This is Brad Barrie, Chief Investment Officer and Portfolio Manager with Dynamic Wealth Group. Welcome to this market and economic update. The stock market rally has hit a snag as investors debate the timing of the Fed’s first rate cut this cycle. At the same time, many asset classes have performed well this year, capturing the attention of investors. This includes gold, Bitcoin, and large tech stocks. In the next few minutes, we’ll explore how investors should think about these asset classes as a component of a larger portfolio. As always, it’s important to not lose sight of the big picture.
First, gold has reached a new all-time high of around $2,185 per ounce based on the price of futures contracts. Prices of any investment like gold or stocks, can be impacted by many things. Gold has rallied sharply, possibly as investors anticipate that the Fed will cut rates later this year.
Rate cuts can be good for the prices of gold and other commodities because lower interest rates on bonds and cash make hard assets more attractive as a store of value.
While gold has rallied significantly since the bottom in 2022, the S&P 500 has actually performed better over that period. More importantly, though, this chart helps to illustrate non-correlation.
Showing that there are times when both stocks & gold can increase, but there are also periods of time when they move in opposite directions. Including non-correlated asset classes and strategies should be a goal of every diversified portfolio.
Despite stocks’ longer-term performance, this is not to say that they are always better. All assets can play a role in a well-balanced portfolio. This has been the case despite investor worries over fiscal and monetary discipline, geopolitical concerns, and more. Similar to gold, Bitcoin has also made significant gains this year. This is also partly due to possible Fed rate cuts which increases investor interest in assets that can be a store of value.
Bitcoin has also benefited from two other factors. The approval of spot Bitcoin ETFs in January has led to flows into these funds. Additionally, there is something known as a Bitcoin “halving” which occurs once every four years that might reduce the amount of new Bitcoin mined in the future.
Whatever the reasons, it’s clear from this chart that Bitcoin and other cryptocurrencies are extremely volatile. So, like gold, the question is not just whether to invest in an asset class, but how it relates to the rest of a portfolio, an investors goals, time frame, and most certainly risk tolerance. While digital assets are still new, it’s clear that they are volatile and unlike gold, have had a high correlation with other risk assets, including stocks.
So, what matters is balancing these assets in order to achieving an attractive risk/reward ratio that fits an investor’s financial goal. The same is true for the stock market as well. While attention has been on large cap technology stocks over the past year, this chart shows that many other sectors have also performed well.
This includes financials, health care and industrials. The strong economy and falling inflation have led to a positive environment for many companies, not just those related to technology and artificial intelligence.
Thus, it’s important to stay diversified across asset classes and sectors, no matter how tempting it is to focus just on what has performed well in recent months. Just like driving a car, one should spend most of their time looking forward, and not in the rear-view mirror. Just because something has performed well in the past, does not mean it will continue to do so. As I have said in the past, “it’s the bus you don’t see that hits you” so predicting the future isn’t the answer. At Dynamic Wealth Group we work with Financial Advisors to help them build & maintain properly diversified portfolios, of non-correlated asset class, strategies & approaches, that can help to provide a smoother investing experience.
We hope you found these insights valuable. If you are a financial advisor and would like more information on our Multi-Dimensional Approach, please visit our website DynamicWG.com, or reach out directly by emailing us at: Info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor. Until next time, take care of everyone, and make smart financial decisions.
Clearnomics and Dynamic Wealth Group, LLC are not affiliated entities. No part of this should be taken as investment advice. Consult your financial advisor for specific investment recommendations tailored to your specific situation.
Dynamic Wealth Group (“Dynamic”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Dynamic by the SEC, nor does it indicate that Dynamic has attained a particular level of skill or ability. This material prepared by Dynamic is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Dynamic are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Dynamic, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.
Dynamic does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice. Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Past performance is no guarantee of future results. Actual returns may be lower.
< Commentary
Gold, Bitcoin, and Market Breadth
Gold, Bitcoin, and Market Breadth
3-11-2024
This is Brad Barrie, Chief Investment Officer and Portfolio Manager with Dynamic Wealth Group. Welcome to this market and economic update. The stock market rally has hit a snag as investors debate the timing of the Fed’s first rate cut this cycle. At the same time, many asset classes have performed well this year, capturing the attention of investors. This includes gold, Bitcoin, and large tech stocks.
In the next few minutes, we’ll explore how investors should think about these asset classes as a component of a larger portfolio. As always, it’s important to not lose sight of the big picture.
First, gold has reached a new all-time high of around $2,185 per ounce based on the price of futures contracts. Prices of any investment like gold or stocks, can be impacted by many things. Gold has rallied sharply, possibly as investors anticipate that the Fed will cut rates later this year.
Rate cuts can be good for the prices of gold and other commodities because lower interest rates on bonds and cash make hard assets more attractive as a store of value.
While gold has rallied significantly since the bottom in 2022, the S&P 500 has actually performed better over that period. More importantly, though, this chart helps to illustrate non-correlation.
Showing that there are times when both stocks & gold can increase, but there are also periods of time when they move in opposite directions. Including non-correlated asset classes and strategies should be a goal of every diversified portfolio.
Despite stocks’ longer-term performance, this is not to say that they are always better. All assets can play a role in a well-balanced portfolio. This has been the case despite investor worries over fiscal and monetary discipline, geopolitical concerns, and more.
Similar to gold, Bitcoin has also made significant gains this year. This is also partly due to possible Fed rate cuts which increases investor interest in assets that can be a store of value.
Bitcoin has also benefited from two other factors. The approval of spot Bitcoin ETFs in January has led to flows into these funds. Additionally, there is something known as a Bitcoin “halving” which occurs once every four years that might reduce the amount of new Bitcoin mined in the future.
Whatever the reasons, it’s clear from this chart that Bitcoin and other cryptocurrencies are extremely volatile. So, like gold, the question is not just whether to invest in an asset class, but how it relates to the rest of a portfolio, an investors goals, time frame, and most certainly risk tolerance. While digital assets are still new, it’s clear that they are volatile and unlike gold, have had a high correlation with other risk assets, including stocks.
So, what matters is balancing these assets in order to achieving an attractive risk/reward ratio that fits an investor’s financial goal.
The same is true for the stock market as well. While attention has been on large cap technology stocks over the past year, this chart shows that many other sectors have also performed well.
This includes financials, health care and industrials. The strong economy and falling inflation have led to a positive environment for many companies, not just those related to technology and artificial intelligence.
Thus, it’s important to stay diversified across asset classes and sectors, no matter how tempting it is to focus just on what has performed well in recent months. Just like driving a car, one should spend most of their time looking forward, and not in the rear-view mirror. Just because something has performed well in the past, does not mean it will continue to do so. As I have said in the past, “it’s the bus you don’t see that hits you” so predicting the future isn’t the answer. At Dynamic Wealth Group we work with Financial Advisors to help them build & maintain properly diversified portfolios, of non-correlated asset class, strategies & approaches, that can help to provide a smoother investing experience.
We hope you found these insights valuable. If you are a financial advisor and would like more information on our Multi-Dimensional Approach, please visit our website DynamicWG.com, or reach out directly by emailing us at: Info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor. Until next time, take care of everyone, and make smart financial decisions.
Please also visit our previous commentary on the SEC’s approval of Bitcoin ETF.
Disclaimer:
Clearnomics and Dynamic Wealth Group, LLC are not affiliated entities. No part of this should be taken as investment advice. Consult your financial advisor for specific investment recommendations tailored to your specific situation.
Dynamic Wealth Group (“Dynamic”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Dynamic by the SEC, nor does it indicate that Dynamic has attained a particular level of skill or ability. This material prepared by Dynamic is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Dynamic are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Dynamic, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.
Dynamic does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Past performance is no guarantee of future results. Actual returns may be lower.