Fisdom Weekly Update (Issue #32): Did you make money while markets lost it? Dark clouds have arrived, but so has the golden lining

The summer of May 2019 brought about a tremendous heatwave in more than one way. While many in India felt the mercury rise up the scale, many spent days watching Indian equities melt – albeit in line with a global sell-off.

With domestic uncertainties around the general elections & monsoon predictions looming large, escalation of trade tensions between US and China seem to be offering no respite even from a global standpoint. Major world indices have been withering since the beginning of this month in anticipation of counter-growth effects of developing geopolitical & trade scenarios.

Investors seem to be cashing out and hopping onto the fences waiting for the haze to clear before resuming the play.

According to an internal survey, below are the top three events that have led to a global sell-off.

(Skip to the next section, below the pointers, if you want to know where the real money was made in the past week and what’s going to help your investment ride the tide)

• Trump acting up once again

The United States has escalated its trade war with China, hiking tariffs on $200 billion worth of Chinese exports. This has created a panic across global markets since this move can affect global economic growth – this has a huge bearing on emerging economies like India. However, recent notifications about Trump intending to have a “friendly” conversation with Xi has investors crossing fingers and hoping for an amicable conversation and favorable outcome.

• Industrial output in India slumps

IIP – a barometer to gauge industrial output contracted for the first time in 21 months, adding to concerns about slowing growth in the economy. IIP fell by 0.1% in March 2019, compared to 5.3% in the same month a year ago.

• A contraction in manufacturing & services activity

PMI composite index which takes into consideration both manufacturing and services fell from 52.7 to 51.7 in April, which indicates a relatively slower pace of expansion in manufacturing and services activity.

While things may seem gloomy at the very outset, this dark cloud has a “golden” lining!

As domestic and global uncertainties led to equity, currency, commodities as well as bonds move in an erratic fashion, there was one asset class that has stood the test of time and emerged victorious during volatile times like this – the good ol’ gold!

As evident by the above graph, the prices of gold surged in tandem with increasing volatility (represented by India VIX- an index reflecting volatility in Indian equities). Gold has been known to be a strong preserver of value with universal & transparent prices.

With rising uncertainties and evolving episodes over at least the next two months, gold continues to remain a preferred asset class and we expect the prices to appreciate well over the shorter term – at least till more clarity develops.

It is during times like now that an investor appreciates the importance of asset allocation and acknowledge that gold is an important asset class that deserves allocation. Typically, allocation of 5%-10% of the total portfolio is considered as a healthy allocation to gold to hedge against event-driven volatility.

Our investors who have utilized the option to invest in digital gold offered right on our app will notice the uptick in the value of their purchase. It is recommended to stay invested or perhaps even top it up at least for the next few months.

For the ones who are yet pondering over the benefits of our digital gold offering, here’s a brief insight:

• Preferred hedge against inflation and event-driven volatility.
• A safe investment in digital gold allows accumulating 24K gold without worrying about storage or security.
• Investors may choose to get physical gold delivered to their doorstep on accumulated gold over a gram.

If you have any concern, please write to us at ask@fisdom.com or call at +918048039999, we would be happy to answer your query.