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Are there any safe havens left?

Hugo: hello everyone and welcome back to the BlackRock multi asset podcast with me Hugo Thompson.

Chris: and me Chris Ellis Thomas

Hugo: the topic of discussion today is safe havens, what they are, why we like them, and most importantly, do they still exist. Why are we talking about this today Chris?

Chris: well it feels like the list of assets behaving like safe havens is shrinking. Probably the most obvious example being government bonds, but more recently the dollar also seems to have lost some of its haven status. In light of that we thought it would be interesting to do a deep dive into what exactly is going on, and what the implications are for multi asset portfolios.

Hugo: It is such an interesting topic, and I would say surprisingly underdiscussed. But before we jump in, lets take a step back and just lay out exactly what we mean by a ‘safe haven’. I think its one of those terms in finance that people use a lot, and maybe not quite as precisely as they should. For example, Chris, what distinguishes a safe haven from say a diversifier, or a risk dampener?

Chirs: A finance textbook would tell you that a safe haven is an investment that exhibits negative downside correlation with the risk assets held in a portfolio. Risk assets are those which outperform when the economy is growing so the corollary is that safe havens outperform in slow growth or recessions

Hugo: translating that into English, they are assets that will rise in value (or at the very least hold their value) when equity markets are falling. But how is that different from any other diversifier in a portfolio?

Chris: A diversifier is just any investment that has a less than perfect correlation with the portfolio. A diversifier is a broad category, one sub-section of which is safe havens. So all safe havens are diversifiers, but not all diversifiers are safe havens. It’s the assets that rally when everything else is struggling that are becoming harder and harder to find.

Hugo: lets unpack that point a bit because this is a really recent phenomenon in the grand scheme of things. Roll the clock back just a couple of years and the humble government bond, one of the most widely held asset classes in client portfolios, had this magical safe haven quality. During COVID for example, when equities fell, government bonds rallied, we saw the same thing in 2018 during the US-China trade war, the Greek default in 2016, the Global Financial Crisis in 2008, the Dot Com bust in 2000 – the list goes on.

Chris: yes, but not anymore. Since 2022 the correlation between bonds and equities has turned positive. And that’s because government bonds just don’t work as well when inflation is elevated. What’s perhaps more interesting is that this loss of safe haven status isn’t just contained to government bonds. More recently we have seen another stalwart of safety stumble – the dollar. The greenback typically rallies versus other currencies during equity market downturns, it was in fact one of the few investments that effectively dampened portfolio losses in 2022. But this year not so much. When US equity markets fell in April, the dollar was dragged down too.

Hugo: Okay, first government bonds were struck from the list of safe havens, then the US dollar. What about other safe havens, like Gold? Gold has a history of being used as a financial asset that stretches back to ancient Mesopotamia. It was popularised as a safe haven during the First and Second World War as people identified it as an effective way to store their wealth during an acute period of political, economic, and financial instability.

Chris: for sure gold often behaves as a safe haven asset, and has continued to do so recently, in 2020, 2022 and this year in 2025, it rallied while equities sold off. The dynamics that drive the gold price are pretty interesting. Its scarce, durable and decentralised. So even if the sky is falling down, gold isn’t going anywhere, and no more of it is being made. So investors rush to move their wealth into the precious metal. This pushes prices up – exactly what we are looking for from a haven asset.

Hugo: and all of the characteristics you just described above for gold are true of other precious metals like silver, platinum, and palladium. Are they also safe havens?

Chris: we actually did quite a bit of work at the start of this year to understand if they have a role to play in portfolios. The issue is they are used pretty extensively in industry and so their price is also influenced by industrial demand – and therefore growth -at least to some degree.

Hugo: about half of the silver bought each year is used for industrial purposes, and 95% of the palladium. This contrasts to just 7% from gold¹.

Chris: And that creates this sort of cyclical cross-wind that also impacts their price fluctuations – often in the same direction as equity markets. Gold is a sort of purer expression of that haven quality.

Hugo: those other precious metals have too many actual uses, and so, a little like copper, their price is more heavily linked to demand from business and therefore the economic cycle than gold. But I have a question, if some asset classes in our portfolios that previously demonstrated safe haven qualities – like Government bonds and the dollar – are no longer doing so, can’t we just replace them with gold?

Chris: we have done that to some extent. We have been holding gold for at least 18 months now, and that has been funded from our government bond. But you have to remember that while gold is a great haven, in our view it is hard to assign a positive long term expected return, because it doesn’t generate any cash flows. Where as, government bonds still do that, in fact they are doing that better now than they have for the past 15 years².

Hugo: we wouldn’t want to over expose our portfolios to gold, because while having safe haven qualities is really valuable, ultimately what we are looking to do is generate a positive return for our clients, and we don’t have faith that gold will do that over a 10 or 15 year time horizon. Okay what about bitcoin (one of us was going to have to bring it up eventually)? Could that fill the gap left by these other formerly safe haven investments within our portfolios?

Chris: yes it would be an oversight to have an episode about safe havens and not talk about bitcoin. The first thing to say is that while bitcoin has delivered attractive historic returns, it is very difficult to forecast performance from here. I think the stronger argument for including Bitcoin would be a risk based argument. It has a negative correlation to equities, so at first glance you might assume it is a safe haven asset. The problem is that that negative correlation tends to disappear when equity markets fall, especially growthier markets like the US technology sector.

Hugo: in fact we saw that this year, at its low in early April the US stock market was down 15% for the year, over the same period bitcoin was down about 18%³.

Chris: Exactly, add to this the fact that Bitcoin is still extremely volatile – it’s still a very new asset after all – this means it can be very risky for the types of clients that our team usually focuses on. So for us, bitcoin is not the answer, or at least not the answer to this particular problem. Its gold, and maybe cash.

Hugo: but as you said earlier there is only so much gold that we want to hold in portfolios, and of course the same is true of cash. So if we really do have a problem of disappearing safe havens, what should we be doing about it? Is there anything we can do?

Chris: we absolutely need to be rethinking portfolio positioning. What worked over the past decade may well not work going forward. Effective diversification becomes much more important. There are three things that we are thinking about to accomplish this: introduction of real assets, greater granularity in equities, and greater granularity in fixed income.

Hugo: okay, lets take those one at a time. Starting with real assets, I assume we are talking about listed real assets here so things like commodities, REITs, and infrastructure equity?

Chris: yes exactly, to be clear none of these are safe havens, but they do tend to demonstrate more resilience than traditional equities during market drawdowns – and if there are fewer and fewer assets actually rising when equities fall, having something that doesn’t fall as much is the next best thing.

Hugo: that makes sense, and then the point you made around granularity. In equity I guess that means playing sectors and factors rather than just county views, and then in fixed income we are talking higher income bonds like emerging market debt and high yield credit? But why does that help?

Chris: well if we take equity sectors as an example. Even when the global stock market is falling, there tends to be pretty high dispersion in returns between different sectors. Granularity allows us to take advantage of that. For example, by having larger allocations to ‘defensive’ sectors such as Health Care and Energy. This was apparent in 2022, energy stocks were up over that period, despite broader market indices being down.

Hugo: its really important to add, all of this works best when you have the ability to be dynamic. We wouldn’t want to run a structural overweight to energy companies just because they are more resilient during falling markets. Instead we want to have the ability to be precise with our exposures, and the latitude to move in and out of them as needed.

Chris: I suppose to summarise, are there any safe haven asset classes left? Yes. But not as many as there once were…This means three things, an increasing role for liquid alternatives and in particular scarce assets. A greater need for granularity to find those sub-asset classes that do still demonstrate downside resilience. And dynamism becomes even more important.

Hugo: right, I think that is us just about out of time. if you enjoyed this discussion then please do look out for our next podcast which should be released in a couple of months time and click that subscribe button to be notified. If you are interested to hear more about the multi asset strategies that the team run, then don’t hesitate to reach out to your BlackRock relationship manager.

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¹Source: Grand View Research, 31/08/2025
²Source: Bloomberg, Global Government Bonds proxied as Bloomberg Global Aggregate Treasuries Index
³Source: Bloomberg, 31/08/2025

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