The wealthiest Americans are hoarding physical gold just in case the next market correction is one of complete devastation. They are keeping their gold as an insurance against runaway deficits and a ballooning national debt which is devaluing the dollar.

There’s also the looming threat of a global pandemic in the coronavirus outbreak.

“The longer that this virus threat continues to weigh on the global economy, the more it poses a risk for at least a correction in the stock market,” said Ed Yardeni, the president of Yardeni Research.  He is pointing to the possibility of a 10% drop from recent market highs in an interview on CNBC on Friday.

While there’s no denying the stock market has done exceptionally well, market bulls like Yardeni suggests that because of that, this next correction will be a noticeable one. Yardeni, who says he’s going to keep cash on the sidelines until he gets more clarity on the coronavirus, remains bullish longer term. “Interest rates are so extraordinarily low,” he said. “The central banks have basically provided no interesting reasons to buy in the fixed-income markets and lots of reasons to buy in the stock market.”

While cash is not necessarily a poor decision, having savings for an emergency just makes sense. But in the face of runaway deficits, and an ever-increasing national debt that is devaluing the dollar, why are some market bulls hoarding cash to prepare for the next market correction?

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    The amount of cash being held by the wealthy has been increasing noticeably, especially in the past several months. That’s because the perfect storm is set up, but no one, not even the wealthy and the bulls know exactly when the next market correction will occur.

    But, for those wealthy individual investors who have the luxury of not being 100% invested in the stock market if they don’t want to, the ability to have a large cash allocation is a huge advantage. It’s an advantage on which high net worth investors around the world, including Warren Buffett, are overwhelmingly capitalizing.

    The rich are largely in agreement about an imminent downturn. “55% of family offices said a global recession will come in 2020,” according to a Campden Wealth Research survey of 360 ultra-high net worth UBS clients. “Family offices are cautious about geopolitical tensions, and there is a widespread sense that we’re reaching the end of the current market cycle,” says Rebecca Gooch, director of research at Campden Wealth.

    Gold and cash appear to be the choices of the wealthy to protect themselves against any upcoming market downturn, whether it’s a market correction or a complete recession.

    If Yardeni is correct in his assumption that the next market correction will be noticeable, thanks to the coronavirus and other geopolitical factors at play, then it makes sense to diversify and cash is part of the for the wealthy.

    As I have previously mentioned, when the majority of those who are wealthy make moves, it can be important to understand why. Afterall, they are wealthy for a reason!

    Best Regards,

    James Davis

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