Dollar, bonds or gold – which is the safest haven to hold?
The choice is complicated, as traditional refuges behave unpredictably.
Turmoil in the Middle East has sent investors scrambling for safety once more, reigniting a debate over which assets truly offer protection in times of stress.
The choice is complicated, as traditional refuges behave unpredictably. Gold has swung sharply and the dollar - which has been out of favour in the past year - has bounced back.
Here is a look at how some of the favourites stack up:
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Greenback passes a test
The dollar has arguably performed the best among safe havens this week.
The dollar index, which tracks the US currency against six others, is up 1.5%. The dollar has even gained against the Swiss franc and yen, which both typically outperform at times of market stress.
That is particularly notable as the dollar weakened when stocks fell following last April's tariff turmoil, raising question marks about its safe-haven status.
It is short-term dollar cash that is in demand, not other dollar assets, flow data shows.
Of course, the US is a net energy exporter, so a crisis like this that sends benchmark Brent crude oil above $80 a barrel should help.
"The dollar has some safe-haven characteristics, but it is context specific," said Morgan Stanley head of FX strategy James Lord.
And that will not always be the case, he said, because US policy uncertainty has eroded the currency's safe-haven characteristics.
No safety in sovereigns
Government bonds have struggled to attract the kind of safe-haven flows typically seen during geopolitical shocks, with investors trading them primarily on the inflation outlook rather than on their defensive qualities.
Fiscal considerations, such as Germany's relaxation of its debt brake, to broader worries about heavier government borrowing have also outweighed the haven appeal.
Yields on Germany's 10-year Bunds, the euro zone benchmark, have jumped 14 basis points so far this week.
"Germany is a flight-to-quality kind of investment, but you don't really want to be playing around at the long end of the bull market if they're raising more debt," Bryn Jones, head of fixed income for Rathbones, said.
Gold's safe-haven street cred is solid
Gold's safe-haven credibility is strong, judging by its 240% surge so far this decade.
Yes, it is proving volatile too, falling sharply on Tuesday. Analysts reckon that was partly because investors sold top-performing assets to make up for losses elsewhere, as concern about the Middle East conflict whacked market sentiment.
But this should not detract from gold's safe-haven status, which remains intact, given worries about inflation, geopolitics and high debt, they add.
State Street said gold remained under-owned in portfolio terms, with gold exchange-traded fund allocations still under 1% of global fund assets, below the 5-10% range it cites as a strategic allocation range.
"As a base case, $6,000 is more likely than $4,000 this year, and we're just above $5,000," said Aakash Doshi, head of gold strategy at State Street Investment Management. "That's a clear point to make."
Classic FX refuges put to the test
The Swiss franc and the Japanese yen, long regarded as currency havens, have slipped 1.2% and 0.8% so far this week.
"The one that looks relatively attractive from a valuation perspective is still probably the Japanese yen. It stands out to me as one that can provide protection in this environment," said Justin Onuekwusi, chief investment officer at St James's Place.
But political uncertainty has added a layer of risk to the outlook for the yen after reports that Japanese Prime Minister Sanae Takaichi has voiced reservations about further rate hikes.
Meanwhile, analysts caution that the franc's upside may be constrained, given the Swiss National Bank's warning that it stands ready to step in to curb excessive strength.
"Elevated SNB intervention risks would likely diminish its haven attributes during the current shock," Goldman Sachs strategist Teresa Alves said.
Defensive stocks are not helping
Stocks often perform poorly at times of market stress, though some so-called defensive sectors, for example, utilities or consumer staples, typically see smaller declines.
But that has not happened this time.
The S&P utilities and consumer staples sectors are down 1% and 2.8%, respectively, this week, while the S&P 500 is flat. In Europe, utilities are down 3% and consumer staples are down 4.5% compared to a 3% fall for the STOXX 600.
This is partly because they had already been doing well. One big investment theme, until the war began at least, was buying "hard assets" like infrastructure and industrials.
More broadly, defensive value stocks have been outperforming growth stocks, and some have done very well.
"When you're investing in the classically defensive sectors at the level of current interest rates, you have to be much more disciplined about relative prices," said James Bristow, portfolio manager at Templeton Global Investments.
"I own shares in Pepsi, for example, ... [it] isn't the highest quality company, but the starting point was very low ... that's a different margin of safety from if you're buying shares in, say, Nestle."
