I don’t want to spook everyone managing their own retirement portfolio. But the London-based money managers, who successfully anticipated the dot-com collapse and the global financial crisis, are expecting an almighty stock-market crash — and are now holding nearly 60% of their flagship Total Return fund in cash and short-term bonds.
And cracks are starting to show in the U.S. economy, as well as economies elsewhere, they wrote. “COVID-era excess savings have been spent; consumer confidence is slowing; Q2 GDP growth and recent payrolls were revised lower; U.S. department stores are reporting rising credit-card delinquencies.
Since the start of August, the yield on the benchmark 10-Year Treasury note has risen by a fifth, from 3.96% to 4.74%. That is a staggering move in such a period. The S&P 500 SPX, so far, has dropped just 8% over the same period. The more volatile index of smaller company stocks, the Russell 2000 RUT, has fallen 14%.
, and the chairman recalls that he was early on both of those occasions as well: His funds underperformed in 1998-1999, and in 2006-2007, before the wheel turned. “That currency mismatch is making money for them — their contentment has turned to happiness,” Ruffer wrote. “You don’t have to be a genius to see that, in a crisis, everyone will de-risk; that will include neutralizing currency mismatches, and end the happiness. In a crisis, we expect to see a strong upward move in the yen.” In 2008, he added, it rose by a third against the dollar.
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