In previous blog entries this month, Home Stored Gold IRA covered the potential causes of economic recession, and how buying gold, or investing in precious metals, can act as a secure back-up in a crisis. However, could you increase your chances of weathering the next Great Recession by knowing it’s coming? Is there a way to predict a recession? At Home Stored Gold IRA, we spend a lot of time researching finance, and we can point out a few possible warning signs of a looming recession.
Low Consumer Confidence
A telltale sign of a recession is that consumers simply stop buying. They may not stop altogether, but in rough financial circumstances, everyone is forced to tighten their belts. Most often, this means that the average consumer will restrict themselves to essentials in terms of what they spend their money on, meaning that wholesalers and retailers lose out on an immense amount of profit.
The US economy is made up of consumers by an incredible margin of 70%, which is an immense number of people potentially losing confidence in the economy, creating an equally immense loss. What further exacerbates this situation is when news of a potential recession reaches the media – doom and gloom forecast only makes things worse. Home Stored Gold IRA’s experts suggest that you keep an eye on financial forecasts, and to invest in gold and silver to help keep you ahead.
Capital Spending Gets Lower
Capital spending, more commonly referred to as capital expenditure or CAPEX, refers to the money that companies use to buy or upgrade their physical assets. This includes things like industrial equipment or buildings if they are looking to expand or start new projects. This expenditure varies depending on the industry, but is generally a good sign of the financial health of a company. However, the problem comes if there is an excess of inventory or ability, which can lead to issues when combined with another factor, like the low consumer confidence outlined above.
For example, imagine that a tech company opens a new manufacturing plant to make a new, specific luxury gadget. Just as it begins production, news of an economic downturn hits, and consumers turn away from electronics deemed unnecessary to focus on the basics. This means that sales of the new gadget immediately drop, the company now has new factories, with new staff, new equipment, and warehouses full of unsold electronics. Prices are cut, profit is reduced, and consumer confidence continues to fall, fuelling a catastrophic loop of negativity.
The Inverted Yield Curve
This factor is more in the realm of economic experts and can be harder to explain simply but, at Home Stored Gold IRA, we’re dedicated to helping everyone understand what they need to be aware of. The yield curve refers to a method of plotting interest rates and using them to measure debt throughout the financial market.
More importantly, it is used to measure economic growth. The ideal yield curve shows higher long-term yields and lower short-term yields. So, the inverted curve is simply going the wrong way – higher short-term yields, but lower long-term yields. This is essentially a prediction of slowing or stagnating economic growth, pointing to the possibility of a coming recession.
Home Stored Gold IRA and Reading the Economic Tea Leaves
These are three examples of ways in which some try to predict a possible recession. But, are they effective? Unfortunately, as with most things related to our modern economic climate, there is often little to guarantee anything. The market is unpredictable and, at times, these trends will occur with no ensuing recession or crisis.
If you are looking to secure your financial future, this instability is frustrating, which is why Home Stored Gold IRA recommends precious metal investment. Gold and silver have maintained value for thousands of years, and little else can give you the peace of mind that buying gold for your future can. Contact us about precious metal investment today.