Conflict upon conflict. Ukraine, Gaza, Iran bombarding Israel. Nevertheless, financial markets do not seem particularly affected. Investors have better things to do than fear war, it seems. How is that possible? APG's chief economist Thijs Knaap answered this question yesterday in the investor panel on BNR Nieuwsradio.
“To protect yourself against geopolitical risks, many investors engage in hedging, which is no more or less than covering the financial risk of an investment with another investment”, Knaap explains.
Classic hedges for investors provide a safe haven in times of increased market turbulence. In the past, for example, US government bonds fulfilled that role. “But the strange thing is that those bonds are not doing so well at the moment, even though there is plenty going on. Gold, on the other hand, has risen in price by 25 percent since the end of September.”
Rising inflation
According to Knaap, this may be a result of increasing concerns about rising inflation. “When money becomes less valuable, the demand for gold often increases. But gold is also a hedge against instability. If you no longer trust the government, or you don't really know what is happening, gold can stabilize your portfolio.”
It is striking that China has been one of the largest buyers of gold in recent times. According to Knaap, a consequence of geopolitical developments. “If you have a fight with the US government, you better not have your money in US treasuries. We have seen that these assets can also be frozen. Investors' search for another safe asset and that is gold.”
During the investor panel on BNR Nieuwsradio, Thijs Knaap also discussed the earnings season, the IPO of investment company CVC Capital Partners and the partnership that APG has entered into with GPIF, the Japanese government pension fund and also the largest pension fund in the world. Listen to the broadcast here (in Dutch).