2012 is here and there looks a wait-and-see approach among many investors across the markets. The tenuous debt situation in Europe, gridlock over debt in Washington and slowing growth in emerging nations, particularly China and India, have weakened assessments for the economy this year. Some analysts predict the equity market with retract considerably in 2012. For investors who believe that Nostradamus might have been right, at least in terms of the market, there are still places to hide. So what will be the best safe havens this year?
Swedish government bonds-Swedish government bonds are reportedly set to gain further in the coming year as investors look for a place to store cash and the central bank lowers rates to help bolster the economy. Through the extreme volatility of the last year, Sweden was looked at a safe haven as the stability of their infrastructure and economic performance in comparison to the rest of the globe pushed them into the spot light. Investments in the Swedish currency became so extreme that the country was forced to cap investment. In 2012, with the currency no longer an option, Swedish government bonds seem to be coming into the spotlight.
The government bonds are being viewed as a safe haven against inflation as the government lowers rates to help bolster their economy. Recent trading in advance of the New Year has shown investors still have an affinity for Swedish assets. Foreign holdings of Swedish government debt have increased steadily over the past three years, according to Reuters. The foreign holdings amounted to 386 billion crowns in October 2011 from 245 billion during October 2008. The trend is expected to uphold itself in 2012 as fear over the fates of European economies and their credit ratings looms.
Unlike the U.S. or many European nations, Sweden’s rating is still intact and their debt is under control and compared to most developed nations, relatively minimal. The stability of the nation in contrast to the remainder of the developed world will help it thrive as other nations focus inward on repairing structural deficiencies and overwhelming debt.
“The basic view is that it (Swedish debt) still performs going forward next year,” said Peter Goves, interest rate analyst at Citigroup in Reuters, “You can probably shave off another 10-20 bps from the 10 year rate … but it (the market) is already pricing in quite loose monetary policy.”
Gold-Gold’s role as a safe haven is up for debate right now as some argue its recent movement has been too closely aligned with volatile equities to be determined a safe haven. Still some banks, Goldman Sachs (GS), Barclay’s (BCS), and a number of others are staying bullish on the metal, predicting it will average in between $1,800 and $2,000.
Some are attributing the recent volatility of gold to investors looking to gather yearly gains and create liquidity. Up over 11 percent for the year, even those who missed selling at its peak are still in for a healthy pay day. There’s speculation that the buying will begin again as inflation as investors look for a place to protect their cash against inflation.
TIPs– Another manner in which investors have been protecting themselves against inflation and avoiding equities are Treasury inflation protected securities or TIPS. Predicting inflation can be a challenge but some investors are but investors are now buying Treasury inflation protected securities, TIPS, at negative yields. The motivation is that inflation will really ramp up in the coming years and boost the adjustable rates on those bonds.
Consumer Discretionary Stocks-Sam Stovall, chief equity strategist for the Standard & Poor’s recently spoke to Reuters about the shifting behaviors for some of the most recognized safe havens.
“Safety stocks may not be the safest,” he said “We recommend overweighting the consumer discretionary sector on the lessening of recessionary pressures in the U.S. as well as above-market EPS growth prospects, and favorable technicals.”
The holiday season has put American retail enthusiasm on full display, with a healthy five percent gain in buying. For the most part, luxury retailers from Nordstrom, Inc. (JWN) to Macy’s (M) have shown improvements in same store sales for 2011 while climbing 16 and 25 percent YTD respectively. With many economists predicting that the economy will continue to lurch along, burdened by the weight of Europe and U.S. debt, some investors are looking to employ the same tactics that worked in 2011.
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