The Threat of Inflation in a Trump Economy

The United States elected Donald Trump its 45th president because he promised voters change – change in the country’s immigration policy, change in its environmental laws, and, above all, change in its economy.
 
The United States has been residing in a bubble of low interest rates and minimal inflation. Due to the President-elect’s proposed changes are now closer to reality as inauguration date approaches, they warrant an additional look.
 
In his insightful December 12, 2016 article, CNN digital correspondent Paul R. La Monica approached the inflation issue through a discussion on the changing pricing of bonds. In general, as inflation increases, the prices of bonds decline. This is because rising inflation degrades what you can earn on a bond investment. For bonds to become more appealing as an investment, then, they need to be priced lower, since they’re competing with the rising prices of stocks.
 
We know, of course the Fed rate hike that La Monica called “very likely” came into being on Wednesday, December 14, 2016, two days after CNN published his article. In that piece, La Monica smartly suggests the “great bull run for bonds” might be just about over.
 
About a month ago, bond yields hovered at 1.8%. Financial analysts are now predicting yields just above 3% in the near future. If rates move higher, consumers will almost certainly feel the pinch through increased mortgage and credit cards rates.
 
As though all this weren’t enough to kick-start inflation, Donald Trump is widely expected to hit up Congress for as much as $1 trillion to overhaul the nation’s infrastructure. Much of this construction bill will most assuredly have to be financed through debt. Investment maven Jeff Gundlach of Doubleline Capital after the election expressed fears that Trump policies could drive rates to soar as high as 6% in the next several years. If bond rates keep rising and stocks keep skyrocketing, the nation could find itself faced with runaway inflation.
 
While second-guessing the policies of any incoming president is always problematic, with Donald Trump it’s even more so. As a career entrepreneur with no public policy experience, he appears to favor a return-on-investment perspective more than he does, say, a socially expansive principle like the greatest good for the greatest number.
Still, from everything we know about him, he could shift strategic plans on the toss of a nickel. Social Security, Medicare, international trade policy, and the national debt all remain up in the air.
 
These precarious financial possibilities bring us back to why it’s important to consider an investment in gold now more than ever. On the one hand we’re faced with inflation. On the other hand, we’re faced with economic uncertainty.
 
At today’s closing spot price of $1,134.70 per ounce, just $35.00 an ounce above its support level, the yellow metal is too attractive a safety hedge to pass up. Gold is the best financial way out for investors caught in the dual trap of uncertainty and looming inflation.
 
For more information, call 800-777-6177 now, and ask to speak to a Fortress Gold Group representative or request your FREE GUIDE now.

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