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ERA Limited in Hong Kong believes in rolling with the tough times

With December's monster sell-off in hindsight, many investors are looking for a potential shelter to hide when the market goes wild again. U.S. Treasuries, Japanese yen and gold could be their best safe havens, says Danial Wu of ERA Limited
Traditionally, all three assets have served investors as shelters when risk buffets the markets, given their relative stability and liquidity. Recently, we ran 1 thousand simulations of various portfolio weightings, and found that short-dated Treasuries are a clear winner with the highest risk-return ratios and hit rates when equity volatility rises. The Japanese yen is in second place, and gold gets the bronze medal.

Treasuries will work even when higher yields are the catalyst for a stock market sell-off.
"Although the correlation between U.S. bonds and equities can rise during bond-driven sell-offs, any 'flight to quality' tends to quickly push the correlation back into the negative territory.

Yen's long-time safe-haven status is secured based on our analysis. When global growth slowdown intensifies, the currency should perform well as it has a large international investment base, Wu said.

"If we were to see a period of repatriation across global financial markets, the likely home bias of Japanese investors could dominate the outflows from foreign investors in Japan.

Gold came behind Treasuries and yen for its lower risk-return ratios. Its safe-haven quality was "exacerbated" by the dollar weakness during the last financial cri ...

News Release: ERA Limited in Hong Kong believes in rolling with the tough times
Submitted on: February 07, 2019 01:45:31 AM
Submitted by: Nick Cole
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