US equities are now on track for an 11th weekly gain in 12.
It’s a familiar refrain – a broken record. And indeed, that’s the point.
There is no set definition of the term “melt-up”, but as we put it earlier this month, “a rose by any other name”…
As shown in the top pane, the VIX hasn’t returned to levels seen during the halcyon days of the 2017 low vol. bubble, but it’s close. And, as Bloomberg’s Ye Xie wrote Thursday, the S&P’s road to a near 30% gain in 2019 has been remarkably devoid of potholes – a harrowing stretch in May and some “chop” in August notwithstanding.
“As of December 24, the S&P 500 posted positive returns in 146 trading days, the 9th highest number of green days in any year since 1929″, Ye noted. A quick (and I do mean quick, so if you check this yourself and discover an error, you’ll forgive me) run through Excel suggests the following breakdown:
As you can see, the next year’s returns after the years with the most total green days aren’t always positive, but there have been some blockbuster encores.
Of course, what’s remarkable about 2019 is the concurrent rally in bonds, credit and, frankly, everything else.
This is by now well-worn territory, but it bears repeating, especially as gold refuses to roll over despite the unrelenting character of the equity rally and rise in bond yields off the August lows.
This is the best year for carefully-polished paperweights since 2010.
Presumably, gold’s resilience in the face of rising yields has something to do with the idea that with central banks now predisposed to persisting in accommodation for the foreseeable future, 2020 will be a decent year for the yellow metal.
And yet, the Fed is on hold and bond yields have risen fairly sharply off the August recession-scare nadir. Dissecting that shows a breakeven-led selloff in rates, which is obviously more conducive to gains for gold than a situation where real rates are rising sharply. That said, gold can also perform if real rates rise too far, too fast, sapping demand for risk assets and thereby catalyzing a flight to safety.
The point being, there’s always a way to argue the bull case for any asset if you really want to. At the end of the day, that’s the story of 2019. At any given time, investors have found an excuse to like any given asset, although, when measured from September 2018, before the worst quarter for stocks since the crisis, the tale of the tape sounds quite a bit different – only not for gold.
Read more: Cross-Asset Returns Are The Best In Recent Memory, But Beauty Is In The Eye Of The Beholder
If the US debt house of cards collapses, having a few highly polished paper weights may be a good thing. And an awful lot of people don’t have a lot of confidence in the government to prevent a collapse. Me for one.
What good is gold in a real “collapse” scenario? What are you going to do with gold if the government dissolves and anarchy reigns?
This is the ultimate irony of gold: It’s a doomsday hedge that’s only worth something as long as there’s not a REAL doomsday.
It’s a hedge for a “fake news” doomsday.
As I always put it, if there’s ever “a long shear of light and then a series of low concussions” as the “clocks stop at 1:17”, gold is going to be just as worthless as paper money.
If there’s a REAL doomsday there will be no people left to value anything, so it doesn’t matter. If anarchy reigns is there a record of an anarchist who didn’t value gold? He may have confiscated it from the rightful owner (in this case it would be worthless to the owner), but gold doesn’t just disappear and it still maintains a value to someone. You’re right, if there are no people gold is worthless and you can’t eat it to survive if you’re the last man walking. Let’s assume Adam and Eve (or early man) had no use for gold at the start, but at some point the shiny paperweight started getting attention.