The status of US Treasuries, the equivalent of our government bonds, and the US dollar as the world’s safe-haven assets is cracking under the weight of Trump’s unpredictable reign.
This is forcing a fundamental reassessment of whether they can still be considered the world’s safest investments. Until we see where the chips fall, however, diversification is probably the best safe haven to ride out the Trump turmoil.
“The only certainty is that nothing is certain.” (Pliny the Elder)
For decades, US Treasuries (government bonds) and the US dollar have been the world’s primary safe-haven assets. Investors have been able to rely on them to hold their value due to America’s status as the world’s leading democracy, with deep, liquid markets and a steady, predictable economy.
However, this foundation is showing serious signs of cracking. The dollar has tumbled to multi-decade lows, while Treasury yields have risen sharply when they would traditionally decline (risk-averse investors typically flock to these assets). Trump’s decision to impose 50% tariffs on the European Union, before extending the deadline a couple of days later, highlights the administration’s erratic approach to trade policy that has markets constantly guessing the next move.
Other factors adding to waning confidence in the dollar and US Treasuries’ safe haven appeal include the risk of a widening fiscal deficit after Trump announced his “big, beautiful bill”, which is expected to add $3.8 trillion to the US budget deficit. Further adding to these concerns, Moody’s cut the US triple-A credit rating in May – primarily because of concerns surrounding the country’s fiscal sustainability.
Monica Defend of Amundi Investment Institute, captures the market’s evolving sentiment, saying: “Recent bond yield dynamics signal a shift from seeking safety in US assets to a reassessment of Treasuries and the US dollar as ultimate safe havens.”
Gold's golden moment
Gold has stepped into this uncertainty, reclaiming its ancient role as the ultimate store of value. Gold prices have surged above $3 000 per ounce, gaining 40% over the past year driven by the appeal of gold being safe from the macro-economic and geopolitical turmoil.
Gold’s resurgence isn’t just about individual investor sentiment. Central banks have collectively bought more than 1 000 tons of gold each year since 2022, up from an average of 481 tons a year between 2010 and 2021. This institutional buying reflects deeper concerns about dollar-denominated reserves, with many central banks seeking assets beyond the reach of potential political weaponisation.
What this means for investors
While gold shines brighter in this environment, declaring it the definitive replacement for US Treasuries and the dollar as the world’s safe-haven investment may be premature.
The reality is that Trump’s unpredictability cuts both ways, sending markets into a tailspin when taking investors by surprise and then prompting sharp rallies when he backtracks on those decisions. “A clear pattern has emerged when it comes to Trump’s tariff strategy – hefty tariff threats soon followed by tariff pauses during which negotiations ensue,” notes analyst Tim Waterer.
Given this uncertainty and the fact that it will take some time to establish the safe-haven investments of the future, diversification has emerged as the new safe haven from the storms. Rather than betting everything on gold, investors should ensure they are spreading the risks across multiple asset classes and geographies. In Trump’s world, the only certainty is uncertainty, making a well-diversified portfolio the most reliable shelter from the storm.
If you have any further questions about how all of this affects your investment portfolio, please give us a ring.
Disclaimer – *The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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