Changing of the Guard: What It Means for Your Portfolio

Equity markets may look promising after the CPI report, but underlying risks signal caution for investors. Learn how surging bond yields, rising tariffs, and escalating U.S. debt underscore the critical need for diversification into gold and silver.

Risk of Overvalued Equities

While this week’s positive CPI report sparked a brief rally, investors should be aware that global equity markets, especially in the US, continue to show signs of being overvalued. The price-to-earnings (P/E) ratio signals that the market may be approaching unsustainable levels. Speculative sentiment has driven prices up, much like the dot-com bubble, and while short-term rallies might offer momentary relief, they obscure the underlying risks.

Bond Yields Surge

Rising bond yields have significant implications. 10-year Treasures reached 4.77% and 30-year bonds briefly surpassed 5%. Higher yields make bonds more attractive compared with equities, while the rising cost of borrowing strains corporate debt. For investors, this means a prolonged market downturn, especially in high-growth sectors like technology, where rising interest rates suppress stock valuations.

Precious Metals Rally Ahead of Tariffs

Both gold and silver have climbed higher this week driven by concerns over the new tariffs coming into effect. These concerns are impacting prices because it may cost more to import gold and silver once Trump comes into office. Premiums on 1,000 oz bars and several other forms of silver are beginning to move higher. Large gold bars are also showing similar trends.

Changing of the Guard

The US debt sits at $36.2 trillion as Joe Biden ends his term in office. With interest on the debt exceeding $1 trillion annually, it will continue to compound and may double in the coming years. With over $6.7 trillion in Treasury bonds coming due in 2025, the situation could escalate into a market crisis, as the US is exposed to refinancing risk and increased market volatility. Trump’s urgency to allow for greater American exposure to crypto is a subtle admission that saving in the dollar has a perilous future and reiterates the need for financial diversification for all Americans.

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