It's another ho-hum sort of day on the S&P/ASX 200 Index (ASX: XJO).
At the time of writing, the ASX 200 is down around 0.22% to 6,007.1 points. Since 21 July, the Index has lost 2.4%, going off today's numbers.
This might not seem important at face value. But a few other recent developments in the world of investing have turned my head.
Firstly, gold this week broke its all-time high of US$1,921 an ounce that was last set back in 2011. Since Monday, gold has reached new heights, trading as high as US$1,977 an ounce.
Fair enough, perhaps? With a global pandemic, unprecedented monetary easing, and fears of both deflation and inflation — the ground is certainly fertile for a 'safe haven' asset like gold.
Fellow precious metal silver is also experiencing a pricing boom – more than doubling since March.
But these aren't the only trends that have caught my eye this week.
Bitcoin (remember that?) is also on the move. It has appreciated almost 20% in the last 2 weeks (against the US dollar) and is at its highest level in almost a year. A similar pattern can be seen in other cryptocurrencies like Ethereum and Litecoin over the same periods.
And according to reporting in the Australian Financial Review (AFR), the appetite for 'safe' government bonds is insatiable right now.
The AFR points out that the Australian Government's auction for 30-year bonds on Monday attracted more than $20 billion in orders. That's despite the almost-negligible rates of interest currently being offered on public bonds (the 10-year Australian government bond currently has a floating yield of 0.86% per annum).
So what's going on?
Fear and loathing on the ASX
I think these trends point to an investor base that is getting extremely nervous. Remember, ASX 200 shares are down just 10% in 2020 so far — despite the worst pandemic the world has seen in a century. That statement in itself is enough to make this writer concerned.
So it's clear investors are trying to diversify and hedge their bets across different asset classes, particularly those with an inverse correlation (either historically or conceptually) to the performance of equity markets (shares) or offer protection against inflation or monetary debasement.
And that includes government bonds, gold and (to a lesser extent) cryptocurrencies.
Foolish takeaway
In these risky times, I understand why some investors are attracted to gold, bond and other asset classes. But the fact remains that ASX shares have been the best performing asset class over the past 100 years and more.
So don't feel the need to follow the investors that are driving up the prices of other assets. As long as you have a portfolio of quality ASX shares, I think you'll do just fine over the long run.
