When it comes to the stock market, there have been a lot of "worsts" in 2022, but investors are looking to safe haven assets to mitigate risk.

Simone Del Rosario Business Correspondent

Investors turning to ‘safe haven’ assets like gold, cryptocurrency amid volatility

Apr 26, 2022

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Emma Stoltzfus (Video Editor)

When it comes to the stock market, there have been a lot of “worsts” in 2022, from the worst January since 2009 to the worst quarterly decline in two years. Now, with interest rates skyrocketing, inflation at a 40-year high and experts predicting increasing likelihood of recession in the next two years, investors are looking to safe haven assets to mitigate risk.

Definition

A safe haven is a type of investment that is expected to retain or increase in value when the market is turbulent.

In order to qualify, it needs to be uncorrelated or negatively correlated to the market, meaning it doesn’t mimic market moves.

Types of safe havens

Gold is one of the most well-known safe havens. The financial crash of 2008 is a perfect example of its performance under pressure. While markets were a bloodbath, gold went from about $700 an ounce in late 2008 to touching $1,900 by 2011. Finite supply and healthy demand for this safe haven helped drive up prices.

In recent years, gold has been getting some competition from the cryptocurrency space.

“Bitcoin is the best safe haven treasury reserve asset in the world right now, and it’s engineered to be superior to gold in all aspects,” MicroStrategy CEO Michael Saylor said in late 2020 after moving some of his company’s reserves into Bitcoin.

Bitcoin enthusiasts call the cryptocurrency “digital gold” and argue it too is a safe haven. But lately, it’s failing the correlation test as its sensitivity to the stock market increases.

Other safe havens when the markets are shaky include government-backed securities; currencies like the Japanese Yen, Swiss Franc and U.S. Dollar; and defensive stocks. Defensive stocks are shares of companies the population can’t live without regardless of how the economy is doing, from industries like health care, utilities, food and beverage.

Another safe haven option is cold hard cash, but when inflation is sky high, that’s losing value too.

When it comes to safe havens, it’s important to note that every downturn is different, which means what’s safe can change with the tide.

What term should we dive into next in Word On The Street? Comment below.

NEWS CLIP: this market is as volatile as you’ll ever see

SIMONE DEL ROSARIO: WHEN SEAS GET ROUGH

NEWS CLIP: The markets posting a sea of red

SIMONE DEL ROSARIO: INVESTORS STEER THEIR SHIPS TO SAFER WATERS

NEWS CLIP: gold is the ultimate safe haven

NEWS CLIP: bitcoin is the best safe haven treasury reserve asset in the world

NEWS CLIP: do bonds feel like a safe haven to you right now?

SIMONE DEL ROSARIO: WITH STORMY MARKETS AHEAD – WE’VE GOT WHAT YOU NEED TO KNOW ABOUT SAFE HAVEN ASSETS IN TODAY’S WORD ON THE STREET.

A SAFE HAVEN IS A TYPE OF INVESTMENT THAT IS EXPECTED TO RETAIN OR INCREASE IN VALUE WHEN THE MARKET IS TURBULENT.

IN ORDER TO QUALIFY – IT NEEDS TO BE UNCORRELATED OR NEGATIVELY CORRELATED TO THE MARKET – MEANING IT DOESN’T MIMIC MARKET MOVES.

NEWS CLIP: right now this is the perfect market environment for everyone to be analyzing gold.

SIMONE DEL ROSARIO: GOLD IS ONE OF THE MOST WELL-KNOWN SAFE HAVENS. TAKE THE FINANCIAL CRASH IN 2008.

SEPTEMBER 29, 2008

NEWS CLIP: we are watching this market deteriorate

SIMONE DEL ROSARIO: WHILE MARKETS WERE A BLOODBATH –

NEWS CLIP: i have something for you for next year watch gold.

SIMONE DEL ROSARIO: GOLD WENT FROM ABOUT 700 AN OUNCE IN LATE ‘08 – TO TOUCHING 19-HUNDRED BY 2011!

FINITE SUPPLY AND HEALTHY DEMAND FOR THIS SAFE HAVEN HELPED DRIVE UP PRICES.

NOW IN RECENT YEARS – GOLD’S BEEN GETTING SOME COMPETITION.

NEWS CLIP: bitcoin at least philosophically is supposed to be a safe haven :38 it’s supposed to be a hedge against geopolitical risk.

SIMONE DEL ROSARIO: BITCOIN ENTHUSIASTS CALL THE CRYPTOCURRENCY “DIGITAL GOLD.” AND ARGUE IT TOO IS A SAFE HAVEN.

BUT LATELY IT’S FAILING THE CORRELATION TEST.

NEWS CLIP: the debate over bitcoin’s value as a digital gold safe haven asset or a risky investment is heating up as BTC’s sensitivity to stock markets increases.

SIMONE DEL ROSARIO: OTHER SAFE HAVENS WHEN MARKETS ARE SHAKY – INCLUDE GOVERNMENT-BACKED SECURITIES…FOREIGN CURRENCIES LIKE THE JAPANESE YEN AND SWISS FRANC…AND DEFENSIVE STOCKS – SHARES OF COMPANIES WE CAN’T LIVE WITHOUT REGARDLESS OF HOW THE ECONOMY IS DOING…FROM INDUSTRIES LIKE HEALTH CARE, UTILITIES, FOOD AND BEVERAGE.

THE LAST SAFE HAVEN OPTION IS COLD HARD CASH. BUT WHEN INFLATION’S SKY HIGH – THAT’S LOSING VALUE TOO.

NEWS CLIP: i think that in this kind of market he who loses least actually wins.

SIMONE DEL ROSARIO: KEEP IN MIND EVERY DOWNTURN IS DIFFERENT – WHICH MEANS WHAT’S SAFE – CAN CHANGE WITH THE TIDE.

WHAT TERM SHOULD WE DIVE INTO NEXT IN WORD ON THE STREET? TELL ME IN THE COMMENTS.