Macroscope | US Treasuries, Japanese yen, gold – are any still safe havens?
- Hawkish central banks and the possibility of extended lockdowns in Chinese cities have adversely affected sentiment
- The rise in Treasury yields, the yen’s depreciation and the erosion of gold’s value by inflation means investors need to consider their options carefully
The market’s shifts between risk-on and risk-off environments have been abrupt this year. The growing chorus of central bank hawks in the United States and Europe are rattling investors, as they digest the effects of potential policy errors on equity markets and the economy.
It’s worth noting that all storms eventually pass, as will the negative sentiment pervading global equity markets. The economic support from healthy household and corporate balance sheets should not be overlooked either, while low unemployment rates in many parts of the world are keeping recession risks at bay.
However, the economic outlook has deteriorated since the start of the year, and economic activity can be expected to moderate and the global economy expand at a more trend-like pace.
Gold has been more successful at offsetting risks, increasing by around US$100 per ounce since the start of the year. However, as an asset that produces no income and has its real value eroded by inflation, gold’s performance is somewhat tarnished.
