S&P500 vs Gold in 1970sWe’re hearing a lot of talk about how today’s economic environment is similar to the 1970s, and in many ways, that’s true. Back then, we had runaway inflation and monetary shock, just like in the 2020s.
In recent years, we’ve seen two major shocks:
1) First, the inflation spike following the COVID lockdowns and the reckless stimulus packages.
2) Second, the accelerating demand for gold. Central banks started stockpiling gold over a decade ago, but after the U.S. weaponized the dollar in 2022, that trend exploded. It’s not just BRICS nations; countries all over the world are scrambling to increase their gold reserves. No one wants to be left holding the bag when the next currency crisis hits.
If we’re on the verge of Gold regaining its rightful place as the anchor of global financial reserves, the repricing of PreciousMetals is going to be enormous. In fact, it will completely overshadow the returns of stock indices, just like it did in the 1970s. After the Nixon shock, gold skyrocketed, and while the S&P 500 rose in nominal terms, it was obliterated when measured against gold.
Maybe this time the magnitude of this move will be smaller, who knows? What matters is that stock market returns alone are not the ultimate measure of success. What truly counts are the returns relative to real-world-assets.
