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Over the past century, U.S. equities have performed exceptionally well, rising 221-fold in value. But there’s a catch.

That’s a 221-fold increase versus the U.S. dollar, and the U.S. dollar has lost over 95% of its value over this period as a result of inflation. 

So, what if instead of looking at equities priced in dollars, we instead reprice equities in gold?

Over the past century, gold has nearly kept pace with equities, but there have been periods when equities have performed much better than gold, including the periods of 1942-1966, 1981-2000 and 2011-2021. Periods of equity outperformance have had two things in common: stable inflation and a stable world order. 

Other periods have not been so kind to equities relative to gold. Stocks fell by 95% versus gold between the late 1960s and the early 1980s, which marked a time of rising inflation and geopolitical uncertainty. As the United States pulled out of Vietnam in 1973, the Arab oil embargo sent oil prices soaring and the world economy into a recession. Later in the 1970s, the Iranian Revolution, the Soviet invasion of Afghanistan and the Iran-Iraq War set off a second oil crisis. 

Similarly, stocks fell 89% between 2000 and 2011 in the aftermath of 9/11, the United States’ war on terror and the global financial crisis. 

During the past twelve months, the world appears to have entered a new period of uncertainty following the United States’ departure from Afghanistan, the Russian invasion of Ukraine and heightened tensions in the Taiwan Strait. And this all has come while inflation is also soaring worldwide. The question going forward is: could we be on the precipice of another period in which equities fall relative to gold?



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