The debate over whether the current stock market surge represents a bubble or sustainable growth reflects differing perspectives on the market’s valuation and future trajectory. Some investors express concerns about potential risks such as political instability, persistent inflation, and global economic challenges, suggesting that these factors are not fully priced into current stock prices.
Conversely, proponents of the bullish outlook point to factors such as the growth potential of major technology companies, anticipated interest rate cuts, and the strong performance of the US economy as reasons to justify the market’s high valuations.
In reality, predicting the future direction of the stock market is inherently uncertain due to the multitude of variables that can influence short-term price movements. While historical patterns show that bubbles eventually burst, the timing of such events can be unpredictable, often lasting longer than anticipated.
Given this uncertainty, maintaining exposure to equities while ensuring that individual holdings offer fair value is a prudent approach. Additionally, allocating a portion of the portfolio to assets like gold, which historically provides stability during periods of market volatility, can serve as a hedge against downside risks. In times of market stress, gold’s safe-haven status may attract investors seeking to preserve capital, potentially leading to an increase in its price.
Gold’s outlook remains positive, particularly in light of expected interest rate cuts, which would diminish the appeal of income-producing assets like cash and bonds, thus boosting the attractiveness of non-yielding assets like gold. Even if interest rate cuts do not materialize immediately due to persistent inflation, gold’s role as a wealth preserver would likely lead to favorable returns.
Since its addition to the portfolio in April 2021, gold has delivered a robust gain of 31.4% in sterling terms, primarily driven by price appreciation in dollar terms. This performance has outpaced inflation, with price rises amounting to approximately 19% during the holding period, surpassing the gains seen in Bitcoin over the same period.
While short-term returns on gold may be overshadowed by a booming stock market, particularly in high-flying tech stocks like Nvidia, gold’s status as a safe haven asset could become increasingly valued if there’s a correction in the market. In times of market turmoil or uncertainty, investors often turn to gold as a store of value, which could further support its price.
AstraZenecaÂ
AstraZeneca’s shares have shown impressive growth since being recommended by Questor in August 2019, rising by 39% and outperforming the FTSE 100 by a significant margin. Despite this, the stock still presents compelling value for investors.
Trading at around 18 times earnings, AstraZeneca’s full-year results indicate potential for further growth, with expected revenue and earnings growth in the low double-digits or low teens for the current year. Its defensive characteristics, coupled with a solid financial position, continue to make it an attractive proposition in terms of risk/reward tradeoff.
While the company’s recent annual results were somewhat disappointing due to missing analysts’ earnings expectations, there were positive indicators such as a 6% increase in revenues. Excluding the decline in Covid-19 medicines, sales were up 15%, with key segments like oncology and cardiovascular, renal, and metabolism showing double-digit growth.
AstraZeneca’s commitment to research and development, with a 15% increase in spending, underscores its focus on innovation and future growth. With plans to launch at least 15 new medicines by 2030, the company is positioning itself for long-term success.
Although the stock has experienced a slight decline since its addition to the Wealth Preserver portfolio in December, its attractive valuation, growth prospects, and defensive attributes make it a compelling investment opportunity. While current holders should continue to hold the stock, those without a position may want to consider adding it to their portfolios.