With Global Growth Slowing, Investors Fall Back on Familiar Strategies

Image Credit: iStock, Rusian Lytvyn

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War in Ukraine. COVID lockdowns in China. Soaring inflation. These omnipresent realities are beginning to put a dent in the collective enthusiasm of leading economists.

In turn, investors are banking on familiar strategies for navigating times of turmoil: leaning into safe assets, while avoiding riskier bets. Gold and bitcoin tell the story.

New School vs Gold School

Blaming Russia’s invasion of Ukraine, on Monday the World Bank slashed its global growth forecast for the remainder of the year from 4.1% to 3.2%. Meanwhile, in China, even good news is tempered by skepticism. Barclays and JPMorgan both reduced their growth forecasts for the nation this year, even after China’s National Bureau of Statistics announced better than expected GDP figures in the first quarter on Monday (up 4.8% year-over-year).

Amid the gloomy economic projections — and the consequently slipping US stock market — investors are pushing gold (the safe-haven option, bar none, for jitter-bitten investors) and bitcoin (still a somewhat risky new asset) to respective peaks and valleys:

  • The price of gold inched up by some 0.8% to $1,989 a troy ounce, its highest point in five weeks. The increase indicates a strong hedge against inflation, though it remains a slight surprise given the dollar’s current strength and 10-year US Treasury yields shooting to their highest levels in three years — two factors that typically depress gold’s value.
  • Bitcoin, meanwhile, is slumping to its lowest point in over a month. The premier cryptocurrency fell more than 4% to around $38,500 on Monday, while the global crypto market dropped roughly in proportion to that number, Bloomberg reports.

With the blue-chip S&P 500 down around 1.5% in the past month, and roughly 8% year-to-date, it’s unsurprising that investors are turning to safe assets. And while bitcoin bulls have long touted the digital coin as the new gold of the internet age, mainstream investors sure aren’t treating it as such.