After pumping up nearly 2% on the end of election uncertainty Wednesday, markets reversed Thursday for the biggest one-day drop in years.
The S&P 500 Index slid 4%, moving about 1% lower than its election-night lows, and back to the market’s support level that it held in July.
I know it’s tough. I hate seeing months of investment gains evaporate in the space of a day. No doubt you’re feeling frustrated after a big down day like today.
So let’s unpack what happened.
I’ve got more detail in this special video that I recorded after the market close last night here:
Ultimately, this feels more like a quick repricing of the AI trade than anything fundamental.
Chip stocks continued their sell-off from Wednesday. The rise of anti-data center Democrats, particularly in state government wins in Texas and Ohio, has put a pause on the AI story. Of the 40-plus ballot initiatives in towns and cities aimed at slowing or stopping AI data center buildouts, nearly all passed.
And let’s face it, the AI story has been a significant driver of the markets over the past few years.
Yet amid the market’s worst one-day sell-off since 2020, gold held its own. The metal rose nearly $100, back to $4,100, a welcome shift after last week’s drop under $4,000.
Over the long haul, however, despite the fears, gold and stocks are two must-own assets to beat inflation and the slow destruction of the dollar:
Most investors don’t realize that gold has outperformed stocks over time. That’s true century-to-date, and it’s true going back to 1964, as shown in this chart.
1964 isn’t as famous as the 1971 closing of the gold window, or the 1933 Executive Order that ended gold ownership for everyday Americans. But it is the year that silver was removed from coinage, just one of many slippages away from hard money.
Why has gold fared so well? For starters, it doesn’t have to worry about the latest twist in the AI story – even if it is a component in some electronic devices.
For all the stock market’s massive returns, the fact of the matter is that many stocks don’t make the cut. It’s always a small handful of companies that drive the index higher.
The index is always changing, adding companies on their way up and removing those on their way down.
Today’s winners can be tomorrow’s losers. Just ask Sears or Bethlehem Steel – oh wait, you can’t.
Still, even a basket of stocks fares well over time, and offers one of the few ways to escape inflation’s grasp.
We like gold because we can see the long-term decline of the dollar, and because it avoids the challenge of picking winners and losers in the stock market.
Since 2020, that decline has accelerated, backed by trillions in “emergency” pandemic spending.
Cries for universal basic income (UBI) are on the rise – and the three “one-time” payments that nearly every American received in 2020 were enough to cause inflation to surge to its highest level in 40 years.
The case for gold isn’t going away. Neither is gold near a cycle top. Based on the rise of M2 money supply alone, gold can, and someday will, trade over five figures per ounce.
And when the tech trade hit the skids yesterday, investors used gold as their safety hedge. It’s still well off its highs from earlier in the year around $5,500.
~ Andrew
P.S. Grey Swan Live! will return next week. Addison is enjoying some post-election solitude with family this week.
P.P.S. Wall Street is about to face a problem. Its biggest institutional investors may soon be allowed to buy a stock they’ve been effectively locked out of. That changes on November 10, when the company could join the Nasdaq and open the door to as much as $42 billion in institutional buying.
And if I’m right, getting in before that flood of money arrives could be the moneymaking opportunity of a lifetime. In fact, he believes this investment could turn $10,000 into $200,000 by 2028 — a potential 20-bagger.
I called the dot-com bust and the housing crisis before Wall Street caught on. Now I see another massive opportunity taking shape, and I don’t want you watching from the sidelines.
That’s why I just released a special presentation yesterday explaining exactly how to position yourself before the November 10 deadline.
Click here to see what I recommend in this replay here.
