Inflation will be a game changer

TheMarketNZZ/Christopher Gisiger interviews JIm Bianco

“The big thing I would emphasize is that the traditional stock-bond relationship is changing. That’s a fancy way of saying a 60/40 portfolio is not going to work as well as people think. You don’t have a natural hedge anymore when you put 60% in equities and 40% in bonds. At this point, the stock market really has to stumble in a big way, and you are not going to get as much help from the bond market. That’s why portfolio construction between bonds and stocks needs to be rethought. Gold can be a part of the solution, but gold is still a very uncorrelated asset. The negatively correlated asset for stocks used to be bonds, and there really isn’t any other one.”

USAGOLD note:  Even if gold were only “part of the solution” for professional money managers – a fraction of the solution – it could add up to a major influx of capital into the ultra-thin gold market (as compared to stocks or bonds). It won’t be a 40% shift in portfolios to gold, but even a 5% allocation would likely impact the gold price significantly.

Repost from 10/10/2020

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