Fritz Folts says the risk-happy investment landscape in recent years is quickly shifting to one that favors safer assets like gold.
According to a recent article on Bloomberg, a veteran fund manager with over three decades of experience has lost his appetite for ETFs and is moving into gold. Fritz Folts currently acts as chief investment strategist and managing partner at 3EDGE Asset Management, where he oversees $800 million in assets. The firm started in January 2016 with $100 million under management, and has since averaged an annual return of 9.03% in its portfolio.
During their early days, the firm focused heavily on emerging-market ETFs and country-specific funds and made several profitable bets along the way. But the article reports Folts no longer sees this strategy as prudent and has slashed his positions in stock-backed funds while eliminating his exposure to emerging-market ETFs.
Folts' reasoning is straightforward – he says that the risk-happy investment landscape in recent years is quickly shifting to one that favors measured bets and safer assets. In fact, 2017 is an example of how growth momentum and optimism from investors can combine to propel a market sky-high, as equities kept reaching new peaks throughout the year.
In 2018, the senior money manager sees growth diminishing across the board and investors becoming wary of over-exposure to risk. The article states the latter has become that much more apparent by this year's sharp tumbles in the stock market, which were concerning enough to elicit a response from the White House.
In a phone interview with Bloomberg, Folts shared his view that gold is becoming the asset to own in this new environment. To him, the metal is the best way to absorb external shocks and combat the rise in volatility. Gold has gained 1% over the past month, aided by geopolitical tensions and the possibility of a trade war between the U.S. and various other top economies.
What started as an increase in tariffs on metal imports by President Trump escalated into a back-and-forth between the U.S. and China, sparking concerns that the global market could suffer as a result, reports the article. The European Union likewise responded negatively to Trump's restrictions, threatening to retaliate in kind should the policy continue. These events placed further pressure on the stock market, which was already showing its first cracks, and reignited interest in precious metals.
Folts is also bearish on debt and expects rising rates to continue pushing bonds down. Absent a particularly strong corporate earnings report or an abrupt change in the Fed's rhetoric, he sees little reason to place faith in stocks and speculative ETFs, especially given gold's strong performance as of late.
"We will definitely have more volatility this year," he added. "And gold can help us there."
