in April 20.5 million Americans lost their jobs, the official unemployment rate rose to 14.7%. This is the highest value since statistics began after the Second World War. However, the Bureau of Labor Statistics, which is responsible for collecting this data, writes that this figure clearly signifies the true level of unemployment. The Ministry sees the actual unemployment rate around 5 percentage points higher, that is around 20%. As the new registrations for unemployment benefits show, a further 2.5 million jobs were cut by mid-May.
These figures hide the destruction of many livelihoods. The damage caused by the decommissioning of the economy cannot be repaired within a few weeks, it will leave its mark. This is already evident in China. There, consumption is recovering much more slowly than the optimists on Wall Street expect for America. A rapid recovery in the economy always appears more clearly than wishful thinking.
A severe recession is looming
We are only at the beginning of this crisis, which is hitting a highly indebted world with great severity. The emerging debt crisis has not yet started, it is only slowly starting. But it will come. That is why the IMF President has just called publicly to ban all banks from buying back their own shares and paying dividends.
Wall Street cheers the crisis and relies on the Fed
At the moment there is only one dominant topic on Wall Street: the Fed’s money printing machine. It should make the impossible possible. I think there is a high probability that the harsh economic reality will soon lead to disillusionment and falling share prices.
At the moment, however, everything indicates that the recent rise in stock markets is only a bear market rally, fueled by the newly created trillions of the Fed and other central banks. The market technology has not improved to an extent that would be typical for the start of a new bull market, but shows an image that clearly speaks for a bear market rally.
Successful stockbrokers such as Buffett and Druckermiller sell shares
As you can in the June issue of my stock exchange letter Krisensicher Invest, which will appear on May 26 the S&P 500 is extremely overvalued. All proven key figures of the fundamental evaluation come to this result. They are at a level that historically was only reached in 1929 and 2000, that is, on the eve of heavy bear markets. No wonder that the well-known investors Warren Buffet and Stanley Druckermiller do not buy stocks, but reduce their holdings.
Bearmark rally is nearing its end
The combination of gross overvaluation, drastically declining corporate profits and an emerging debt crisis is highly explosive. Therefore, in the course of the bear market that started at the end of February 2020, I still expect at least a third of the price of the S&P 500, i.e. a decrease in the range of 1,000 points.
With an important indicator that measures the market breadth, a negative divergence has developed. This suggests that the bear market rally of the past few weeks will soon come to an end.
Strong buy signal for gold mining stocks
The precious metals sector shows a completely different picture. Although selected mining stocks have risen sharply, the gold mining index has only recently given a strong buy signal with long-term importance. And my price band indicator signals a short-term rise in the gold price to $ 1,900 an ounce. In the medium to long term, I expect the gold price to be considerably higher due to the completely dubious monetary and sovereign debt policy.
If the gold price reaches this price target in the coming weeks – I am convinced – there will be high double-digit price gains for selected mining stocks. Take advantage of the extremely attractive risk-reward ratio that is now on offer here and find out about it at the highest level with Roland Leuschels and my stock exchange letter Krisensicher Investieren – test it now for 30 days free of charge.
I wish you a nice weekend,
Claus Vogt, editor-in-chief, crisis-proof investing
P.S .: There is hardly any report about it, but in the past 20 years gold has performed better than the stock market – although the latter has historically been overvalued, which means it is far too expensive. The best gold investments you can invest in in my crisis-proof letter.
P.P.S .: If you want to get through this crisis safely every week, please request the free Claus Vogt market comment here today easily with your email.
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