Interview
Why gold, bonds and the dollar are underwhelming investors | The Economist
- Global equity markets are at or near all-time highs despite the Iran conflict triggering a historic oil supply shock.
- Investors are currently prioritizing optimism regarding artificial intelligence-driven economic growth over immediate energy market disruptions.
- Market resilience following past shocks (COVID, Russia-Ukraine, US banking crisis) has created a "muscle memory" where investors avoid selling during initial dips, fearing missed rebounds.
- There is a substantive disagreement regarding this resilience: the crisis may be unique due to permanent oil output destruction that will not be easily replaced even if the Strait of Hormuz reopens.
- Gold, traditionally a primary safe haven, fell alongside stocks at the onset of the war, behaving as a speculative asset rather than a hedge after rising significantly over the past five years.
- The US dollar failed to act as a safe haven during recent panic events (specifically the "Liberation Day" tariff shock), failing to appreciate when other assets plunged and remaining relatively flat during the current conflict.
- Government bonds face structural headwinds from expected inflation driven by rising oil prices and concerns over the unsustainable fiscal paths of rich-world governments.
- With traditional safe havens (gold, dollar, bonds) appearing compromised, a significant portion of investors are viewing stocks as the only viable asset class.
- Current stock market gains appear driven by a lack of alternatives rather than fundamental expectations of ballooning corporate profits, creating a potential risk of a bubble and subsequent crash.