Are U.S. Equities The New Safe Haven?

I am pretty sure you are laughing at my heading for this post. It is just intended as a joke (of course) but just stay with me for a second while glancing at the chart in this post.

Chart 1: US equities are the safe haven for the investment cycle

The chart above shows annualised performance of major macro asset classes, from regional equities to various bonds and even Gold (which best represents the area of commodities and/or currencies). So let us analyse some of the squiggly lines in this busy chart.

We can make a few observations here. First, eurozone equities underperformed for a prolonged period of time and are only making a comeback right now. Emerging markets outperformed at the beginning of the cycle, but have also underperformed during the mid cycle, and are having only a flat return right now. Gold is very similar with strong outperformance at the beginning of the cycle, but a major underperformance right now.

Then of course, there are Treasuries, which did terrificly during the mid cycle slowdown in 2011/12, but continue to suffer major losses right now. Corporate bonds held their own for the majority of the cycle, never really outperforming any other asset, but nonetheless giving investors a steady positive return. This all changed recently as they too have succumbed under pressure, as the overall bond sector drags them lower.

However, there is one asset that has been outstanding. Interestingly, since the beginning of the investment cycle and global GDP expansion (early parts of 2009), US equities are the only asset class that has NOT suffered any losses on a annualised (12 month) basis. In other words, the current situation is unorthodox, unconventional and bizarre, as US equities are the only asset class not to suffer any major deflation (annualised under performance) since the expansion began.