The U.S. Economy and Gold: 3 Things to Watch in Second Half of 2024

Heading into the second half of 2024, the U.S. economy is slowing down, inflation is still above the Federal Reserve’s target rate, and gold has climbed to a series of new record highs. As investors look ahead, here are three factors to consider as you position your portfolio for the changing macroeconomic landscape.

1. Making History: Interest Payments on National Debt Set to Exceed Defense Spending

The U.S. National Debt continues its onward march higher and is approaching a record $35 trillion. For investors, it’s worth noting that recent Treasury auctions have been met with lackluster demand – indicating that global buyers are failing to keep up with the tremendous amount of securities the Treasury must continue to offer in order to finance our country’s operations.

The U.S. boasts the largest defense budget at nearly $900 billion in 2024. Yet, interest payments on the national debt are on pace to eclipse that number this year!

• In the first seven months of fiscal year 2024 (which started last October), interest payments totaled $514 billion.
• That was $20 billion higher than defense spending.
• Budget projections reveal that trend will continue, making 2024 the first year ever that the United States will spend more on interest payments than on national defense.

This is an expensive and risky proposition for our nation today and our future. As debt levels grow and interest rates remain high, the high interest payments squeeze out spending for other critical areas. It’s an unstable fiscal position and leaves our nation’s finances vulnerable to crisis.

2. All Eyes on the November Presidential Election: Misery Index May Offer Clues

With many swing state polls and betting odds in a near dead heat, uncertainty abounds regarding the race for the White House. Looking for some economic clues? Since 1980, the Misery Index has correctly forecast 15 out of 16 presidential election winners, according to Strategas Research Partners.

• The Misery Index is the sum of the unemployment rate and the annual inflation rate.
• Historically, if the Misery Index is 7.3 or below, the incumbent typically wins reelection.
• Recently, the index climbed to over 12 in 2022 and dropped to under 7 in 2023.
• Today? The Misery Index stands at 7.269.

No matter who wins the White House, whoever wins will face roughly $4 trillion in expiring tax provisions in 2025. That means from a tax standpoint could make next year one of the most significant since the current tax system formed in 1913.

[For more details on how you can prepare and protect your wealth ahead of the expiring Trump tax cuts check out our recent post: Trump Tax Cuts Expire After 2025: Are You Ready?]

3. Fragile Global Landscape Opens Door to Market Volatility

One of the biggest factors that could drive a major market moving event in the months ahead comes from the global landscape. Today, we are seeing geopolitical conflict and tensions at an all-time high in the post WW II era.

War in the Middle East continues to escalate, and the Russian war in the Ukraine shows no signs of abating. Weakening economic growth in China creates challenges and risks for U.S. – China trade tensions. State-sponsored cyber-attacks are a growing geopolitical risk and are a threat to both individual organizations and national security.

Last but not least are the ongoing breakthroughs in artificial intelligence. While corporate America embraces AI, the technology is moving fast. Powerful AI models and tools create a new Wild West that is largely ungoverned and may have a disruptive influence on politics, markets, or even war. The potential impacts are largely unknown, but many agree the risks are high.

The Bottom Line

We are hurtling forward into a new age of global politics, domestic governing and technology. Throughout the first half of the year, investors turned to gold and silver, which are both returning double-digit gains since the start of the year.

Precious metals provide a hedge against inflation, ballooning government debt, political uncertainty and even against intensifying global conflicts that may arise at any time. If you have been considering adding gold or silver to your portfolio, take action now to protect your personal economy and invest in a proven asset with a 5,000 year track record.

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