...
The Turn of August 2011
One point Hindsight’s team wanted to make was that in many ways the key turning point of the decade came in August of 2011. Up until then, the initial post-crisis stock market gain had stalled, the Federal Reserve had felt forced to resort to a second dose of quantitative easing, and the euro zone had fallen into a severe crisis that was in many ways an extension of the financial implosion of 2008. Gold was rallying, showing deep skepticism of the measures that central banks were taking. At this point, a new wave of Republican representatives in Congress engaged in brinkmanship over whether to raise the federal debt limit amid mounting concern that the U.S. budget deficit would soon become unmanageable, and Standard & Poor’s (now S&P Global Ratings) decided to downgrade U.S. Treasury debt from AAA.
If we follow critics of fiat currencies and denominate the U.S. stock market in gold, rather than in dollars, this was the moment when it collapsed and reached a point of revulsion — and then went on a seven-year rally. (It was also the point when the U.S. stock market started to outstrip the rest of the world.) Commodities prices began to turn down, bringing emerging markets with them, and eventually, in early 2013, gold itself suffered a spectacular sell-off. Runaway inflation, investors now accepted, wasn’t going to happen.
There is something concerning about the S&P 500 priced in gold chart. In dollar terms, the index has made a series of new records this year. In gold terms, it hasn’t. In fact, it’s beginning to look as though it might be settling into a downward trend. It also looked like this in 2016, when the Trump election revived sentiment. But as the decade ends, the story of the U.S. stock market in gold terms is disquieting. As ever, though, Hindsight Capital’s managers wouldn’t tell me anything about the 2020s.
No comments:
Post a Comment