COMING SOON! My American Wealth Summit

This week, many of you had more questions on a U.S. sovereign wealth fund as well as the best way to play the market during recent volatility.

Here are a few questions:

Q: How should investors take advantage of a U.S. sovereign wealth fund? – Steven S.

A: Trump’s decision to launch an U.S. sovereign wealth fund raises a number of interesting questions. Most countries that have a sovereign wealth fund use trade surpluses as their funding mechanism. But since the U.S. doesn’t have a trade surplus, a SWF could also be funded with new sources of U.S. revenue. For instance, tariffs could raise $10 billion or more in annual revenue based on current trade patterns. That revenue would make a good foundation for an SWF. But the most efficient way of funding would be to contribute assets to the SWF that the U.S. already owns. These assets could include gold reserves, federal lands with oil and gas potential and intellectual property that could be leased to third parties. Trump’s plan to open up federal lands for mining exploration and drilling for oil and gas are particularly good for investors in two ways. It would be a source of income for the government to fund a sovereign wealth fund that would promote fiscal sustainability and lessen the burden of taxes on American families. But it could also be a boon for investors to become shareholders in the companies that will actually help the government monetize all those trillions in mineral wealth that have been locked within federal lands. For investors, it’s a new wealth creation opportunity to take advantage of. But as with all opportunities, getting ahead of the crowd is key to maximizing gains. We’ll be showing investors the best way to capitalize on this new opportunity in our publications. Stay tuned.

Q: What should I hold in my portfolio during so much market volatility? – Christina B.

A: What we are seeing in the markets recently cannot be classified as a crash, but actually something worse. What is worse than a crash and quick recovery as markets are going up and down daily is a long, slow grind down. That does not mean a one-day crash of 10% or more. It could mean a slow grind down perhaps 20% or 30% over six months or even longer. A quick crash can recover quickly. With a slow grind, many investors tell themselves it will come back or "buy the dips" or hang in there. Then it will grind down some more until the retail investor finally capitulates with large losses. Economic data shows signs of recession. Unemployment in the U.S. has risen from 3.4% in April 2023 to 4.2% today. That’s not a high level or a huge increase but the trend should be disturbing. Inflation is still sticky at 2.4% (annualized). Again, that’s not an out-of-control level but the fact we aren’t seeing more of a downtrend should also be disturbing. But there are also opportunities during markets like this. For your portfolio, allocations to cash and hard assets like gold are advisable to reduce volatility, increase liquidity and hedge against geopolitical risks. Having cash on hand to invest in companies that are positioned to take advantage of government policies is another smart tactic for savvy investors.

That’s it for this week. Thanks for all your questions sent in.