In another stellar week for stocks, benchmark US stock indices continued to climb and make new all-time record highs. In what has only happened a handful of times in trading history, Nasdaq 100 index futures, traded on the CME, have not closed in the red for the past 11 consecutive trading days. What also might seem unbelievable, Nasdaq 100 index futures are officially up more than 20% for 2017.  Evidently, market participants have had no hesitation to buy expensive stocks with lofty valuations.

However, this truly historical stock rally is not just confined to the country with the largest economy in the world. Japan’s Nikkei 225 stock average index soared past 20,000 for the first time in history, and other markets seemed to tag along for the ride in overnight US trading on Friday. England’s FTSE 100 index made a new all-time high during Friday’s trading. Similarly, Germany’s DAX 30 index, rallied past 12,822.94 thereby making a new all-time record high. It’s safe to say stocks around the world are being purchased en masse. But can it last? Most analysts concur the answer lies in the economic data.

Despite a small sell-off due to a weaker than expected job’s report on Friday, stocks around the world quickly recovered. Economists were forecasting somewhere around 180,000 new jobs for the month of May, but only 138,000 jobs were added. Often times when jobs reports disappoint, the reaction in the market can be mixed. Occasionally, a weak jobs report is healthy for the market, because it indicates the Federal Reserve might be more cautious to raise interest rates.

The underwhelming jobs report certainly assisted the gold market, as spot gold soared 0.80% to climb above $1,280 a troy ounce upon news of the weak than anticipated report. Traders are now pricing in a slight possibility of a delay in an interest rate increase that was originally expected this month.

“This is undoubtedly a weak jobs report, especially with downward revisions. But it’s just one data point that will not change the Fed’s course, which is to raise rates at its June meeting,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Regardless of the outcome of the Fed’s meeting in the coming weeks, stocks and gold have appreciated almost in unison this year. Despite the seemingly endless gains in the stock market this year, gold is still outperforming the S&P 500. Gold is currently up 10.31% for the year while the S&P 500 is up 9.34%. The only asset (besides live feeder cattle) that tops the Nasdaq 100’s impressive 20% YTD gain is palladium which is currently up 22.70% for the year.

Meanwhile, in other global economic news, the price of crude oil continued to sink last week and weigh heavily on shares of companies in energy sectors around the world.

Moving forward in the weeks ahead, all eyes are still glued on the president’s every move as well as the Fed’s every move, because both entities evidently have an increasing effect all markets around the world. 

The novel is set in the year 2029. Interest rates are skyrocketing higher. A dollar crisis has emerged. Inflation is running rampant. America has lost its superpower status and has become a near pariah state.  

If you are looking for a good summer read, check out the The Mandibles: A Family 2029-2047 by Lionel Shriver. (2016 HarperCollins Publishers). It reads like a fast-paced thriller, with an economic scenario that has realistic roots.  

As the U.S. dollar crashes it is replaced by a new global reserve currency. Countries are now using a new global reserve currency called the Bancor – which is physically backed by a basket of real commodities, including corn, soy oil, natural gas, rare earths copper and, of course, gold.  

As the economic crisis unfolds, the U.S. president freezes all money transfers out of the U.S. Capital controls are established and no amount above $100 is allowed to leave the U.S.  

Airport security officials search all those departing the country and businessman with suitcases bursting full of dollars lose their money to confiscation.  

The goal of the new global new physical-commodity backed reserve currency is to restrict the money supply (similar to the old gold standard) and put an end to the quantitative easing and money printing monetary policies that global central banks have embraced in the post 2008-global financial crisis era. 

The new International Monetary Fund demands that U.S. Treasury debt held by foreign investors must be redeemed in bancors. Of course, the American government doesn’t have enough gold or commodities to back its trillions of dollars in national debt.  

The U.S. President finds an easy way out. Just like individuals can declare bankruptcy and have a fresh start –he decides the U.S. government can do that too. He notes, he didn’t run up all this debt, it was a legacy of former presidents.  In a national address, the President declares its debt null and void. The Treasury and the Fed declare a “reset.”  

What happens to the price of Gold in this fictional page turner? It skyrockets to new all-time highs and investors around the world clamor for what has served as a recognized store of value for 5000 years.  

This is a fictional tale, with a disconcertingly plausible economic story line. How does it end? You’ll have to read it to find out.  

US equities were slightly mixed during trading on Friday capping an end to an epic week of more all-time market highs. This marks the 19th time this year that the S&P 500 has made a new record high. All three indices finished noticeably higher for the week, with the Nasdaq 100 leading the pack with an impressive 2.36% weekly gain.

With one of the worst market sell-offs of 2017 occurring only two weeks ago, much of the political fear and investor trepidation that sparked the sell-off has evidently subsided. The 6-day-long market recovery suggest investors took advantage of the discounted prices and capitalized on a buying opportunity.

Shares of major tech companies were some of the best performers of the week. So far this year, tech shares are up around 20% with the big name giants, Amazon, Google, and Facebook outperforming the broader market by a mile.

On the other hand, shares of energy companies did not fare so well last week as the price of crude oil plummeted. Although members of OPEC agreed to extend production cuts into March of 2018, oil prices starkly declined when the news broke that a production cut agreement has been reached. Because reducing the supply of oil is supposed to boost prices, declining prices confused analysts and investors alike.

“The market seems to have lost faith in OPEC’s ability to do whatever is necessary to reduce the massive oversupply and to bring inventories back to the five-year average” by the first quarter of next year, said Thina Saltvedt, an analyst at Nordea Bank AB, when trying to explain the strange reaction in the market.

The price of oil matters not only because it correlates to the price people will pay at the pump, but it also matters because oil and the energy industry as a whole resemble a significant percentage of what most people refer to as “the stock market”.

The energy sector represents 6.3% of the companies in the S&P 500, and the sector is currently down 12.13% year-to-date. Although oil rebounded on Friday, prices still closed in the red for the week, thereby stumping gains in the entire S&P 500 index.

However, not everyone takes such a pessimistic outlook on the energy sector and oil. An oil analyst from BNP Paribas, Harry Tchilinguirian, views the OPEC meeting as a success. He noted that “if agreements had fallen down this would have been a return to the dark days of 2014 and 2015, when it was every producer for themselves.”

Regardless if oil goes back to $100 a barrel or $30 a barrel, the effects will definitely be felt in the equity markets.

In terms of other commodities, gold and silver continued a three-week-long winning streak with the precious metals advancing 1.17% and 3.27% for the week, respectively. Gold is now above $1,270 an ounce and well within striking distance of forming a new YTD high above $1,297.40. Recent terror attacks in Manchester have seemingly increased the desire to move additional cash over to safe-haven precious metals and shy away from riskier assets.

Remember back to college economics? Good old supply and demand? Well, the numbers are tilting favorably for silver. Simply put – the silver equation shows more demand than supply and that is bullish for prices ahead.

Global silver mine production fell in 2016, for the first time since 2002, according to the newly released World Silver Survey 2017 (Silver Institute and GFMS Team at Thomson Reuters.).

Here’s the numbers:

2016 Supply              1007.1 million ounces

2016 Demand           1027.8 million ounces

Doing the math, that leaves a silver deficit of -20.7 million ounces and ultimately puts upward pressure on prices.

Where Does The World’s Silver Come From?

On the supply side, Mexico was the largest silver producer in 2016, followed by Peru, China, Chile and Russia, the report said.

Who Uses Silver?

Silver is both an industrial and precious metal. Investors who purchase silver see a dual demand base for this commodity currency.

On the demand side, industrial fabrication made up the largest component in 2016 totaling 561.9 million ounces. Jewelry stands in second place at 207 million ounces and coins and bars are in a close third at 206.8. Silverware comprised 52.1 million ounces of total demand in 2016.

It is well known that physical ownership of silver offers investors many of the same diversification properties as gold, but at a much lower entry cost. Gold trades at about $1,257.00 an ounce right now, while you could purchase an ounce of silver for about $17.00 an ounce.

New applications for silver are exploding in industry and manufacturing, which will keep upward pressure on prices. Demand is growing, while supply is shrinking due to reduced mining.

Here’s one example: in 2016, silver demand for photovoltaic applications skyrocketed by 34 percent rise to reach 76.6 million ounces. This growth was the strongest since 2010 and driven by a 49 percent increase in global solar panel installations, the Silver Institute said.

Learn More

Read about fascinating new applications for silver in this LinkedIn article authored by Blanchard CEO & President David Beahm.

Follow David on LinkedIn for weekly updates on precious metals investing.

Investing Strategies

Investors turn to physical precious metals as an important component of portfolio diversification. Many studies have shown that when stock prices go down, gold and silver prices tend to rise – often significantly. Owning physical gold and silver is appropriate for all investors and can improve your long-term investment prospects. The latest supply/demand figures for silver only underscore the positive long-term price outlook for silver.

Silver prices have already been climbing in 2017. Now is a good time to add physical silver exposure to your portfolio before prices climb even more.

A great option to add to your portfolio are silver bullion coins. The 2017 1 ounce American Silver Eagle can be purchased right now for around $19.37. Market prices change daily, call Blanchard for today’s price at 1-800-880-4653.

Fresh new controversy regarding the Trump administration surfaced on Tuesday night of last week, and the market’s reaction was harsh.

By the end of the day on Wednesday, the Nasdaq 100 was down a little over 2.5%, and the S&P 500 and Dow Jones were both off roughly 1.5%. Given that a major market index has not moved more than 1% in a long time, Wednesday’s trading activity was quite serious and definitely put investors on the edges of their seats.

On an intraday basis on Wednesday, there was simply no reprieve for passive stock investors; every uptick was short-lived. The real talk of the town, however, was the explosion in volatility. The VIX index soared over 35% to climb above 15.

The explosion in volatility is highly interesting, because volatility hit a 23-year low two weeks ago. An article published on Blanchard’s investment page noted the interesting correlation between fresh new lows in volatility and imminent stock markets selloffs. Although it’s impossible to predict extemporaneous political events, the events always seem to occur right after volatility reaches an extreme low.

Because there was a surprising amount of complacency among investors, as noted in the article, the market reacted quite violently as investors rushed for the exit when news broke of President Trump’s recent activity. Investors immediately became less optimistic about proposed tax reform and all of Trump’s promised pro-growth policies.

If he were to be removed form office in an total worst-case scenario, it seems logical that much of the recent market run-up, that’s predicated on his aforementioned growth agenda, would unwind. Even if the administration’s scandal is overblown, it might be more difficult to push through new reform with obstinate members of congress who look at Trump’s recent activity with disdain. This was the logic behind Wednesday’s sell-off.

Both democrats and republicans in congress were also unnerved with the fact that Trump apparently asked the former FBI director, James Comey, to stop an investigation into a mutual connection.

There was talk of comparing Trumps current situation to that of Richard Nixon’s and the infamous Watergate scandal. During the mid 1970s in the height of the scandal, the S&P 500 cratered over 50% throughout the course of the year. As per usual, whenever the market is caught off-guard by a jarring situation, especially a political one, investors seek the safety of gold and bonds. As such, gold was up more than $24 an ounce on Wednesday.

“This week political risk has caught up on the market but it’s still unclear whether it has any legs,” said a Deutsche Bank strategist in a note to clients Friday.

Since Wednesday, much of the fear has subsided and better news has surfaced regarding the current political situation. The rebound in stocks gained more traction on Friday, but gold demonstrated its beauty as an investment as it kept above $1,250 an ounce and didn’t give up much of its gains.