It may be hard to believe, but the number one question thrown at this Gold Enthusiast the last few days has nothing to do with gold prices, per se. Instead, people have been asking: Why did the stock market go down?
Not the expected “how are gold prices doing compared to the market”, or the time-tested favorite “is it time to buy gold?”
People are nervous. Is it justified?
The answer is that no one can tell you for sure. In the long run, markets tend to return toward a few old-faithful indicators. As an example, the P/E ratio – stock price to company earnings – tends to gravitate toward 17:1 over the long haul. Recently it’s been as high as 24:1. That sounds like stocks were overpriced.
Some say it’s the new normal. Some say it’s Fed-inflated money chasing overblown values. Some say it’s Bitcoin.
Yeah, whatever. All those things were true two, three, four weeks ago. Yet the market kept going up.
Many of these “reasons” have been true for years. Under President Obama, the national debt doubled in just 8 years. Nancy Pelosi is all riled up about $200 billion under Donald Trump – why was she so enthusiastic to vote for $10 TRILLION in debt increases before? If the market was going to crash because of accumulating national debt why didn’t it happen years ago?
In the end, there are always plenty of reasons why markets go up and down. There is always a good “Top 5 Reasons The Market Will Crash” list, with good reasoning behind it.
There is also always a “Top 5 Reasons The Market Will Rise” list. And those reasons are good too.
All the reasons the talking heads give on TV were true last week, the week before, and the week before that. Heck there’s been a threat of gov’t shutdown since Jan 2nd. But the market didn’t go down then. So why did it decided to drop last Friday?
There’s only one right answer:
Because it did!