Editor’s Note: As the clock winds down on 2016, this week we turn to the top minds in finance to learn how to navigate 2017’s choppy investment waters.

Today, The Palm Beach Letter’s own Teeka Tiwari shares his insights on how to handle markets at the start of the Trump years… the biggest question on every gold investor’s mind… and what to do as the War on Cash comes to America in 2017…

J. Reeves, editor, The Palm Beach Daily: 2016 was a wild year for the markets—“Brexit”… Trump… “Quitaly”—and still, the S&P 500 is poised to close out the year at all-time highs. Should we expect this trend to continue in 2017?

Teeka Tiwari, editor, The Palm Beach Letter: We are in a strong bull market. I expect the S&P 500 will go significantly higher.

Over the next two to five years, I think the S&P 500 will rise 20% to 40% from 2016’s “Brexit lows” of 1,991. That will put us at about 2,400–2,800.

Now, along the way, we may have a recession… a “flash crash”… and a good old-fashioned mini bear market. In spite of all of that, I expect the market to trudge much higher in the longer term. Here’s why:

Donald Trump’s fiscal stimulus plan—along with a more pro-business Congress—will bring back normalized GDP growth to America. And that is very bullish for stocks.

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J.R.: While the S&P 500 has soared, the U.S. bond market has plummeted. Yields have exploded almost 100% higher since July. Is the 36-year bull market in bonds finally over? What does that mean for earning “income in an incomeless world” in 2017?

Teeka: I’ve been calling for higher rates since 2014. At that time, I warned as many Americans as I could that the end of the great bond bull market was coming.

My advice was to dump all long-term bonds in favor of stocks that would benefit from higher rates. I also said that if you wanted immediate income, you had to focus your buying on interest-bearing instruments that had “rate-reset” provisions. This would make sure that as rates rose, you wouldn’t be stuck holding a low-yielding security.

(We still have one of these “rate-resetting” instruments in our Palm Beach Letter portfolio that yields 6.9% and is still a buy.)

Now, my bond market call was early by about 24 months… but what I’ve learned is that when you’re calling a major market top, it’s better to be two years early than one day late.

Just look at the beating investors have taken with “safe” 30-year government bonds. They’ve declined almost 20% just this year.

As to finding safe income… it will get more difficult as rates rise, not easier. Rising rates will be a burden on the balance sheets of highly leveraged companies. Yet it’s those companies that offer the highest yields.

So I urge readers to avoid market temptations like higher bond yields. Instead, be sure to read my “stock market income” reports. These ideas will give you big, safe yields—along with a little equity upside kicker.

J.R.: Let’s talk about gold. After roaring higher in the first half of 2016, the gold price (in dollars) has sunken back to 10-month lows. Is the new gold bull market already over?

Teeka: The ultimate driver for gold prices is the trend of “real returns.”

[Real returns are what you get after accounting for inflation. Analysts use the yield on the 10-year Treasury to measure the “risk-free” rate of interest. So the risk-free rate minus the inflation rate equals the current “real returns.”]

If real returns are down, gold goes up. So earlier this year, when real returns were negative 0.70%, gold prices were up.

But if real returns are up, gold goes down. Since Trump’s election, real returns have moved from negative 0.70% to 0.40%. That’s why gold is down right now.

Remember that gold’s primary investment role is to protect buying power. When bonds offer an interest rate higher than the inflation rate, institutional money flows from gold to bonds.

To reverse this flow, we need to see an uptick in inflation….

Here’s the good news for gold bulls: You can’t have the kind of growth that both the stock and bond markets are anticipating without a serious uptick in inflation.

That’s why I’m still bullish on gold. I think 2017 will be the first year since 2011 that we see a 3%-plus inflation rate. That will keep real returns low (if not 100% negative) and provide a bullish tailwind for gold.

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J.R.: One of the most disruptive catalysts for world markets—something that affects almost every person on Earth—is the global War on Cash.

You’ve been all over that issue this year. What should we expect in the War on Cash in 2017?

Teeka: The War on Cash is coming to America.

My personal belief is that within five years, the government will have mandated that all government benefits be delivered via electronic means. This is already done with SNAP (food stamp) benefits.

Within 10 years (possibly much earlier), I think we’ll have a fully digital equivalent to the U.S. dollar.

This is terrifying to me.

The War on Cash means that we lose private ownership of our own liquid wealth. It means that bank “bail-ins”—where depositors are forced to take a loss on their funds in the bank—will not be voluntary… since without cash, you have little choice but to put your liquid wealth in the bank.

It also means that government bail-ins will not be voluntary. When all cash is digital and under the purview of government, via the banks… Uncle Sam can levy whatever tax he wants on it—at will.

That is the promised future of the War on Cash. And that means the time to prepare is now.

I think everyone should have chaos hedges in place. These include a little gold and some private, decentralized “cryptocurrencies”—like bitcoin.

Bitcoin is the only liquid money that’s 100% private. Assuming you hold it offline and anonymously… no bank, government, or court can ever take it from you… and that is terrifying to governments.

The genie is out of the bottle in the War on Cash… The cashless society is coming. But fortunately, the solution is already here: private cryptocurrencies like bitcoin.

Every day, bitcoin is becoming more and more accepted as a legitimate alternative asset. I think the law of inertia will do the rest. My 2017 target for bitcoin is $1,200. (And if we see a bitcoin exchange-traded fund (ETF) launch in 2017, that figure will prove to be very conservative.)

J.R.: Any parting advice for investors in the new year?

Teeka: Be bullish, but be rational. We are in a massive long-term bull market… but you still have to position-size properly. You still need to have diversification. You must manage risk.

That said, treat every pullback in the S&P 500 as a buying opportunity. Stay bullish, and you will make a lot of money.

J.R.: Thanks for these insights, Big T.

Teeka: Absolutely. And glad holiday tidings to all PBRG subscribers and their families!

Reeves’ Note: Teeka’s dire warnings about the War on Cash don’t have to be all bad news… One cryptocurrency known as “bitcoin 2.0” is taking the world by storm.

Unlike bitcoin, some of the largest banks and corporations on Earth are embracing its technology… and investing billions in it. But Teeka says you can still buy in at prices under $10… unlike bitcoin’s $700-plus price tag. Learn more right here.

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