Episode summary
Why Gold Is Money Again: Rethink Traditional Portfolio
The Meb Faber Show
· · Hosts: Meb Faber · Guests: Inigo Fraser Jenkins
Summary
Inigo Fraser Jenkins argues that US equity exceptionalism can persist even if the dollar’s reserve-currency status becomes less secure. He points to AI adoption, flatter US working-age population trends relative to Europe and China, and the long-term rise in US corporate profit share as reasons American equities can keep outperforming other regions. At the same time, he is much less willing to defend the dollar, citing fiscal strain, debt-service pressures, and geopolitical incentives for countries to reduce dollar dependence.
He is bearish on the old 60/40 playbook. Inigo says long-duration government bonds are unlikely to provide the same diversification benefit they delivered in the last two decades, because the long stretch of negative stock-bond correlation was historically unusual. He expects a higher-inflation regime, driven by deglobalization, debt monetization risk, and climate pressures, but not runaway inflation; his base case is something closer to high-2% to 3% inflation.
Against that backdrop, he argues investors need more emphasis on real returns and cross-asset diversification. He is constructive on gold as a strategic holding because he sees it as money rather than a commodity in this environment, and he also sees room for healthcare, energy, selected commodities, and even a small Bitcoin allocation as part of a broader non-fiat hedge.
Key takeaways
- Inigo Fraser Jenkins favors US equities over foreign stocks because AI, demographics, and persistent profit-share strength still support relative US earnings power.
- He declines to defend dollar exceptionalism, citing fiscal strain, geopolitical weaponization of the dollar, and incentives for de-dollarization.
- He argues long-duration government bonds may no longer diversify equities the way they did over the last 20 years, because the recent negative stock-bond correlation was historically unusual.
- His base case is higher equilibrium inflation, roughly high-2% to 3%, but not unanchored inflation.
- He thinks gold belongs in strategic portfolios because its correlation with equities is close to zero and it is increasingly functioning as money rather than a commodity.
- He sees healthcare as an attractive defensive equity sector, with demographic support, possible AI benefit, and still-reasonable valuation versus the market.
Notable quotes
“I would like to take the view I'm not sure whether it's popular or not but to defend US equity exceptionalism but to decline to defend dollar exceptionalism”
“Gold is actually no longer a commodity. Gold is money in this kind of environment”
How the episode opens
AI presumably does raise productivity, but the central case of that is that it just keeps us running at the growth rate that we've seen in recent decades, not an extra uplift to growth. Gold is actually no longer a commodity. Gold is money in this kind of environment.
If you look at the sectors where AI is expected to make the biggest difference with our sector being number one on the list and then overlay it with unionization rates in different sectors then it looks starkly different from attempts at automation in say heavy industries, auto industries etc in the last 20 or 30 years. So it implies in the near term at least I think we should expect some level of job dislocation. If you rank markets by market cap in 1899, then obviously US works spectacularly well and the UK worked reasonably well too.
The next six or seven went to zero, sometimes more than once. Today's guest is Indigo Fraser Jenkins, chief investment strategist at Alliance Bernstein. Indigo, welcome to the show.
Thank you for having me on. I figure we'll start with US exceptionalism and you talk about that, defend the case, pros, cons, all that. You want you want to start here?
I think we need to split up the topic really into two. So there's the question about the US equity exceptionalism and then there's a dollar and these are two slightly separate things and I would like to take the view I'm not sure whether it's popular or not but to defend US equity exceptionalism but to decline to defend dollar exceptionalism. So I guess we have to unpick those things and why they're not necessarily the same kind of thing.
I mean I guess the reasons you know why we want to defend US exceptionalism even after years of out performance and potentially you know high valuations come down to a few things.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- us equity exceptionalism
- dollar reserve status
- gold vs bonds diversification
- equity concentration and valuations
- ai and economic growth
Companies and tickers mentioned
- AllianceBernstein
Watch the episode
Watch “Why Gold Is Money Again: Rethink Traditional Portfolio” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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