>> The F*CKING F*CKS
am guess answer to below question is yes ...
bloomberg.com
Can Gold Keep Beating US Stocks?
The yellow metal has been a better bet in recent years than US stocks. Can that continue?
A lump of shiny rock. Better than yer newfangled passive US tracker funds.
Photographer: Milan Jaros/Bloomberg
By John Stepek
14 March 2025 at 14:49 CET
Where to now for US stocks and gold?This has been quite the week for markets. Let’s take a quick tour (I promise to get back to focusing on investment trusts once a week, it’s just a little hectic news-wise right now).
Firstly, the S&P 500 has had its correction. I said roughly three months ago that US exuberance had reached such a peak that “I’ll be pretty surprised if we don’t at least get a correction (ie a 10% fall) in the next three months, say, barring something even weirder happening.”
Making predictions like that is a mug’s game. I’ll never shy away from giving you my broad view and opinion so you can throw it into your own mental mixer, but I’m as fallible as the next human being and wouldn’t normally be quite this specific.
The reason I did so is because I’m a big believer in the value of contrarian indicators, and the indicators we were getting at the time (the sheer faith in US uber alles) were so blatant that if they’d proved to be false alarms, I’d have had to revisit my whole thesis around market psychology.
Well, thankfully I don’t. As of yesterday’s close, the S&P 500 is down 10.1% from its most recent peak on February 19th. The Nasdaq peaked in mid-December and is now down more than 14%, and the Bloomberg index of the Magnificent 7 — the leading US exceptionalism bubble stocks — is down 20% since it peaked in mid-December.
What’s next? No idea, sorry.
I know, I know, what a cop out. But at this stage, this could still just be a “calm down” moment, rather than the precursor to an epic bear market. Sentiment-wise, we’ve not dropped far enough for “capitulation” — the point of maximum panic — to be a useful concept at this point.
So while the headlines are paying barely any attention to the sell-off (in the UK at least — which makes sense, because this is so far mostly a US phenomenon) I wouldn’t read much into that either way.
On the one hand, tariffs and Donald Trump have introduced enough uncertainty into the mix to force markets to go from pricing in perfection, to pricing in at least some uncertainty. There’s also the risk of recession, which would hit earnings (and thus not necessarily be offset by the excitement over likely interest rate cuts).
On the other hand, there are some very bullish things happening (“bullish” does not always mean “healthy” or “side-effect free”). Europe looks like it’s about to embark on a big stimulus spree led by Germany; the oil price is being remarkably well behaved, which is disinflationary; and some sort of “peace” in Ukraine could boost sentiment.
So it’s by no means clear that the only way is “down” from here. And bear in mind that the “bubbliest” bit of the market is already down by 20% in any case.
Gold Has Done Surprisingly Well
Here’s the only thing I do have reasonably high conviction in: the rotation is in progress, and you’ll likely find better returns in the stuff that has been cheap, than in the stuff that has been expensive. US exceptionalism is probably over.
It’s time for the “rest of the world” to catch up with “the US,’’ and time for value to catch up with growth, and quite possibly time for active managers to have a chance at proving their mettle versus passive funds (you’d still have to choose carefully).
You can close that gap by the US market rising more slowly than everyone else, or falling harder than everyone else. At least some of that work can be done by currencies adjusting, and the US dollar in particular, weakening.
Which takes us to the second noteworthy market event of the week. Gold managed to claw its way above $3,000 an ounce today for the first time. Whether it will close above or below that level is another question, but not an especially important one.
My colleague Simon White, a Bloomberg macro strategist, made a very striking point in a piece on the Bloomberg terminal today. The US stock market, as measured by the S&P 500, hit rock bottom in the last bear market in October 2022 (which was when interest rates were shooting up and the Covid lockdown stock bubble had burst).
Believe it or not, if someone had offered you the choice of buying the Nasdaq or gold at that point, you’d by now be better off if you’d opted for the yellow metal, rather than America’s tech index.
So shocked was I that I checked the figures myself (sorry Simon) and yes, since end-September 2022, measured in US dollars, gold is up 80% precisely and the Nasdaq is up 67%. Make it end-October, and the numbers are 81.7% and 59% respectively. (The numbers for the Mag 7 are 142% and 165%, by contrast).
The obvious difference between gold and “US exceptionalism” is that while gold has certainly been drawing more attention, it’s not yet seeing the levels of exuberance that would make you think we’re at the top. So my gut feeling is that the outperformance can continue for now.
That said, as Simon also points out, hitting a big round number is often a cue for profit-taking. And much as gold is not yet gracing magazine covers, nor is it a “silent bull market” anymore, and this won’t make it any quieter.
None of this matters if you’re a normal “buy and hold” investor. I think it makes sense for most people to have at least a bit of their portfolio in gold (gold specifically, not silver or the miners) and all you should really worry about is making sure the proportion doesn’t get too far out of line with your ideal asset allocation.
For more on gold, listen to Merryn’s recent podcast with Bloomberg’s Jack Ryan and gold (and bitcoin) expert, Charlie Morris of ByteTree. I also suspect it might come up in Merryn’s latest chat with Sebastian Lyon of Troy Asset Management. |
