May 07 2021

Assets You Want to Hold

At least for this week, the three assets that people care most about were gold, commodities, and of course crypto. Bullish Google search faded for everything else but these 3 assets.

Granted, commodities have been hot for a while. The post-covid rebirth has kick-started back to life the economic activity and dragged metal, crop, and energy prices up in their wake. Crude, copper, steel, and soybeans are up anywhere between 20% and 30% year-to-date.

Such rapid increase in commodity prices is typical of upcycles. The breadth of the price recovery goes far beyond that though, as a factor of persisting supply chain bottlenecks and the spur of the infrastructure plans. In all reality, such stratospheric high cannot be maintained for long, which doesn’t prevent investors to see a reason for inflation to shoot up.

Ah inflation, the sempiternal Arlesienne that everybody talks about but one never sees. Yes, there might be some, and this would be good. Would there be too much? According to the Fed, who spend their day and night thinking about these things, very unlikely. In that case, rates should probably stay close to their very accommodative level. I’d say the US 10-year could be range-bound between 1.7% and 2.5%. Not the end of the world.

Nevertheless, some want to read in these tea leaves the beginning of the great tapering, meaning higher rates and inflation. Accordingly, the asset return expectations reprice and equities and bonds go side-ways. In such uncertain mind-boggling environment, you want to hold assets that de-correlate with rates and inflation i.e. gold and crypto.

Contrary to gold, crypto has gained a fantastic amount of traction lately, from under-dog to rising star. Talking to asset managers and custodians, they are seeing record levels of interests for the asset class, yes this is an asset class, which is prompting them to find ways to unlock access to it. We are on the eve of new beginnings. As adoption grows wider, ETH and protocols are setting the future path for the digital economy. Get ready.

360 Advisory – Markets