Recession Indicators and When To Diversify

If Warren Buffett created a market valuation tool, and it’s named after him, it’s probably worth paying attention to. And right now, the Buffett Indicator is screaming at full volume that the market is insanely overvalued.

A chart with different colored circles

AI-generated content may be incorrect.

What is the Buffett Indicator?

The Buffett Indicator simply compares the total U.S. stock market capitalization to GDP. Buffett observed that when this ratio exceeds 133%, it signals overvaluation and impending correction.

Right now the Buffett Indicator is over 200%. That’s “house on fire” territory—a flashing neon WARNING: COLLAPSE IMMINENT sign.

“For me, the message of that chart is this: If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%–as it did in 1999 and a part of 2000–you are playing with fire.” – Warren Buffett

A person in a suit and tie

AI-generated content may be incorrect.

Every Bubble Pops

Every major crash in history followed excessive speculation, bloated valuations, and the delusion that “this time is different.” Sound familiar?

Right now, the Buffett Indicator is sounding the alarm. It is higher than it has ever been. The Fed is running out of tricks, inflation is still a ticking time bomb, we have a trade war on our doorstep and corporate earnings don’t justify these stock prices. Not even close.

Stocks Are a House of Cards—Gold Can Be Your Foundation

So where does real value lie? Not in the overleveraged stock market, where a whisper from the Federal Reserve can sink the markets overnight. The only place investors truly control their wealth is in tangible assets. Gold remains the ultimate safe haven.

Gold has outlasted every empire, every currency collapse, every financial crisis.

It is wealth in its purest form—free from corporate malfeasance, central bank manipulation, and algorithm-driven hysteria.

In a world where digital dollars can simply be deleted, tangible gold remains untouchable.

The Smart Money is Moving—Are You?

While retail investors cling to their overvalued stocks, central banks have been quietly stockpiling gold at record levels—why? Because they know what’s coming. They aren’t betting on the latest trend stock or meme coins—they’re securing hard assets before the inevitable correction.

The Buffett Indicator has been dead-on in the past—and this time is no different. The market doesn’t crash when everyone expects it to. You can’t time it perfectly. It crashes when confidence is highest. And right now? Confidence is irrationally high—which means the fall will be that much harder.

The question isn’t if the bubble pops. It’s when. Will you be scrambling for safety after the fact, or will you prepare now while you still have time?

The warning lights are flashing. Pay attention. Get into something real like gold and silver before it’s too late.

… and his impending showdown with tariffs and inflation. Here’s the math.

The news out of D.C. is coming fast and furious in these early days of Trump’s second administration. One thing is clear: Trump learned a few things from his first administration and has had 4 years to prepare for this, and boy, did he prepare!

With Elon Musk’s business sense and technical acumen assisting, the new administration has engaged in an intricately choreographed dance. In a carefully planned sequence, Trump has issued a flurry of executive orders, put forth a radically different new brand of cabinet nominees and department heads for confirmation, and seized access to entire systems and buildings.

In the process, he has swept aside deeply entrenched career bureaucrats – both literally and figuratively. He has shone bright lights on corruption and waste deep in the belly of the beast, while political opponents are left sputtering and spinning, unsure how to react, or if they should scurry back into the shadows.

For most Americans, this is great fun to watch. We’ve known all our lives that taxes are too high, spending is out of control, the debt is unsustainable – and that’s just the way it is and always will be.

But is it finally morning in America?

Major reforms are in the works. To call the ideas coming out of the White House right now disruptive is an understatement. Trump is aiming to dismantle entire agencies and even departments – USAID, the Department of Education, even the IRS! What a game-changer that would be! No more income taxes? No more dreading April 15?

While few Americans would miss the IRS, let’s think about this for a minute. How inflationary would such a plan be? Remember – inflation is too many dollars chasing too few goods. Taxation is one way to mop up excess dollars in the economy. Maybe it’s a BAD way, but it’s a way.

More money in everyone’s pockets combined with tariffs putting a choke hold on supply chains could be a recipe for disaster!

Consider: The income tax brings in about 50% of federal revenue. That’s roughly $2.43 trillion per year. We are $36 trillion in debt. Trump has suggested we make up the revenue with an “External Revenue Service” and revert to relying on tariffs to fund the government. It used to be that way before 1913! But currently tariffs make up only 2% of revenue, or about $21 billion. That is a pretty big gap.

The yellow sliver is tariffs. The dark blue is income taxes.

All things being equal, tariffs would need to be a rate of 65% to fully make up for ending the income tax right now. That would result in unimaginable inflation, crippling the economy.

Trump is proposing a more modest 10% tariff rate across the board. That leaves us with a $2 trillion shortfall and potentially, a lot of inflation if the deficit is made up with money printing.

Certainly, Trump is making changes on the spending side. The debt clock has added a DOGE savings ticker to the debt dashboard https://www.usdebtclock.org/ It currently stands at around $58 billion. But DOGE has a lot of work to do to get to $2 trillion. Cutting USAID saves only $50 billion. Cutting the Department of Education saves $90 billion a year. These are fractions of total spending.

So where does the money go?

The immovable objects of Social Security, Medicare, Defense and other mandatory spending together make up about 70% of the budget. Are they on the chopping block too? They almost HAVE TO BE in order for the numbers to work. How would Trump swing that politically?

The other strategy is to grow the economy. High tariffs could have the effect of reshoring American manufacturing. Decreased regulation could make the US more business friendly and bring back lots of good jobs. Our prosperity could be “Made in America” again. But would it be enough to bridge the gap? Could enough progress be made before midterm elections?

Can the U.S. Avoid an Inflationary Spiral?

If you’re an optimist, you believe these things could happen:

-Tariffs somehow generate sufficient revenue to replace income taxes.
-U.S. manufacturing magically ramps up quickly to replace foreign goods, keeping prices stable.
-Government cuts enough spending and waste to narrow the gap.
-Strong economic growth reduces the debt over time.

However, pessimists see these major threats on the horizon, leading to inflation:

-Tariffs are not enough to fund the government, leading to more borrowing or money printing.
-Businesses pass all tariff costs to consumers, creating higher prices across the board.
-Global trade retaliation cripples supply chains, hurting American companies instead of helping them.
-Government fails to cut enough spending, leading to an even worse debt spiral.

Bottom line

It all comes down to how it is executed, how strong the resistance is, and if the political will is strong enough for long enough for this to work. Trump himself has warned of short-term pain. He is not dodging or denying that economic conditions will get worse before they get better.

But how long until things get better? And what if his plan falls short – or worse – falls completely apart?

Are you an optimist? Or are you bracing for all possibilities?

At Reagan Gold Group we always hope for the best, but we also believe in helping people prepare for the worst. Right now would be a good time to diversify into precious metals before prices get out of reach. Gold is reaching new all-time highs, as we predicted they would. We also think the sky is the limit. One futures trader we spoke with is predicting $7,000 gold by 2030!

Gold can preserve your purchasing power in a powerful way, come what may. Is your portfolio ready for the wild ride the next 2-4 years will be? It’s time to diversify into gold!

As Donald Trump prepares to assume office for a second term, his vision of a “new American golden age” has sparked considerable debate about the future of the economy and financial markets. For investors, particularly those interested in precious metals like gold and silver, this moment represents both opportunities and questions. What happened to the price of gold during Trump’s first administration, and what might his second term mean for precious metals? 

Gold in the First Trump Administration: A Look Back 

Gold prices experienced notable movements during Trump’s first term (2017–2021), reflecting both domestic and global economic trends. 

Economic Growth and Tax Cuts (2017-2018): 
Trump’s first term began with a focus on economic growth, fueled by significant corporate tax cuts and deregulation. 
Gold prices remained relatively stable during this period, averaging around $1,200–$1,300 per ounce, as strong stock market performance diverted investor attention from safe-haven assets. 
Trade Wars and Market Volatility (2018-2019): 
The U.S.-China trade war caused market uncertainty, boosting gold prices as investors sought safety. 
By mid-2019, gold had surged past $1,500 per ounce, reflecting heightened fears of global economic slowdowns and fluctuating U.S. dollar strength. 
The COVID-19 Pandemic (2020): 
The pandemic triggered massive economic stimulus measures, including record-low interest rates and unprecedented money printing by central banks. 
Gold prices reached an all-time high of $2,070 per ounce in August 2020 as investors flocked to hard assets to hedge against inflation and economic uncertainty.
 

Trump 2.0: What Could It Mean for Precious Metals? 

Trump’s second term could usher in new economic policies and challenges that may impact the price of gold and silver. Here’s what to watch: 

Geopolitical Uncertainty: 
Trump’s “America First” policies, including potential trade disputes and a focus on reducing U.S. reliance on foreign supply chains, could create market volatility, driving demand for safe-haven assets like gold. 
Inflation Concerns: 
If Trump prioritizes economic stimulus and infrastructure spending, inflation fears may rise, further enhancing gold’s appeal as a hedge against the eroding value of the dollar. 
Central Bank Digital Currencies (CBDCs): 
Discussions about launching a U.S. CBDC could spark debates about financial privacy and control, pushing investors toward tangible, private assets like gold and silver. 
Interest Rates and Monetary Policy: 
Trump has historically favored low interest rates to support economic growth. A continuation of this stance could weaken the dollar, making gold and silver more attractive. 

 
Why Precious Metals Remain Relevant 

Gold and silver have long been considered stores of value, particularly during times of economic uncertainty. As Trump declares the dawn of a “new American golden age,” savvy investors may view precious metals as a hedge against the very volatility that such bold declarations can create. 

Key Reasons to Consider Precious Metals Now: 

Wealth Preservation: Gold and silver protect purchasing power in the face of inflation. 
Safe Haven: Precious metals thrive during geopolitical tensions and market instability. 
Portfolio Diversification: Adding gold and silver reduces overall portfolio risk. 

 

Conclusion: A Golden Opportunity Awaits 

While Trump’s second term promises bold initiatives, it also introduces potential risks to the economy. Whether through trade disputes, inflationary pressures, or shifts in monetary policy, the factors influencing gold and silver prices are poised to remain active. 

For investors, the “Trump 2.0” era represents an opportunity to safeguard wealth and capitalize on market uncertainties by turning to precious metals. As we navigate this “new American golden age,” gold and silver may once again prove why they’ve stood the test of time as the ultimate safe havens. 

Start your journey toward financial security today. Explore the timeless value of gold and silver and fortify your portfolio for the opportunities ahead.