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So, which markets and assets “won” 2020?
That’s a trick question; the answer is “all of them.”
As this enlightening Wall Street Journal story notes, one of the most trying years in recent memory for Main Street and America was accompanied by an “everything” rally in financial markets.
U.S. equities. Global stocks. Commodities. All of them surged at least 35% from March through year’s end — only the third time in the last half-century of record-keeping we’ve seen that happen. Here’s how the Journal put it:
Investors ended one of Wall Street’s wildest years on record by piling into everything from bitcoin to emerging markets, raising expectations that a powerful economic comeback will fuel even more gains.
Although stocks failed to follow through in the first couple days of trading in 2021, other investments kept right on going.
Gold jumped more than $50 an ounce on Monday, for instance, and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) soared more than 7%. Silver tacked on big gains, and Bitcoin futures are up another $3,000 since Dec. 31.
Why? What accounts for such gains across so many types of investments — particularly alternative ones like precious metals and cryptocurrencies?
It’s all about the ongoing money flood from Washington D.C.
Fiscal stimulus in the form of unemployment benefit increases and direct payouts to Americans ...
A megadose of money-printing from the Federal Reserve ...
The prospect of even more of both once President-elect Joe Biden takes office ...
Wall Street knew this money flood was headed its way ... and threw a party unlike anything we’ve seen in years — even as millions of Americans were being thrown out of work and thousands more were dying every week due to the COVID-19 pandemic.
As for metals and select cryptos, they offer protection against the enormous side effects of all this stimulus.
These “unintended consequences” include a collapse in the U.S. dollar and increased worries about the long-term outlook for our nation’s balance sheet.
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Naturally, the biggest question now is ... can this amazing rally continue in 2021? Can “everything” just keep going up?
Well, the selloff we saw the first day of stock market trading in 2021 showed how euphoric rallies have a way of (eventually) hitting brick walls. Sentiment is getting extremely frothy, and valuations are getting stretched.
Then there’s simple supply and demand. Wall Street banks are dumping scores of low-quality initial public offerings (IPOs) and special purpose acquisition companies (SPACs) on the public markets. More than 450 companies raised $167 billion via IPOs last year — topping the dot-com bubble record of $108 billion in 1999.
Many of those companies have either been losing money for years or are coming public with no actual business operations, only alleged plans for the future. That kind of action absolutely, positively raises red flags, at least for those of us who’ve been around the block a few times.
On the other hand, the incoming Biden team clearly wants to push through much more fiscal stimulus in 2021.
Plus, there is zero reason to expect the Fed to abandon ZIRP (“zero interest rate policy”) in 2021 — or a couple years (at least) thereafter. Nor is there any reason to expect the Fed to stop flooding markets with cheap money via quantitative easing (QE).
What’s that likely to do? Well, it’s going to keep pressuring the dollar.
And it’s going to keep supporting gold, silver and cryptocurrencies.
It’s also going to keep driving investors into something — anything — capable of spinning off juicier income (plus sizable gains) in a “ZIRP Forever, QE Forever” world.
Safe Money Report subscribers are already reaping the benefits of a strategy focused on these kinds of winning investments — with handsome tracked profits piling up.
Click here or call our team at 877-934-7778 to learn more about Safe Money Report.
And remember to maintain your discipline and keep the dangers of frothy markets in mind.
If you’re already on board, this is no time to abandon principles that keep spinning off sizable gains with reasonable amounts of risk.
If you’re not a Safe Money Report reader, now is as good a time as any to join us.
Until next time,
Mike Larson
P.S. — If you’re looking for more ways to earn more income from your investments in 2021, I highly recommend signing up for Dr. Martin Weiss’s upcoming event “The South Florida Income Miracle”. In it, he explains how it’s possible to generate up to $1,000 in income a week.
This two-day presentation, which is completely virtual and completely FREE, starts this coming Tuesday at 12 p.m. Eastern. Click here to reserve your spot.
