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Investors Are Pulling Out of US Stocks
Contributed Opinion

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Tom Beck of Portfolio Wealth Global discusses why he believes the U.S. stock market has peaked and what factors could reignite gold stocks.

Before reading today's article, here’s a stock update from a week ago: since Monday, our gold play is up 22%. This is over 3x more than the S&P 500 has gained since the beginning of 2017!

We seized the moment in an opportunistic fashion and are being rewarded for being contrarians.

But, today we are focusing on a rear situation happening in the broad indices. Since 2009, the S&P 500 has risen 166%, while European stocks returned 99% and emerging markets have only gained 74%.

Global money managers' allocation to U.S. stocks slumped to a nine-year low in April, a total of $22.2 billion in the past seven weeks.

Three factors are driving this change in performance after eight straight years of U.S. market dominance:

1. U.S. stocks are incredibly expensive as a group. The cyclically adjusted price-to-earnings ratio is 25.27x in the U.S., compared with 16.7 in Europe and 13.7 in emerging markets. As you know, we've made huge gains on select U.S. based Wealth Stocks, but bargain priced stocks are scarce right now.

P/E Ratio US Stocks

2. Europe is rebounding. The continent is now growing at the same speed as the U.S., but European margins are near recession levels, while margins in the U.S. markets have nowhere to go but down.

3. The U.S. is raising interest rates and Europe isn't. The Fed funds rate has already been hiked twice in six months; with a third time most likely coming in a month. Interest rates have historically acted as a weight on equity prices. This means you can expect to see the S&P 500 correct soon.

What Portfolio Wealth Global uncovered is that three converging themes are coming to fruition in the coming one-to-three months, which could reignite gold stocks in a major way:

1. Investor appetite for emerging markets means it's "risk-on," which has historically fueled the resource sector higher.

2. The S&P 500 underperformance has historically been incredibly bullish for resource stocks.

S&P Underperformance Courtesy of: (our good friend Jordan Roy-Byrne)

3. The gold-to-silver ratio: we are again reaching an extreme, and I remind you that all major precious metal 300%-1,000% moves were preceded by the ratio hitting 80:1 and then resetting course.

Today, it sits at about 75:1—we are absolutely close to a significant breakout.

Gold-Silver Ratio

Right now is a perfect period to create a watch list, take advantage of volatility to your advantage and wait for a truly clear signal that we're back to bull territory.

If you haven't already, take a look at what I'm doing with my money this year.

Tom Beck is senior editor of Portfolio Wealth Global. Known as one of the first millennial millionaires in the United States, Beck is a relentless idea machine. After retiring two years ago at age 33, he's officially come out of retirement to head up Portfolio Wealth Global. He brings a vision of setting a new record for millionaires with his seven-year plan to accelerate any subscribers' net worth who will commit to the income lifestyle. Beck delivers new ideas on the marketplace that were once only available to the rich. Traveling the world, he's invested in over a dozen countries, including real estate.

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1) Tom Beck: I, or members of my immediate household or family, own shares of the following companies referred to in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies referred to in this article: None. My company has a financial relationship with the following companies referred to in this article: First Mining Finance Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor's fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Charts provided by Tom Beck

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