From Peter Reagan at Birch Gold Group

In 2022, there have been several signs that indicated the U.S. was in economic recession.

These signs included (but weren’t limited to): Back-to-back quarters of negative GDP growth, red-hot inflation all 12 months, and major market indices tumbling 10% to 33%. Bonds also had their worst 12 months since before the Civil War.

Despite signals pointing to the U.S. economy slowing in September 2022, it seems that careful massaging of the definition of the word “recession” brushed off the thought it was actually, technically in a recession. (That will be a nasty political look, in spite of everything!)

A lot of the mainstream media played along.

But you recognize who wasn’t fooled? Well, me, for one – and Morgan Stanley’s top financial experts.

Concentrate – this evaluation relies on data, not on hope or wishful considering…

Morgan Stanley predicts stocks will lose one other 22%

While optimistic investors look as if they’re grasping at any opportunity to assert the “markets are high-quality” (like reacting favorably when inflation cools by 0.1% in a month).

Michael Wilson, who’s Morgan Stanley’s chief equity strategist, isn’t so optimistic concerning the markets. In accordance with MarketWatch, he’s the expert who: “accurately predicted the 2022 stock-market selloff, which saw all three major indexes cement their worst annual losses since 2008.”

Wilson suggested:

the S&P 500 could discover a bottom around 3,000 points by the tip of 2023. The index was trading around 3,919 eventually check, in accordance with FactSet.

That’s a 30% drop in stocks. Sound shocking?

Even a 30% drop wouldn’t be enough to return the Shiller PE ratio to its historical average. Right this moment, that might require a 41% plunge.

A recent Bloomberg article added a vital piece of context that more optimistic investors seem determined to overlook:

One in all the aspects driving Wilson’s bearish view is the impact of peaking inflation. US stocks rallied last week amid signs that a modest ebbing in price pressures could give the Federal Reserve room to potentially slow its interest-rate hikes. Wilson, nevertheless, warned that while a peak in inflation would support bond markets, “it’s also very negative for profitability.” He still expects margins to proceed to disappoint through 2023. [emphasis added]

Wilson’s predictions aren’t recent. He’s published two successive articles that projected a grim outlook for stocks this 12 months. The first, from December 14:

We expect corporate sales volumes and pricing power to deteriorate, resulting in profit declines, even with out a recession, hence our lower earnings estimate of $195 per share for 2023. Once we consider aspects corresponding to the Purchasing Managers’ Index (PMI) data, the yield curve and correlations between profit growth and the speed of the Fed’s rate hikes, we anticipate that 2023 year-over-year earnings growth will likely be materially negative.

The subsequent and more strident warning appeared on January fifth of this 12 months, starting with the words “Don’t Expect Much from U.S. Stocks.”

The multiple bear-market rallies staged by U.S. stocks throughout 2022 suggest many stock investors haven’t embraced the likelihood of higher-for-longer rates of interest and a materially slowing economy, whilst economic data and Treasury yields proceed to sound warnings.

Here’s why this matters: bear markets cannot end without “capitulation,” which suggests bulls giving up. Once buyers turn into pessimistic, prices can return to reality. (Remember, paying 40% over the historic average for stocks, based on fundamentals, is a bet that their value will increase 40% within the near future. It’s not rational! But there’s no mental competency test required to open a brokerage account…)

Wilson continues:

We expect U.S. stock investors could also be overly optimistic and see two key reasons for concern heading into 2023:

Unattractive valuations: Equity risk premiums – the potential excess returns one can expect for investing in stocks over risk-free bonds – are still relatively low…

Lofty earnings expectations: Consensus 2023 earnings projections for the S&P 500 Index sit around $230, a number that bakes in earnings growth of about 5%. To us, this estimate fails to account for the challenges that firms are more likely to face, especially as they begin to feel the effect of tighter monetary conditions in earnest. These include lower sales volumes and lack of pricing power, potentially at the identical time.

To summarize Wilson’s arguments against a brand new bull run in stocks:

• Stocks are already expensive
• They’re priced for one other 5% earnings growth
• Investors are ignoring each the results of the Fed’s rate hikes and recession indicators

As Benjamin Graham identified in his masterpiece The Intelligent Investor: a stock purchased with the hope that its price will soon rise independent of its dividend-producing ability is a speculation, not an investment.

All speculative bubbles end the identical way – in a panic. Until that moment of capitulation and the next rush for the exits, more rational and prudent folks will take a unique course.

After reading all this, you could be asking yourself: “How can investors protect their savings from losses if stocks are projected to drop?”

Fortunately, there’s still a while before panic sets in. We don’t know the way long now we have, and we don’t know the way bad it’ll get. For those of us biding our time, though, there’s some excellent news on the horizon…

The consensus is in: gold is poised for an awesome 12 months

Zach Scheidt, editor of Lifetime Income Report, recently put a highlight on the reply. He thinks gold could have a record 12 months:

I predict that the worth of gold will reach $3,000 an oz inside the subsequent 12 months.

He bases this prediction on two aspects:

1. The dollar peaked in September 2022 relative to other currencies, and has since crashed some 11.5%.
2. Bitcoin (BTC) has crashed since peaking in late 2021, and isn’t stealing gold’s traditional role as a possible refuge right away.

In accordance with quite a variety of analysts and market veterans, gold is poised for a great 12 months (I covered this recently). Listed here are two highlights:

Ole Hansen, head of commodity strategy at Saxo Bank:

The metal has also been buoyed by the reopening in China with pictures of very crowded gold markets seeing pre-Lunar demand and the PBoC [People’s Bank of China] announcing it bought 62 tons of gold through the last two months of the 12 months.

David Neuhauser, founder and chief investment officer at Livermore Partners:

I feel as you look forward, you begin to go searching and think ‘where is the safest place on your investment by way of assets?’ and the one place really to go in its place now could be gold, by way of knowing that you just will not be going to see that debasement of your assets. [emphasis added]

So if you happen to’re searching for protection against stock market plunges, especially if you happen to’re nearing retirement (and don’t have time to attend out an extended bear market), diversifying your savings with physical gold may very well be best for you. If you happen to’re curious and wish to learn more, we just released an updated version of our free info kit on Precious Metals IRAs right here.