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For much of last year, President Donald Trump promised “extraordinary” economic benefits from his policies and “the brightest economic future the world has ever seen” for the country. But just months into his second term, the administration is asking Americans to brace for an economic dip instead.
In a recent interview on CNBC’s Squawk Box, Treasury Secretary Scott Bessent warned that the ongoing efforts to cut back government spending would negatively impact the economy. “The market and the economy have become hooked, become addicted, to excessive government spending and there’s going to be a detox period,” he said.
At the end of 2024, government expenditures as a percentage of gross domestic product was 34%.
However, despite the efforts of Elon Musk to cut costs via the so-called Department of Government Efficiency, there is little evidence that government spending has been reigned in. The federal budget deficit hit $1.3 trillion in March — 15% higher than the same time last fiscal year.
While federal government revenues have risen 3% year-over-year last month, total spending increased by 7%. All told, the government is still spending a huge amount of money.
Meanwhile, tariff-driven uncertainty has caused the stock market to record the most volatile week ever during the second week of April. Plus, JPMorgan & Chase raised the odds of a recession from 40% to 60% earlier this month.
Such drops suggest that the only thing this “detox” is eliminating is economic optimism. Here are three ways you can prepare your portfolio for the ongoing fallout.
In times of uncertainty and volatility, investors often consider gold to be a safe haven. Amid the recent market turmoil, gold has been regaining steam over the last few months, trading above $3,000 per ounce.
With more uncertainty looming, JPMorgan predicts an ounce of gold could reach an average price of $3,675 by the end of 2025, and $4,000 by the second quarter of 2026.
Adding a little gold exposure to your portfolio could help insulate your wealth.
For those looking to capitalize on gold’s potential while also securing tax advantages, one option is opening a gold IRA with the help of Thor Metals.
Gold IRAs allow you to invest in gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold, making it an option for those seeking to ensure their retirement funds are well-shielded against economic uncertainties.
Despite the 90-day pause on tariffs and increasing calls for trade agreements, the U.S. has yet to reach finalized deals with its major trading partners. As the broader market uncertainty impacts stocks and bonds, investing in alternative assets like real estate and art might help diversify your portfolio.
If you want to invest in real estate but don’t want to take on too much risk, consider tapping into the $36 trillion home equity market.
Homeshares’ U.S. Home Equity Fund is allows accredited investors to gain direct exposure to hundreds of owner-occupied homes in top cities across the country.
Homeshares enters into home equity agreements (HEAs) with the property owners, which typically have built-in downside protection. Because HEAs only represent 25% to 35% of the property’s total value, there’s significant return potential at reduced risk levels.
This approach provides an effective, hands-off way to invest in high-quality residential properties, plus the added benefit of diversification across various regional markets – with a minimum investment of $25,000.
Another option for diversification is investing in art – which has almost zero correlation with stocks. Bluechip contemporary art has outperformed the S&P 500 index by 43% between 1995 and 2024.
Investing in art was once reserved for the ultra-wealthy, but Masterworks has changed that by enabling retail investors to invest in blue-chip art from the likes of Banksy, Basquiat, and Picasso. From their 23 exits so far, investors realized representative annualized net returns like 17.6%, 17.8%, and 21.5% (among assets held for longer than a year).
While consumer confidence is dropping, expectations of inflation are rising. Consumers surveyed by the University of Michigan said they expect 4.9% inflation in the year ahead, while their long-term inflation expectations have jumped from 3.5% to 3.9%, the highest level in 32 years.
Luckily, the government offers Treasury Inflation Protected Securities, or TIPS, which are designed to protect investors against inflation. For investors worried about the cost-of-living or those living on fixed income, these special treasuries could offer a safe place to park cash.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
