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With just one week left until the US presidential election, uncertainty is rising. Investors are wondering how to position their funds against the possibility of significant volatility and market changes.
While some hedge funds are making bold moves with so-called “Trump trades,” we at US Global Investors see things differently.
In fact, I’m sharing billionaire hedge fund manager Paul Tudor Jones’ recent outlook on gold and Bitcoin (which confirms what I’ve been writing about for years). Like him, we now support alternative assets as a smart strategy going forward.
We’re not betting on stocks or the economy. I believe that whoever wins the White House next month will do well in the long run. Nevertheless, the writing is clearly on the wall: ballooning US debt and geopolitical tensions all point to the need for strong hedging.
The growing US debt problem
You won’t be surprised to hear that the U.S. debt situation is spiraling out of control. Just 25 years ago, the national debt was just under 60% of GDP. Today, that percentage has doubled to 120%.
Paul Tudor Jones, founder and CEO of Tudor Investment Corporation, said this puts the United States in a precarious position and calls for serious action to rein in government spending. Unless action is taken, the company is in an unsustainable position in the long term.
We all know that politicians have a knack for promising more spending (for Democrats) or lower taxes (for Republicans) to satisfy voters. It’s easy to see why Jones is concerned that either approach will only make the debt problem worse. As he pointed out, the United States “will soon go bankrupt unless we get serious about addressing our spending problems.”
It’s not just a dramatic soundbite, it’s a reality check. The federal deficit in 2024 will exceed $1.8 trillion, an 8% increase from the previous year. Meanwhile, the debt burden is rapidly approaching $36 trillion and shows no signs of easing.
US deficit spending continues to spiral out of control
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All roads lead to inflation
If governments continue to print money to finance their spending, the inevitable result is inflation. And during times of inflation, the purchasing power of traditional assets such as bonds declines. That’s why Jones favors assets that perform well in inflationary environments, such as gold, silver, commodities and Bitcoin. I completely agree with this assessment.
Think about it. Why would you want to own fixed income assets when interest rates are likely to adjust and be lower than the inflation rate? Long-term bonds are especially vulnerable. Remember, US banks still have billions of dollars in unrealized losses on their bond positions. Bank of America had a staggering $110 billion in unrealized losses on held-to-maturity investments in the first quarter, far more than any other U.S. financial institution, according to the Florida Atlantic University Bank Examiner.
The Fed will likely try “inflation” as a way out of this mess. This means keeping nominal interest rates below the inflation rate to support economic growth. For investors, this means that preserving wealth requires smart positioning in alternative assets.
Jones is already betting on the bond market — “I’m obviously not going to own bonds,” he told CNBC last week — and thinks many investors would be wise to take a similar approach. I believe.
gold and silver case
Let’s start with gold and silver. Both have been go-to assets for centuries, and for good reason. When geopolitical tensions rise, inflation rears its ugly head, and there is uncertainty in the markets, investors flock to gold and silver.
This year is no exception. 2024 broke multiple records for gold, with prices up more than 32% year-to-date and the highest annual growth rate since 1979.
According to data from the World Gold Council, gold consistently outperforms both inflation and growth rates in the global economy. From 1971 to 2023, the compound annual growth rate (CAGR) for gold was 8%. In comparison, the US Consumer Price Index (CPI) was 4% and global GDP growth was 7.8%.
Gold kept pace with global GDP and outpaced inflation
US global investor
Silver, also known as “poor man’s gold,” is another asset worth noting. Silver has great potential for future growth due to its industrial applications, especially in the green energy sector. According to some projections, the transition to clean energy will dramatically increase the demand for silver in photovoltaic (PV) technologies, with a staggering 98% of global silver reserves by 2050, up from the current 85%. May be consumed.
Bitcoin: Digital Gold
Now, let’s talk about Bitcoin. The world’s largest digital asset has quickly become the preferred store of value for many investors, especially those looking to hedge against fiat currency declines. Almost half of traditional hedge funds currently maintain exposure to cryptocurrencies, including Bitcoin.
Institutions are backing Bitcoin with similar enthusiasm. Take a look at BlackRock’s Bitcoin ETF. It is one of the fastest growing ETFs in financial history, currently with over $26 billion in assets under management. It’s never easy.
Bitcoin’s decentralized nature, capped supply, and growing institutional acceptance make it an attractive asset in times of uncertainty. Like gold, it’s a hedge against inflation, but it also offers significant upside potential as more investors and institutions realize its value.
Don’t get distracted by election noise
Now, I think many of you are wondering this. What happens if Trump wins? What happens if Harris wins? ”
We’re here to bring you breaking news. In the long run, it may not be as important as you think. BlackRock CEO Larry Fink recently made a great point when he said, “I’m tired of hearing that this is the biggest election of our lifetime.” The reality is that time passes and it doesn’t matter. ”
Hedge funds are taking positions in “Trump trades” like private prisons and fossil fuels, but we think trying to time the market based on election results is a dangerous game. Certainly, the election will cause short-term volatility, but I believe that if you have the right assets such as gold, silver, and Bitcoin, you will be well-positioned to weather the storm.
