Displaying items by tag: safe haven

(New York)

There are a lot of safe havens that people are trying to use to defend against market turbulence right now. The two that immediately come to mind are Treasury bonds and gold. However, those are clearly overbought, so where is another good place? Some REITs are offering very attractive defensive profiles. REITs generally do well during periods of falling rates as their yields become ever more attractive. They were beat up during the rate rises of 2018, but have surged this year, up 20%. What is very compelling, though, is that despite the big rise, REIT valuations are just now returning to their average historical valuations. Speaking about the nature of REIT cash flows, especially regarding long-term leases, “The cash flow is locked in, and that’s just not the case for most of the stock market”, says and Eaton Vance Real Estate fund manager.

FINSUM: Certain REITs seem like they could be a very good buy right now given that they are not overpriced and have falling rates as a tailwind.

(New York)

With markets at elevated levels, investors may be looking for a safety stock. How about one outside the usual suspects? Here is a suggestion—Goldman Sachs. Yes, we know, that sounds odd considering that investment banks tend to have wildly unpredictable earnings because of fluctuations in trading revenue. However, the bank has just made a big dividend boost from 85 cents to $1.25 per share, which is likely to significantly elevate its status with dividend-seeking investors. Goldman is also diversifying away from its highest risk businesses and smoothing out its revenue by focusing on a more steady Main Street-oriented suite of products.

FINSUM: We think the jury is still out on Goldman’s success at retail banking products. That said, the prevailing narrative about its transformation and the dividend boost will help it be less volatile.

(New York)

Gold has been doing well, and it is no surprise as to why. Both the economy and the trade war are having a bullish effect on gold, which has responded in line with investor fears. Additionally, worries over tensions in the Middle East and the protests in Hong Kong have offered a short-term boost to prices. Stephen Innes, managing partner at Vanguard Markets, says “Today’s price action suggests the market is not long enough gold, especially by historical standards, for this elevated level risk as investors have remained far too complacent to mounting risk in Hong Kong and the smolder explosive political powder keg in the Middle East”.

FINSUM: Gold has been in a bear market for so long that it had many times seemed to have lost its role in a portfolio. However, it appears to once again be finding its footing.

(New York)

Stock markets are taking a pounding right now. Where should investors turn? One’s first instinct is probably to look for ten-year Treasuries. However, that safe haven may have finally worn itself out given the current rising rate paradigm. So where should investors turn? Look at short-term (two years and under) securities, both sovereign and corporate. The two-year Treasury yield is now 2.82%, and funds at the very short end of the curve have positive returns for the year even though the rest of fixed income has had a tough time.

FINSUM: Short-term bonds look very favorable right now. Yields are strong and they have little rate sensitivity. So long as one avoids too much credit risk, they look like a good safe haven.

(New York)

It might come as no surprise, but that does not mean it isn’t noteworthy. Alongside the big surge in volatility this month, gold has risen considerably. The precious metal has risen 3.2% this month to $1,230 per ounce, no small feat considering that stocks initially started falling because of worries about rising rates. Gold has been shunned for most of the year as stocks rose, but is now being sought out as a haven from volatility. An analyst at UBS summarized the situation this way, saying “Price action in the past couple of weeks has shown signs that gold is slowly reasserting its role as a safe haven … In the near term, a pullback in the dollar, weakness in equities and the potential for a soft patch in US data would be upside catalysts for gold”.

FINSUM: Gold rising when the Dollar is strong and rates are being hiked is quite noteworthy. It will be interesting to see how fast gold might fall if this correction in stocks reverses.