Good as Gold? | 26 July 2020

Weekly Update

With a tight yield environment, relaxed monetary policy, and record ETF inflows—$40B for YTD 2020—gold rapidly gains ground in asset allocation. As the precious metal approaches an all-time high of $1,900 per oz, gold may be an anchor for advisors seeking to protect clients from churning waves of credit risk and the rocky shores of low yields. 

Although not traditionally a part of a 60/40 portfolio, gold has been a safe haven, rewarding investors with a total return of 25% YTD while posting records in most G-10 economies. An extended period of lower interest rates and less-than-stellar corporate earnings will boost its luster and attract advisors and investors alike. 

To help navigate the myriad of choices for this distinct market exposure, let’s take a look at two gold ETFs from VanEck. Here’s our analysis on GDX, and here we have GDXJ.

When compared head-to-head with peer funds, the recommended options offer benefits like reduced risk, lower fund expenses, and improved available capital. But most of all, the return opportunity provided by GDX and GDXJ is unmatched for the long-term investor.

What We’re Reading

• Impact of COVID-19 on the Gold Supply Chain– Excellent infographic on how the gold supply chain has been impacted by COVID-19.
• Capturing Credit Opportunities in Times of Crisis– Blog post from the Common Fund on some of the better fixed income opportunities in today’s market.
• Global Wealth Management Report 2020 – Oliver Wyman– Jointly prepared paper from Morgan Stanley and Oliver Wyman that lays out the prospects for the global wealth management space.
• Is There a Retirement Crisis ?– CFA publication which provides excellent commentary on the current debate on whether there is a retirement crisis.
• Vanguard Comes to the Defense of the 60/40 Portfolio as it Forecasts Returns for the Next Decade – Vanguard is the first of several firms to recently defend the validity of the 60/40 portfolio in today’s market environment.
• Fiscal Monetary Policies Inflating Bubbles– Blog post from renowned Ed Yardeni, who discusses how the monetary support is likely inflating a market bubble.
• Passive Funds Batter Active Products During 2020 ‘Wild Ride’– [Paywall] FT article which details how passive funds continue their dominance over active funds in the volatile first part of 2020.
• Why Everyone’s Trading ? – Blog from Michael Batnick of RitHolz Wealth on apparent irrational trading by retail investors.
• Financial Contraptions– Interesting blog from Investor Amnesia which lays out how the new SPAC fund filed by hedge fund investor, Bill Ackman is not a new concept.

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Have a great week!

Best,

John DiBenedetto and the Portformer Team