Market Insights

America’s Economy Exposed

Gold Alliance disclaimer

On the surface, the US economy looks like it’s improving. 

Inflation has slowed, job reports are encouraging, and Washington says everything is looking up. 

But despite the glowing reports, economic trouble is brewing in crucial financial sectors.  

Starting with an alarming rise in… 

Corporate bankruptcies. 

By the end of 2023, at least 591 American retail institutions—the highest since 2020 according to S&P Global Market Intelligence—had filed for bankruptcy after struggling with massive debt, rising interest rates and dwindling sales, including:  

Bed Bath & Beyond, David’s Bridal, Revlon, Pier One, GNC, Neiman Marcus, Hertz, Gold’s Gym and many more. 

And the trend may continue into 2024. 

Joann Fabrics, for example, just filed for bankruptcy after 81 years in business. And The National Law Review is watching nine more mega retailers for possible Chapter 11 filings in the months ahead, including Petco, Express, and AMC. 

What do these troubled companies have in common?  

They all tend to thrive when Americans have plenty of discretionary income. 

Now, many Americans are struggling just to pay the bills. And analyst David Morgan notes we can all see what’s happening: “You don’t have to tell this to the girl with three jobs. She knows what is going on.” 

Prices for necessities like gas, food and rent are rising across the nation. 

And markets for discretionary goods and services are struggling. 

But consumers and businesses aren’t the only ones feeling the pressure… 

The commercial real estate sector is also facing stiff headwinds. 

Fox Business says, “About $1.5 trillion in commercial mortgage debt is due by the end of 2025, but steeper borrowing costs, coupled with tighter credit conditions and a decline in property values brought on by remote work [due to the pandemic], have increased the risk of default.” 

Starwood Capital Group CEO Barry Sternlicht says, “The office market has an existential crisis right now… There’s $1.2 trillion of losses spread somewhere, and nobody knows exactly where it all is.” 

Morgan Stanley estimates the market could see a decline of up to 40%, echoing the 2008 financial crisis. 

If so, the ripple effects could also impact… 

Regional banks 

Last March, rising interest rates and a flagging economy triggered the unexpected failures of Silicon Valley Bank, First Republic Bank and Signature Bank. 

Today, the industry may seem safe. But the consulting firm Klaros Group has identified 282 stressed banks with massive unrealized losses and high levels of commercial real estate exposure. 

And during the latest Senate Banking Committee hearing, Fed Chief Jerome Powell delivered a sober warning: “There will be more bank failures.” 

So, in terms of defensive timing… 

Thousands of investors may rush to buy gold as a hedging strategy if the turmoil continues… just like they did after the 2008 financial crisis. 

Back then, the demand for gold was so high shipping was delayed up to four months, and some dealers couldn’t even fill orders as the price of gold soared to record highs.  

As you may know, gold hit five record highs in the last few weeks alone. 

If you’ve been thinking about buying gold or adding more to your holdings, now is the time. 

Don’t miss the boat. 

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