Actionable insights straight to your inbox

Equities logo

New Safe Haven Investments for 2012?

With the economy in an uncertain recovery, the housing market persistently refusing to find a firm bottom, and Europe continuing to create stress, many investors are just looking for a safe place

With the economy in an uncertain recovery, the housing market persistently refusing to find a firm bottom, and Europe continuing to create stress, many investors are just looking for a safe place to park their money. Safe havens can be exactly what an investor is looking for, particularly in volatile times. Finding a steady but consistent return with very little risk will make many happily give up a chance at much higher returns in exchange for relative certainty.

In January, took a look at classic safe havens and their prospects for 2012. Now, with the first quarter of 2012 completed and earnings season well under way, it’s time to take a second look at where investors can look when trying to find a safe haven.

The Usual Suspects for Investors?

Many of the previously outlined potential safe havens are still chugging along as expected. Swedish bonds, for instance, remain an attractive investment for the risk-averse. The company’s strong infrastructure and low public debt (less than 40 percent of GDP) has helped Sweden fly above the chaos in the rest of Europe. On Monday, the bonds continued to show their strength, gaining further value among rumors about rate cuts from the central bank.

“Swedish bonds are safe haven assets, but there is also another important reason for why Swedish bonds are performing,” said Par Magnusson, chief analyst for Scandinavian rates at Royal Bank of Scotland (RBS). Citing the belief among some investors “that the Riksbank will deliver rate cuts and the more bullish the market becomes on the Riksbank delivering rate cuts the lower the bond yield will be.”

Gold, meanwhile, appears to have shown some stability after spiking early in the year. Price for a troy ounce sit at around $1,640, but prices are also in limbo as traders await comments from Ben Bernanke on any future plans from the Fed. Most agree that the Fed is most likely to announce a plan to keep interest rates low, with some speculating that with recent economic numbers showing a slow-down in the recovery there’s also a chance at a third round of quantitative easing. In both cases, these are actions that would most likely increase the price of gold.

“Today of all days we can’t avoid talking about quantitative easing,” Natixis analyst Nic Brown said. “I wouldn’t be surprised to see gold trading a fair bit lower tomorrow if the Fed gives no hints about imminent QE.”

New Options for “Safer” Investing?

One potential safe haven these days may be where few would expect it: the American stock market. There could be an increasing push to find safe havens in the equities market. Which is exactly what investors have traditionally been looking for a safe haven for. According to a new survey from Bank of America (BAC) Merrill Lynch, showed that money managers are playing things close to the vest so far in 2012. Cash positions have increased since March, with a net 24 percent of those surveyed being “overweight” on cash. While money moved out of equities as a whole, with a net 33 percent surveyed reporting that they were overweight in March to only 26 percent now, the money appears to be moving into US equities. The net percentage of money managers “overweight” on US stocks was up to 27 percent from 14 percent in March.

So are U.S. stocks the place to park your money? It’s fast approaching May, a traditional time to divest based on the old adage “Sell in May and go away,” but global money managers clearly seem to think that U.S. stocks are undervalued. At a time when they’re hording cash, the poll would seem to indicate that relatively risk-averse professional traders and investors are high on American equities.

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.