According to a report from the Wall Street Journal,"the safe-haven trade is making a comeback".
"Gold and Treasurys were among last month’s big winners while U.S. stocks fell sharply. Turmoil in emerging markets and concerns about the pace of global economic growth prompted many portfolio managers to shift away from the kinds of investments that did exceptionally well last year but are vulnerable to large swings".
The questions now are just how much longer safe havens will keep rallying and how much further stocks will keep declining.
Market watchers have been saying for months that stocks have been long overdue for a significant decline. But every pullback over the past few years has been short and shallow, as bargain hunters have consistently stepped in and bought the dips.
The S&P 500 has gone 835 calendar days without a 10% correction, according to Bespoke Investment Group, a stretch that dates back to October 2011. The index has rallied 68% through that time frame. Since 1928, there have only been four rallies that ran higher and longer than the current run-up.
The Dow Jones Industrial Average dropped 5.3% in January, while other markets performed significantly better. Gold gained 3.2% after last year’s steep tumble. Bond prices rallied, as the yield on the benchmark 10-year Treasury note dropped to 2.669% late Friday, from 3% at the end of 2013. Yields and bond prices move inversely from one another. Even volatility rose. The CBOE’s volatility index, the VIX, jumped 34% last month to 18.41, although it still remains below its long-term average of about 20".
At the end of last year, a growing number of market participants fretted that valuations were getting excessive and that the stock market was getting close to bubble territory.
January’s drop quieted much of that chatter.
“A correction of some kind is eventually inevitable, but timing when that 10% drop comes is very difficult,” Bespoke said.
