Safe Haven Assets & a Victory Lap

About three weeks ago I published my investment outlook for stocks, saying the possible reward is not worth the risk. I also mentioned that gold and especially silver would be much better investments. What has happened since then? Stocks have fluctuated wildly with no reward while gold and especially silver have skyrocketed.

The people of Britain voted to leave the European Union. This wreaked havoc on the stock market for about three days – the S&P 500 dropped over 5.5%. While it has recovered since (as I predicted), the stock market is still moving sideways, not up. But what happened with gold and silver? Gold rose over 5% since my blog posts, and silver skyrocketed 15%! Why did this happen?

The rise in gold and silver is due to increased demand for safe haven assets. A safe haven asset is any investment that people run to when world events cause uncertainty or fear. If the stock market plummets, investors run to safe havens. If a major terrorist attack occurs, investors run to safe havens. If the world’s second largest economy (the European Union) looks like it’s falling apart, investors run to safe havens. Investors often refer to this phenomena as a flight to safety. Safe havens include US Treasury bonds and precious metals. While gold and silver would still be phenomenal investments even if Britain decided to remain in the EU, the decision to leave certainly helped to speed up gold and silver’s rise.

What about the stocks that I recommended – those consumer staples, healthcare companies, and utilities? The S&P has risen 1% total and experienced a 5.5% drop following Brexit. The stocks that I recommended, however, have risen a total of 6% and actually rose about 1% following Brexit.

All in all, since I wrote my blog posts about stocks three weeks ago, my personal portfolio rose 30% while the S&P returned only 1%. Additionally, I never experienced the scary fallout in the stock market following Brexit. (If you’re wondering how my portfolio returned 30%, I own a 3X leveraged silver fund – this means that it returns three times whatever silver does. Silver went up 15%; my fund went up 45%).

My Portfolio

Although they have risen from their prior lows, gold and silver are still your best investments by far at this time. If you want to buy stocks, stick with consumer staples, utilities, and healthcare. Stocks like Johnson & Johnson (JNJ), Exxon Mobil (XOM), Southern Company (SO), Walmart (WMT), Kroger (KR), and Mondelez (MDLZ) can be expected to outperform the stock market as a whole. Short term US Treasuries would also be a good bet. In short, invest in safe haven assets.


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