As the steam comes out of the equity bubble, I expect safe haven assets to outperform. Cash, fixed income, inflation-linked bonds and precious metals should offer protection for investors during an equity bear market. Let’s look at gold as an example. Gold tends to trade inversely to equities - not always, but often - as it is considered a safe haven asset. It is clear from the chart below, which shows the relative performance of US equities to gold, that US equities outperformed gold pretty consistently from 1990 to 2000. Then it was gold’s turn. Despite the rally in equities from 2003-2007, gold consistently beat the stock market for a decade from 2000 until 2011, when gold surged to a bull market top at $1,923/ounce. US equities regained the upper hand from 2011 until 2018 but now the trend is reversing again in favour of bullion. It’s time for the barbarous relic to shine once again.
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