With inflation still a “hot” topic in the investment community, it’s a good time to highlight two of the most misunderstood assets in most portfolios: Gold and TIPS. Both are widely regarded as good inflation hedges, but the truth is more nuanced than that. Gold and TIPS typically perform well when real interest rates are falling, i.e., when inflation is rising, and central banks are behind the curve on stopping it. They both perform poorly when real interest rates are rising as they did in the second half of 2022. Lately, however, their positive correlation has broken down, with TIPS selling off on fears of “higher for longer” interest rate policy from the Fed, but Gold surging to new all-time highs. Gold’s sharp rise in March and April also clashes with the resurgence in the U.S. dollar, which normally has an inverse relationship with Gold and other commodities. What could be causing this breakdown? Geopolitical risk is the likeliest culprit. Specifically, investors in “hot spots” moving more of their money out of local currencies and assets and into gold or “safe” U.S. dollar-denominated accounts or investments. Aside from falling real interest rates, Gold’s other ideal environment is general panic. While we aren’t quite there, the rise in market volatility and credit spreads in recent weeks along with concerns about weaker growth in China and turmoil in the Middle East has, for now, created fertile ground for Gold investors.

The Macro Week In Review

Macro Job Board

VP, Multi-Asset Strategies & Solutions @ BlackRock (New York)

The ideal candidate will possess a combination of client skills, technical expertise and strategic vision, and will be driven to deliver outstanding results. The candidate should have a deep understanding of markets, customer needs and the competitive landscape, and be able to convey the differentiated nature of MASS Income’s strategies.

Associate, Global Macro Investment Team @ Blackstone (New York)

The Associate will support the Global Macro team in its mission to deliver investments with high absolute returns in an uncorrelated and liquid manner. Global Macro investments are executed through allocations to third-party hedge funds and opportunistic direct investments.

Global Macro Research Credit Associate @ Goldman Sachs (New York)

The Macro Research team focuses on the intersection between economics and financial markets across a wide class of assets including equities, rates, FX, credit, mortgages and commodities. We are seeking an experienced credit strategist to join the Credit Strategy Research team.

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