As the world wakes up from the pandemic lockdowns, most people seem to think a boom will follow with spending pumping liquidity into the economy. In turn this will lead to a recession in around 18 – 24 months. While arguments fly around over the length of the boom period, I see a flaw in their arguments and it’s why I believe the window of opportunity is closing and more quickly than people realize.
As the world went into lockdown the focus was on supporting workers whose incomes suddenly dried up. Furlough schemes became the buzz word and grants were made available to many businesses. Money was being printed at unprecedented levels. People working from home became the norm. There were no travel costs, no eating out so money was saved.
There were a couple of growth areas during the lockdown – Home deliveries such as Amazon where people were able to buy the usual clothes, personal products, home furnishings etc. Businesses which operated an online shopping facility found their loyal customer base move from foot traffic to internet traffic. Online shopping has moved to another dimension. Home deliveries provided a boost to courier industry.
Another industry which benefitted was building renovations and associated trades as homes were adapted so people could work from home. Tradesmen were working increased hours to meet demand. Some people took advantage of the free time to personally decorate their homes. DIY boomed.
In the UK, the government introduced reduced stamp duty as an incentive to encourage house purchases. This created a boom for solicitors, tradesmen, surveyors, mortgage brokers, real estate agents. For solicitors it has been so successful that many are unable to take on new clients and settlements are taking 6 months or more.
The world has been so focused on the pandemic it has missed a lot of the market signals showing businesses thriving and inflation rising. Russia, 5.8%; US 4.2%; Philippines 3.3%; Canada 2.2%; Germany 2%; New Zealand 1.5%. It will definitely be interesting to see what happens when other countries release their figures.
Controlling the rate of inflation as economies move out of the pandemic is going to be tricky. But as inflation goes up, so too will interest rates. Quantitative easing will be stopped and money supply will be withdrawn from the market to reduce spending in an attempt to curb the prospect of hyperinflation. Whenever any of these measures are implemented safe haven investments go up. It is no surprise then, as more economies start reporting higher inflation rates that the markets are preparing for it and moving into the safe haven of Gold and Silver Bullion with gold up 4.06% and silver up 6.37% for a month.
While many pundits are considering a boom for 18 – 24 months, I believe that boom is already underway and likely to end within a much shorter timeframe. My projection is that with Gold and Silver already heading, the markets are slowly adjusting to the economic news and by the last quarter of 2021 there will be more momentum for safe havens pushing Gold & Silver upwards.
I am always asked when is the best time to buy Gold and Silver? My answer is now. The window of opportunity is closing quickly.
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