It seems as though the stock market cannot be wrong for the time being. Since the election, the broad-based S&P 500 has hit more than a dozen all-time highs, and the aggregate valuation of its components crossed the $20 trillion mark. Meanwhile, the Dow Jones topped the elusive 20,000-point mark.
When the stock market is speeding past milestones at what seems to be an ever accelerating pace, investors tend to become less worried to risk and are often more willing to dive into higher-growth investments. When this happens, precious metals and mining stocks run the risk of being left in the dust. But should then be?
Two months ago the U.S. dollar index hit a 14-year high! Generally, the U.S. dollar and gold and silver, the two precious metals most commonly purchased by investors, tend to move in opposite directions. The dollar is usually strengthening when the U.S. economy is improving and uncertainty is declining, which is often bad news for gold and silver. On the flipside, a falling dollar implies potential weakness and uncertainty in the U.S. economy, which gold and silver feed off of.
However, silver has recovered it's losses from a low of $16 dollars late last year and with a bond market that is yielding negative returns. Last year, the aggregate value of government bonds with a negative yield held around the globe nearly topped the $12 trillion mark. Even though we've seen a global rebound in yields, the opportunity cost of owning gold and silver remains attractively low.
It may be time to look at adding silver and gold stocks to your portfolio and detach the performance of gold and sliver from from a weak or strong dollar.