On August 13, 1979, BusinessWeek accidentally created a new investment indicator…
Stocks had been dead money for more than a decade – and that’s if you’re being generous. At the time, the country was struggling through the worst bout of inflation of the 20th century… So in real terms, investors had spent years losing money in the stock market.
Sentiment was bad. Folks were wondering if they could ever make money in stocks again.
The magazine published a cover story reflecting the fears of the time. You might have heard of it. It was titled, “The Death of Equities: How Inflation Is Destroying the Stock Market.”
There was just one problem. The authors of the now-infamous cover story didn’t know it yet… but the worst of the bust was already over.
True, it took until 1982 for stocks to fall a few percentage points more to their ultimate bottom. But if you had given up on stocks when BusinessWeek declared them dead, it would have been a mistake…
After bottoming in 1982, the S&P 500 Index went on to soar nearly 20% a year for 18 years.
That’s a total return of 2,500%… enough to turn a $10,000 investment into $260,000.
That’s how one bad call from BusinessWeek gave birth to a new phenomenon… the so-called “Magazine Cover Indicator.”
Today, we’re seeing a similar setup in a different asset. And that means one thing for us as investors… It’s time to pay attention.
The Magazine Cover Indicator works for a simple reason…
By the time the mainstream financial press covers a big story, the trend is closer to the end than the beginning. Once everyone is finally talking about an idea – and no one is left to buy – it shows us a reversal is likely.
This is especially true when the headlines say an asset is about to stop doing what it has always done. Those claims have a history of being dead wrong.
That’s why I get excited when I see headlines like this one. It came out of Bloomberg this summer…
Gold has gotten a bad rap in recent years. And it’s easy to understand why…
When inflation began to soar in 2021, everyone believed the metal would be the perfect hedge. After all, gold prices surged thousands of percent in the 1970s – the last time inflation ravaged the U.S. economy. So everyone assumed gold would perform similarly this time.
But the metal didn’t live up to the hype.
Instead of soaring, gold dropped by more than 20%… while inflation skyrocketed to a 40-year high in 2022.
Plus, in today’s environment of risk-free 5% yields, gold seems even less appealing. It’s a nonproductive asset, after all. It doesn’t have earnings. And it doesn’t pay a dividend.
So, a lot of folks are asking the same question…
Why should I own gold at all?
The logic seems sound enough. But asking that question is the same mistake folks made with equities more than four decades ago…
Gold hasn’t swooped in to save investors from soaring inflation. But it has been performing better than most folks realize.
From January 2022 to this year’s October lows, stocks and bonds both suffered – while gold quietly did its job. Take a look…
Gold might not have soared the way investors expected. But it was the perfect crisis hedge. The metal did a darn good job of protecting investors since the pain began early last year.
We’ve seen stronger performance since then, too. Heck, the metal hit a new all-time high earlier this month.
That’s the setup we want as investors – rising prices despite an uninterested crowd. It’s perfect.
The recent rally is likely the start of something much larger. I wouldn’t be surprised if the metal soars past $3,000 an ounce in the next couple of years.
So, as we get closer to 2024, now is the perfect time to consider holding the metal in your portfolio.
Good investing,
Brett Eversole
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Source: Daily Wealth