Looking in the rearview mirror won’t tell you where we’re going, but it will provide absolute clarity on what’s come and gone. The conceit in giving historical analysis more than passing reference is that maybe, perhaps we can glean clues about the future despite all the compelling evidence to the contrary.
Yes, the jury’s forever out on the value of looking back, but it lends a veneer of credibility to an art form that’s always in need of a plausibility boost. With that caveat, we’re about to engage in activity that, by our own definition, is questionable.
If anyone’s still reading, we refer you to the chart below, which shows that oil and gold have been in the lead over U.S. equities and the dollar, as defined by the U.S. Dollar Index. What lessons can we draw from said chart? One is that investors (or at least gold traders) are increasingly concerned with inflation.
Inflation, as officially calculated by the Department of Labor, has risen by around 3% in the past five years. By that measure, one could be forgiven for yawning at the idea that inflation’s a growing threat. On the other hand, gold has paid no mind to official government numbers and instead has climbed by nearly 16% a year since 2002. The greenback, in its usual role as moving inversely to gold, has lost roughly 5% a year over the same stretch.