Applying hedges during periods of economic stagnation or decline can best be compared to taking out an insurance policy to offset, or more likely, to try and mitigate adverse market movements in riskier assets such as stocks, corporate credit and real estate. Hedging does not come without risks as the both the choice of product and timing of when the trade is entered will have a major impact on its potential success. A good hedge is finding an asset where correlations to other asset classes decreases during recessions. Studies have found that gold’s correlation with stocks breaks down during recessions. This means ... (full story)