• Markets misprice uncertainty, creating opportunities for long-term investors
• Falling markets improve valuations for high-quality businesses
• Gold is a long-term asset driven by policy cycles and currency debasement

Periods of heightened uncertainty tend to unsettle markets — and for good reason.

When investors struggle to assess how long disruptions will last, or how far second-order effects will reach, asset prices adjust quickly.

Energy costs rise, inflation expectations shift, and concerns around global growth begin to surface. In more extreme cases, the market starts to price the risk of stagflation — a difficult backdrop for equities.

But this is where the dynamic becomes more interesting.

For long-term investors, periods like these are often when the best opportunities begin to emerge — not in spite of uncertainty, but because of it.

Markets have a tendency to misprice uncertainty.

In doing so, they frequently push high-quality assets to levels that are far more attractive than the underlying fundamentals would suggest.

Fortunately, there is no shortage of quality businesses to own.

However, over the past few years, many of these companies have traded at elevated multiples — often well above 30x forward earnings (see this related post as to why stock valuations matter)

Even the broader S&P 500 Index has, at times, hovered in the low-20s on a forward basis — a level that has historically been associated with more muted long-term returns.

As prices adjust, that equation begins to change.

And the lower markets move, the more compelling those opportunities can become.

S&P 500 – Room to Fall

Putting aside the fundamentals — occasionally we check in with momentum.

The chart is only useful for one thing – how traders are feeling. That is, the chart tells us nothing about if we are getting value (which is far more important over the long-term). 

On a weekly basis, momentum for the S&P 500 has sharply declined. 

I would argue momentum was lost well before the war started – as I highlighted the negative divergence we saw against the RSI (lower window). 

It was making a series of lower highs vs the price making higher highs. This is often a precursor for lower prices. 

Sketched in white is the rising 8-10% CAGR trend channel from 2008. 

The key is knowing where we are in the channel. 

Ideally you want to buy towards the lower third. 

Now on occasions the index will break either side of this defined channel. 

More recently – stocks moved to the upper band – as investors piled into tech names (the Mag 7) – paying very high multiples – pushing the Index higher. 

But that trade is now reversing. 

It"s my view we see the Index move back towards the mid-point (~6,000) and possibly lower (pending how long the war goes without resolution) 

What I"m also watching closely is the weekly RSI (lower window). 

Ideally I would like to see this indicator move below 30 — which is typically a good longer-term buying opportunity. 

And whilst the RSI is nota good indicator of timing a bottom (i.e., stocks will often fall a lot further than you think) – generally it favours a better risk/reward.

For now, keep some powder dry – ready to strike on either:

(a) buying the Index (e.g., with the ticker VOO); or
(b) higher quality names.

As equities adjust to this uncertainty, capital doesn"t disappear — it rotates.

One of the primary destinations is often gold.

Gold: A Crisis Hedge

With stocks selling off – I"m often asked if gold is a good hedge. 

As a rule of thumb – I think it"s always prudent to own in the realm of 5-7% gold in your portfolio. 

In short, it"s insurance against things such as:

• Economic downturns;
• Geopolitical events;
• Inflation and currency debasement
• Reckless fiscal policy from government

And the proof is in the numbers.

Over the past 100 years – gold has averaged a return of ~7% per year (in nominal terms — more on this shortly when we examine the 50-year chart). 

To be clear, there are many years where gold has performed poorly.

However, through all its volatility, the average return is in the realm of mid-single digits over many decades.

Now gold is often described as a "crisis hedge" — an asset that retains value when uncertainty strikes.

But the story is more nuanced…

Recent events in the Middle East illustrate that gold can be highly volatile, even when geopolitical tensions soar. 

For example, after reaching record highs earlier this year, gold lost ~20% of its value, defying conventional wisdom.

This isn"t new…

The 1970s, the early 2000s, and the post-Global Financial Crisis period all saw sharp surges and sudden declines in gold prices.

During periods of extreme market uncertainty, even traditional havens can amplify volatility rather than dampen it.

And just like any other asset class — investors need to understand the underlying drivers.

For example, blindly assuming that gold will protect portfolios in times of crisis can lead to disappointment.

Gold (and Tech) Mania

One striking pattern is how gold"s recent surge mirrors historic speculative episodes.

Analysts have compared the trajectory of gold in the past year to the Nasdaq Composite in the late 1990s, leading up to the dot-com bubble.

Let"s examine the 50-year chart over four periods: 

• During the mid 1970"s – gold saw an 8x increase in ~4 years.  The 1970s oil shocks and stagflation prompted investors to seek protection in gold.

• With inflation ~18% in the early 1980s – gold peaked at $800. Investors would not see gold back above this price until 2008 (i.e., 28 years without a return). Under Paul Volcker, the Fed tamed inflation with higher rates – pushing gold prices down sharply.

• Between 2002 and 2011 gold rallied from lows of ~$250 to hit ~$1900 in the space of ~9 years (~8x return). During the Global Financial Crisis, fears of currency debasement drove demand. But when inflation receded in the following decade, gold often lagged behind other assets.

• From 2022 – gold surged from ~$1600 to a brief peak of $5,600 ~4 years later – as traders feared further currency debasement – as governments struggle with historically high deficits and escalating debts. However, over the past ~2 months, the yellow metal has retraced ~20%

What lessons can we draw from this?

When a broad group of inexperienced investors piles into an asset based on narratives rather than fundamentals, corrections are almost inevitable.

In gold"s case, massive ETF inflows in Asia and elsewhere indicated enthusiasm that outpaced reason.

That trade is now mean reverting – catching many traders off guard. 

But when viewed over a long timeframe (i.e. decades) — we can see that bubbles follow predictable patterns: rapid appreciation, broad retail participation, and subsequent corrections.

Understanding these cycles — whether in tech stocks, real estate, or commodities — can help investors avoid the pain of buying at peaks.

I do think we will get a good opportunity to buy gold at more reasonable levels (if you don"t already have exposure).

From mine, that range could be closer to ~$3,500 to $3,800 (which would represent another good long term opportunity)

Perspective Over Panic

The story of gold in 2026 offers timeless lessons for investors.

Overbought markets correct, bubbles burst, and perceived safe havens can disappoint.

However, history also shows gold"s resilience.

For example, gold prices often rebound after corrections, just as they did in the 1970s and after the 2008 crisis.

Practical takeaways include:

• Focus on fundamentals, not narratives: Understand why you hold an asset. Is it inflation protection, currency hedge, or speculative exposure?
• Avoid chasing peaks: Rapid gains attract retail enthusiasm, which historically precedes reversals.
• Consider diversification: No single asset is impervious to shocks; a balanced portfolio can weather both geopolitical and economic storms.
• Use historical context: Patterns from past crises — from stagflation to financial crashes — illuminate how markets respond.

The sharp 20% correction in gold serves as a reminder: investing is as much about mindset and context as it is about timing.

Crises test assumptions and reveal blind spots.

By studying history and recognizing clear recurring patterns, investors can navigate uncertainty with perspective rather than panic.

Putting it All Together

Gold"s behaviour is not just a function of speculation — it is deeply rooted in macroeconomic forces.

Rather than acting as a reliable short-term hedge, gold is better understood as a long-duration, policy-driven asset — one that is highly sensitive to interest rates, currency movements, and shifts in central bank expectations.

When markets anticipate aggressive rate cuts, gold tends to rise, reflecting concerns around currency debasement. Conversely, higher rates and a stronger dollar typically weigh on gold — even in periods of geopolitical stress.

History reinforces this dynamic.

In the early 1980s, Paul Volcker aggressively raised rates to tame inflation, triggering a sharp decline in gold. Investors who bought at the 1980 peak would wait nearly three decades to break even.

By contrast, the era following the Global Financial Crisis — defined by ultra-loose monetary policy — saw gold rally meaningfully.

The pattern is consistent:

While geopolitical events may influence sentiment in the short term, it is monetary policy and currency dynamics that ultimately drive gold over the long run.