Jeremy Schwartz, Global Chief Investment Officer at WisdomTree, joins TheStreet to share his insights.
Transcript:
Caroline Woods:
Joining me now, Jeremy Schwartz, global chief investment officer at WisdomTree. Jeremy, thanks so much for joining me at the desk.
Jeremy Schwartz:
It’s a pleasure to be here. Thanks for having me.
Caroline Woods:
So, Jeremy, we’re talking about turning global volatility into opportunity. I want to talk about some of the things causing that volatility, namely geopolitics and trade and of course, interest rate policy. But before we get to that, I want to ask you about gold because gold continues its run higher, continually hitting record highs, trading above $2150 an ounce right now. Some might look at it as a hedge against volatility, as a means of diversification, a safe haven. How much of it is that, and how much of it is geopolitics driving this run higher? And are we nearing the top? You’ve got a name for the trade at the moment called the debasement trade — it’s going around the desks this week as people talk about: is the debasement trade on? What is really driving this gold price higher?
Jeremy Schwartz:
You know, gold has had a very unique role. It’s been one of the monetary assets used for thousands and thousands of years. People look at it as a store of value. Now you have crypto as Bitcoin — the new digital gold and a hedge. And we talk about — if you look at just the last week and the sort of sell-off in crypto over the weekend — you had all these leveraged trades on, and there’s a huge crash down in crypto. So like, was it a safe haven hedge the way people are thinking about that? It’s hard to argue that case. But gold has a different role as a ballast in some of this long-term purchasing power protection. I’ve done research with Professor Jeremy Siegel at Wharton. He has 200 years of data, and gold kept up with inflation over 200 years — basically providing protection from inflation. Over different periods, it has better returns. But I think it is a useful hedge asset from that purchasing power perspective.
Caroline Woods:
Do you think it can continue its run higher, though? Because we have seen such impressive gains — at the same time that the market has been gaining as well. This year has been very hot. The last few years, it’s been hot.
Jeremy Schwartz:
I do think it has a role. You’re finding central banks saying, “You know, maybe I don’t want to have all my money in dollars. Maybe I’m using it as another diversifier.” There are questions about debt and deficits around the world. And bonds — really, you don’t get any income off gold like you do U.S. Treasuries, so very different place. But there’s definitely a role for gold in portfolios.
Caroline Woods:
OK, so let’s talk about how investors should be positioning their portfolios amidst some of this global volatility. Should they be looking at traditional safe havens at this point? Should they be looking here in the U.S. or maybe abroad?
Jeremy Schwartz:
We talk a lot about what we call the equity risk premium. And that’s comparing the earnings yield on the market versus bond yields. And the 10-year bond in the U.S. yields just 4%, but on an inflation-adjusted basis, it’s below 2% — like 1.60% to 1.70%. Now at 1.70%, it’ll take you almost 40 years to double your purchasing power with that kind of yield. Stocks — yes, they’re more expensive than normal. But we’re talking a 4% to 5% earnings yield. That’s more like 14 to 15 years to double your purchasing power.
So we’d say stocks are still a very good deal versus that safe haven of U.S. bonds. There’s more volatility with stocks, but I think if you’re looking out over long periods, stocks are still a very good place to be.
Caroline Woods:
And you have a particular ETF that you actually say is geared towards turning global volatility into opportunity. It’s the Alpha Opportunities Fund, ticker symbol GEOA.
You overweight allies and you underweight vulnerable regions. So it sounds like you have both domestic and international exposure with this ETF. But tell us about the strategy — how it works.
Jeremy Schwartz:
I think geopolitical risk is very top of mind — from the tariffs that we had to the war in Europe and Russia-Ukraine, you have Asia, underlying tensions with China. So how do you think about this shifting geopolitical order? It’s not just to be defensive and crouched, afraid of things — it’s to go for advantageous opportunities that come from all this shift that’s happening. And we think we’re in a defense tech supercycle. So this is not a short-term, one-year thing.
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