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Must-know: Safe-haven assets

Russ Koesterich, CFA of BlackRock

Overview: Safe-haven assets (Part 1 of 2)

For investors who are worried about a correction, Russ provides a look at which traditional safe-haven assets tend to perform best during times of uncertainty.

Given stocks’ stellar rise over the last year, investors worried about a correction are asking me where they can park their money.

While I still believe that stocks aren’t yet in bubble territory and can still push ahead this year, there’s always the risk that an unknown exogenous shock could send markets tumbling.


Market Realist – Markets respond to exogenous shocks and geopolitical risk. This is particularly concerning in the current uncertain climate. With political unrest in Ukraine and Russia, the Israel crisis, and the Algiers and Malaysia airline tragedies, markets are experiencing a period of heightened volatility. The S&P 500—tracked by SPDR S&P 500 Fund (SPY)—moved by more than 1% on July 17, 2014, for the first time since April in response to the Malaysia Airlines crash. The CBOE Volatility Index (VXX) increased by a remarkable 32% to reach 14.54—its biggest one-day increase since April, 2013. The previous graph shows the fluctuations in the S&P 500—as tracked by iShares Core S&P 500 ETF (IVV)—from April to July. The graph shows the percentage change was the maximum on July 17, 2014.

Assets traditionally considered as safe havens are already experiencing the effects of geopolitical risk. While gold (IAU) prices increased by 1.5%, silver (SLV) increased 2.2% in response to the Malaysia Airlines tragedy.

So to help investors who are concerned about such a scenario and want to allocate to safe havens to prepare, here’s a look at how various traditional safe-haven investments stack up in terms of post-market shock performance.

Contrary to popular belief, gold (IAU) may not be the best performing safe-haven option, at least based on an analysis by David Wang, a researcher on my Investment Strategy Group team.

Market Realist – Continue reading the next part of the series to find out which safe-haven assets are good performers in periods of high financial stress.

Continue to Part 2

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