- In spite of Thursday’s stock market plunge, non-traditional and traditional hedges as gold and bitcoin were not immune from the sell off.
- Engineering stocks led a steep sell off in the market, with the Nasdaq 100 index down pretty much as 5.5 % in Thursday afternoon trades.
- Gold traded down almost as 1 %, while bitcoin fell six % on Thursday.
- Usually, investors appear to these non-traditional assets to offer shelter in the course of stock market sell-offs.
Technological innovation stocks led the market decline, with the Nasdaq 100 index down pretty much as 6 %. Mega-cap tech winners as Apple, Amazon, and Microsoft fell 8 %, seven %, along with 6 % respectively.
Meanwhile, the S&P 500 fell almost as four %, while the Dow Jones industrial average fell more than 1,000 steps for a loss of three %.
The high technology-driven sell off in the stock market spread to traditional and non-traditional portfolio hedges like orange and bitcoin.
Gold fell as much as 1 % to $US1,927.20 per ounce in Thursday trades, while bitcoin fell as much as six % to $US10,455.
Both gold and bitcoin have recently been bid in place by investors anxious about the expanding balance sheet of the US Fed and its recent policy overhaul which will probably result in higher levels of inflation.
Very last month, gold touched all-time highs during $US2,089 an ounce, while bitcoin reach a multi-year high of $US12,473.
Investors typically look to both gold and bitcoin as a hedge to inflation, deflation, and falling stock prices because of their historically low correlation to equities.
But that historical correlation didn’t play out on Thursday.
A standard asset class that did offer protection to investors from Thursday’s promote sell off was bonds. The Bloomberg Barclay’s US Aggregate Bond Index traded up as much as 0.20 %.
For all the talk with Wall Street analysts that the popular 60-40 investment profile that balances stocks and bonds is actually “dead,” it’s alive and nicely today.