly higher.

While this week’s interest rate move was widely expected, a bigger question heading into 2017 is what will President-elect Trump think of the rising interest rate environment? The Fed now projects a total of three interest rate hikes in 2017, up from a previous two.

Higher Borrowing Costs for Consumers

This could begin to trigger a rise in borrowing costs throughout the economy impacting individual consumers with slightly higher rates on mortgages, car loans and credit card rates.

No doubt some traders will be monitoring President-elect Trump’s Twitter feed, which has become a market mover as of late.

A Trump tweet earlier this week which called Lockheed Martin’s F-35 Joint Strike fighter costs “out of control” triggered a quick sell-off in Lockheed Martin’s stock, initially wiping out $4 billion of the company’s market value.

President-elect Trump did suggest that Janet Yellen was keeping rates low during the campaign to support the outgoing administration. He also suggested that low rates were creating a “false economy.”

Historically, United States presidents have avoided interest rate talk in deference to the Federal Reserve’s independence. The incoming President, however, has already shown a willingness to break tradition on other matters during his transition.

At the heart of the matter is that President-elect Trump’s proposals to boost economic growth through lower taxes, deregulation and billions of dollars of infrastructure spending will also likely boost inflation.

One of the main jobs tasked to Janet Yellen and the Fed is to keep inflation under control and their main method for doing so would be a shift to a more aggressive interest rate hiking cycle.

Are Stocks Near A Climax?

The stock market is shouting out a great big hurrah right now. Stocks are cheering as the Dow Jones Industrial Average approaches the 20,000 mark for the first time in history. However, analysts are also warning that the market is extremely overvalued, which leaves it vulnerable to a turn.

As the calendar prepares to flip to 2017 in just a few weeks, not only are stock prices in the nose-bleed section, but a developing brew of inflation and higher interest rates could be the trigger the brings the stock market bear back out of hibernation.

Is your portfolio properly hedged? Gold and other tangible precious metals assets have the proven ability to diversify and protect a portfolio against stock market declines. We, at Blanchard and Company, believe that gold and silver bullion in physical form is an appropriate asset for a small portion of any properly diversified investment portfolio. Call us today at 1-866-827-4314 for a confidential consultation with one of our portfolio managers.

Many investors are aware that the stock market has surged to new all-time highs since the presidential election.

What you may not know is that many on Wall Street are beginning to issue warnings that the stock rally is overextended on the upside. Stocks are gaining in anticipation of infrastructure spending, tax cuts and deregulation. There remain many hurdles to the implementation of these proposals and stocks will fall in disappointment if delays unfold.

Investor Alert: Many clients are using the recent strength in stock prices to take profits out of equities and diversify into metals.

Asset Performance

Despite the recent pullback in metals, gold and silver still beat stocks (data through November 30):

Gold up 10%
Silver up 19%
The S&P 500 up 7.7%.
10-Year Treasuries yield 2.36%

Looking Into the Crystal Ball For 2017

The big picture, long-term macro view remains gold-bullish.

As the stock market sits at all-time highs, valuations are overstretched. The stock market remains ripe for a corrective pullback, or even a cycle turn. Gold and silver have a negative correlation to stocks, which means as stock prices fall metals prices historically have climbed often significantly. If a bear market cycle in stocks begins in 2017, metals would benefit strongly.

Other potential bullish drivers for gold in 2017 include:

Protectionist trade policies: If trade frictions with other nations begin to unfold on the global stage, gold will benefit in 2017.
Geopolitical concerns: A number of hot spots around the globe, including Syria, are ripe for disruption, which would generate strong demand for metals as a safe-haven and amid flight-to-quality.
Inflation is already rising. Gold and silver are traditional inflation hedges and tend to rise in value during inflationary periods.

US Coin Demand

Weekly sales of U.S. Mint gold and silver coins spiked during November, climbing to their highest levels since January when the new 2016 dated coins were launched. Individual investors both in the U.S. and abroad continue to diversify portfolio holdings with physical gold. The physical demand outlook remains extremely strong.

Predicted Price Trading Bands, Next 90 Days

Gold $1,125-$1,250
Silver $16.00 – $17.80

Our Recommendations:

Buying Rare Coins:

The high-end rare coin market continues to grow
For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential

Buying Precious Metals:

The price retreat off the summer highs offers long-term investors a better entry point
An accumulation strategy is probably the best bet for clients wishing to add to holdings

Trading Precious Metals:

Silver continues to offer a better value than gold
Ratio: 71 oz. silver = 1 oz. gold
This ratio has averaged 55 to 1 over the past five years
You may want to consider converting some gold holdings to silver
Popular silver products: 10 oz & 100 oz. silver bars, Silver American Eagles in monster boxes.

The recent price retreat offers investors an excellent entry point for both gold and silver investments. Give your portfolio manager a call today at 1-866-827-4314 to discuss current market conditions and potential shifts you may want to consider to your investment picture.

President-Elect Trumps victory on Election Day served as an inflection point in the financial markets. U.S. stocks have surged in the month since the election, with the major large-cap indexes hitting record highs in late November.

On the flip side, bond prices have dropped with the jump in bond yields. Rates on benchmark 10-year U.S. Treasury notes have climbed in the four weeks since Election Day, from 1.8% to nearly 2.4%. Gold prices are also down over 8% over this time.

Investor trends are clearly rotating, away from relatively safe haven asset classes such as bonds, precious metals and hard assets, and toward riskier assets such as stocks. But how much of this shift is for real?

There has been a lot of emotion in the move toward equities since the election. Investor optimism seems to have turned on a dime as Wall Street largely cheered Trumps pro-business perspectives.

Many investors anticipate market-friendly policies from the incoming Trump administration, including lower taxes and higher government spending on defense and infrastructure. But how much of Trumps agenda comes to pass is for the most part unknown, depending on how much opposition he may face from the traditional deficit hawks among Congressional Republicans.

Seasoned investors know that investor sentiment can often be fickle. Many have seen emotionally charged market rallies fizzle when confronted with reality. Thats certainly could happen in this latest bull market run.

But emotion isnt the only factor driving the divergent paths of stocks, bonds and precious metals. Strong economic conditions are also underpinning the recent trends toward risky assets such as equities and the flight away from the relative safety of bonds and hard assets.

It wouldnt be surprising to see the stock rally lose some steam once investors emotions cool off. But the following factors may help keep momentum moving in the direction of stocks, with an inverse effect in the bond and precious metals markets.

Recharged economic growthAnnual growth for U.S. Gross Domestic Product (GDP) was revised up to 3.2% for the 3^rd Quarter. Thats the strongest pace of economic growth since the 3^rd Quarter of 2014. Plus, its well above the average quarterly GDP growth of 1.8% since 2015.

Much of the surge in economic activity was attributed to personal spending, including an 11% increase in durable goods orders. Exports also gained at the fastest pace in nearly three years.

The jump in GDP growth is a welcome signal for future expansion, especially after nearly two years of sluggish growth and concerns about economic stagnation.

Easing deflation fearsThe sharp rise in bond yields came as investors reset their expectations about inflation. In recent months, market worries had focused more on the threat of deflation, especially as the trend of negative interest rates swept through the global government debt markets.

Now it appears prices are on the upswing and fears of deflation on the wane. Headline inflation in the U.S. is at a two-year high of 1.6% in October. Recent inflation reports from Japan, China and the Eurozone also showed a trend of rising prices.

Higher prices usually spell bad news for an economy. But after a long spell of little to no inflation, the recent upward pressure may in fact be a positive sign for future global growth.

Job and income gains Employment has been a consistent bright spot in the current economic expansion. Job market growth in November was on par with recent reports, with 178,000 jobs added during the month. The unemployment rate in the U.S. touched a nine-year low at 4.6%, although a drop in labor force participation was a factor in this decline.

Wages and income have been slower to recover, but in recent months both have shown improvement. Personal income rose 0.6% in October, its best monthly gain since April. Average hourly wages declined slightly in October, but were up 2.5% on an annual basis for the month.

Brighter consumer optimismImproving prospects for employment and income tend to make consumers feel more confident about the future and more comfortable about spending money. Both areas have seen rising strength in recent months.

Consumer confidence jumped to a nine-year high in November according to The Conference Board, exceeding many analysts expectations. This confidence was apparent at the nations cash registers, where retail sales grew at an annual 4.3% rate in October 2016.

The rebirth of the consumer is critical to future economic growth, because consumer spending typically represents two-thirds of the U.S. economy. As the job market expands and income grows with the humming economy, higher consumer spending should help keep the momentum going.

What could throw a wrench into the works for this scenario? Again, the risks go back to the uncertainty over Trumps economic proposals. While plans for cutting taxes and ramping up infrastructure spending should provide a boost to the U.S. economy, any improvement could be undercut by his hard line on trade.

Tariffs and other restrictions on global trade may offer relief to some areas of the economy, but it will likely come at the expense of another. President-Elect Trump and his GOP allies in Congress will need to pull off a balancing act between promoting economic growth and protecting the interests of U.S. workers and businesses.

The good news is, they can start from a strong foundation of economic expansion. This will likely sustain current market trends for the near term. But the prevailing risks to the economy require investors to pay some attention toward wealth preservation. The recent dip in precious metals prices is a good opportunity to put a strategy in place at lower costs.

Call your Blanchard portfolio manager today to discuss the current outlook and options that may be right for you at 1-800-764-9135.

Last week’s release of the November unemployment rate on the surface may appear that the economy is coming up roses.

The news: The U.S. economy added 178,000 jobs in November, while the unemployment rate fell to 4.6% – the lowest reading in more than nine years.

Digging deeper into the details of the report, there are some trends emerging that warn of potential black clouds looming on the horizon for the economy.

Here are 4 key trends seen inside the details of the latest report:

1. The unemployment rate fell primarily because people left the workforce.
2. The trend in job growth is slowing.
3. Wage growth slipped in November.
4. Inflation is eating up a larger portion of consumer’s take home pay.

Here’s what you really need to know. The latest report revealed that about 200,000 people left the workforce, or simply gave up looking for jobs, which contributed to the sharp drop in the overall unemployment rate.

The hiring trend is slowing. Job growth averaged 180,000 per month this year. However, notably, over the last three months, it has averaged 176,000 jobs, compared with an average of 223,000 between June and August.

Also, according to the November employment report, retailers hired fewer seasonal workers in October and November 2016 than they did the last few years.

The slowdown in wages is a worrisome economic story. How much consumers take home each month matters for spending power. The good news of 178,000 new jobs created was offset by the average hourly earnings number which showed a drop of .1% month over month. Average hourly earnings fell 3 cents in the month, marking the first decline since December of last year.

Rising inflation, including higher gasoline prices are eating up a larger portion of their take-home pay.

What Does This Mean For Precious Metals?

Gold prices leapt to a higher close on Friday in the wake of the U.S. employment news. The Federal Reserve is widely expected to hike interest rates at its December meeting. But at this late point in the economic cycle, the odds suggest that the central bank will be unable to normalize its interest rate before the next recession hits. That leaves open the door to negative interest rates here in the U.S. just like they have in Europe and Japan. That is gold bullish over the longer-term.

Gold suffered a setback in a risk-off trade immediately following the election. The stock market may well have gotten ahead of itself by pricing in a lot of ‘good news’ for the economy that will have to come to fruition in 2017.

The recent pullback in gold prices offers long-term gold and silver investors an attractive buying opportunity.

Both the stock market and the current economic expansion phase are long in the tooth on a historical basis and cycles are poised to turn in 2017.

Protect Your Portfolio Now

Use this time to consult with one of the Blanchard portfolio managers to assess if your current asset allocation has properly protected your assets. Call us today at 1-866-764-9135.

About Blanchard

We are the premier tangible asset advisor in the United States for serious investors and collectors. We have a long history of providing individuals investors with consultation and investment guidance to help protect and build their hard-earning wealth. We believe that gold and silver bullion ownership is appropriate for all investors as a proven portfolio hedge. Metals are a non-correlated asset to stocks, which means when stocks fall metals increase in value.

In recent years, inflation in official government figures has been virtually non-existent. In fact, the Federal Reserve and other central bankers around the globe have been valiantly trying to stimulate inflation to no avail.

The perfect storm may be brewing for 2017 and money velocity — the speed at which money changes hands throughout the economy — may be finally about to kick into high gear.

Markets Are Already Signaling Potential Inflation Ahead

In the wake of the surprise election of President Trump, the yield on the U.S. Treasury note surged from 1.77% before the election to 2.27% just a few days after the results were in this represents a startling rise in interest rates in a very short period of time. Bond-holders are dumping Treasury notes (the price moves inverse to the yield) as they anticipate inflation on the horizon.

Where Could The Inflation Come From?

One of the signature proposals by President Trump includes a $1 trillion infrastructure spending plan to rebuild the country’s roads, bridges and even airports. This plan is intended to create jobs and stimulate growth. Wage growth is good except too much of a good thing can quickly turn bad. Economists are already warning about the potential for inflationary pressures to rise quickly.

The increase in inflation could arise from several areas, not only the infrastructure plans. Another key proposal from the President includes repealing parts or all of the regulations imposed on the banking sector in the wake of the global financial crisis. Bank lending is expected to pick up as regulations are eased, which could help to stimulate inflation and money velocity.

How Does Gold Fit Into This Puzzle?

Gold slid lower in the days after the election in a “risk-off” type of financial trade. Stocks rallied in euphoria that pro-growth policies could lie ahead, which removed short-term demand for gold.

The gold price quickly found support in the $1,215 per ounce zone as emerging market buyers jumped in to buy physical demand at the lower price point, notably from China.

The lower prices in gold were viewed as a buying opportunity for long-term investors.

Western investors face a bevy of uncertainty ahead, including how the new Administration’s policies will truly impact the economy. Rising inflation remains a key risk, along with the potential for heightened geopolitical tensions. The President-elect has questioned at times the NATO allianceand also threatened to slap tariffs on China and potentially start a global trade war.

Gold has a solid track record as an inflation hedge, and an “insurance policy” against geo-political and economic uncertainties. The Chinese have rushed into the market this week at the lower prices points as they perceive gold around $1,225 an ounce as a bargain.

U.S. investors have the opportunity to build their hard asset allocation now at a better price point than three months ago. The 2016 uptrend in gold remains intact. It makes sense to use the price dip as a buying opportunity to diversify your portfolio against the uncertainty that lies ahead.

Call your Blanchard portfolio manager today to discuss the current outlook and options that may be right for you at 1-800-764-9135.