Safe Havens Are Surging. What This Means For Stocks

While the U.S. stock market has been trending downwards from December 2018 – present, safe havens (e.g. gold and Yen) have been going up.

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Let’s determine the stock market’s most probable medium term direction by objectively quantifying technical analysis. For reference, here’s the random probability of the U.S. stock market going up on any given day.

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*Probability ≠ certainty. Past performance ≠ future performance. But if you don’t use the past as a guide, you are blindly “guessing” the future.

Safe haven

While the U.S. stock market has gone down, gold has gone up. Some veteran investors and traders see this as a repeat of early-2008, in which stocks fell while gold went up.

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Is this a bearish sign for the U.S. stock market?

Here’s what happened next to the S&P 500 when gold went up more than 7% in the past 3 months while the S&P fell more than -15%

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As you can see, this is not a consistently bearish factor for U.S. stocks on any time frame.

What about for gold? Historically:

  1. Gold can go up during the initial stock market crash because gold makes a “safe haven” play.
  2. But gold falls during the middle part of the stock market’s bear market (e.g. after March 2008, when gold fell).

Here’s what happened next to gold when gold went up more than 7% in the past 3 months while the S&P fell more than -15%

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You can see how gold’s safe haven play doesn’t usually last for a long time.

Another safe haven

The Japanese Yen is often a “safe haven” during times of trouble. (Yen going up = USDJPY going down). There are many reasons for this phenomenon, but that topic is for another day.

Over the past month, the S&P has tanked while the Yen surged (USDJPY tanked).

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