Nowhere to Hide

June was a cruel month for financial assets, whatever the class.

Most major stock indices were hit, with the more racy emerging market and BRIC favourites clobbered even harder.

But what of the “safe haven” diversifiers, such as bonds, gold or alternatives?

Bonds had a torrid time, whether they were Sovereign, corporate (which we call equity in drag,) index-linked and/or high yield. All were hit.

As we approach the one year anniversary since US Treasury yields “bottomed,” anyone who still believes that Central Bankers control interest rates, we present this one year chart of the “market” rate.



And it’s not just the US, as can be seen for UK and Euro-Zone interest rates of late.



Gold and the companies that mine it were of no help either and have been perhaps the worst asset class to hold this year, with June proving  to be particularly painful.



A few “alternative” strategies fared well, but even here the majority were wrong-footed.

It’s no wonder that today’s financial news wires included a selection of comments such as the following:-

  • Multi-asset funds are struggling because all the investments they have been using as hedges—equities, bonds, gold—are going down together.” Equilibrium Asset Management.
  • We have been very conservative and measured about this sell-off, but there is no place to hide at the moment,” agreed Mona Shah, co-manager of Rathbones’ multi-asset portfolios.
  • Fund sector research for H1 from Fitch Ratings also shows multi-asset funds have recently suffered as equity/bond correlations turn positive in falling markets for the first time in three years….Investment Week.

So just what is happening?

It would appear that, just like 2007, the forces of De-flation are overwhelming the inflation attempts and all asset classes are falling in synch.

If so, then there really is nowhere to hide excepting cash for the more prudent or loaded up with shorts for the brave.



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