Monday trading has seen another bloodbath emerge on global stock markets.
As if coronavirus panic wasn’t enough to rock investor confidence, the breakdown of relations across the OPEC+ group — and fears that waves of oil from Saudi and Russian wells are about to hit the market — has provided a sucker punch to market sentiment.
As I type the FTSE 100 is down an eye-watering 450 points from Friday’s close. It’s off the three-and-a-half-year troughs below 6,000 points struck earlier his morning, sure. But clearly more hefty falls could be in store as market sentiment deteriorates.
The Sell-Off Worsens
It pays in volatile times like these to get exposure to some good old-fashioned safe haven assets.Today In: Markets
What are the best ones to get hold of today, though? Buying into some classic rush-to-safety stocks is one good option. Sectors like healthcare, defence, and utilities are usually popular assets in times like these. Their earnings tend to be quite resilient irrespective of social, economic and political upheaval. We all still need our medicine cupboard stocked, the lights switched on and our fridges topped up, even though the coronavirus continues to spread across the globe. Right?
That may be true, but the scale of seller panic means that even these shares are being sold off hastily today. FTSE 100 shares like Hikma Pharmaceuticals, United Utilities and BAE Systems are also sinking today.
Some commodities, despite their more cyclical nature, have also been known to attract waves of buying in panicked periods like now. Take copper, for example, a metal whose essential role in a massive range of products keeps demand ticking over. Even prices here are sinking in start-of-week business, though. The red metal was recently 3% lower and dealing below $5,500 per tonne again.
At the moment, then, it may pay to lock your money up in only the safest of safe havens. How about cash? Well storing your money in the mattress obviously won’t give you any sort of return at all. And the paltry interest returns on most cash accounts means that putting your capital in something like a Cash ISA isn’t a much better idea, either. The best rates on offer here still sit below 1.4%.
What about government bonds instead? They’re definitely one of the most secure options, though returns here are negligible today as frightened investors pile in. The yields have even turned negative on UK, US and German bonds, meaning that you essentially have to pay to keep your money protected.
Go For Gold?
The ultimate safe-haven asset in these troubled times could be gold. Its sentimental qualities are eternal, while the hard currency’s role as a hedge against inflation makes it a particularly-attractive asset to buy today. Central banks have already been loosening monetary policy like crazy to support global growth over the past year. More stimulus is coming down the line following the Fed’s interest cuts of last week to offset the impact of the coronavirus, too.
Gold has recovered from the heavy, margin-call-related selling of last week. It’s currently up 2% on Monday and chugging back towards recent seven-year peaks above $1,690 per ounce. New record highs could be just around the corner, and so buying shares in gold producing stocks or in a metal-backed fund could prove to be a very good idea right now.
by Royston Wild for Forbes