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Why does the stock market’s downside exposure make gold a safe haven?

*Dow Theory Letters, by Richard Russell, January 26, 2009

“Since its October 11, 2007 bull market peak, the S&P has lost over 52.9% of its value. That represents one of the greatest losses in a limited amount of time in stock market history. It should be noted that historically, bear markets tend to last one-quarter to one-third as long as the preceding bull market.

The bull market of 1982 to 2007 lasted 25 years. This means that the current bear market could last 6 to 8 years or to 2013 to 2015. So far, the current bear market, even if it halts here, must be labeled a major bear market. Historically, most bear markets end with stocks selling ‘below known values.’  In the past, ‘below known values’ has meant the Dow selling at 5-7 times earnings while the dividend yield was 6% or more. If that is to be the case for this bear market, we can expect the Dow to decline to at least the low 5000s.”

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.