The Daily Telegraph

Gold is sure to keep shining while fears of a stock market bubble grow on Wall Street

The precious metal’s defensive qualities make it a worthwhile holding as investors push shares in America’s ‘magnificen­t seven’ even higher

- ROBERT STEPHENS QUESTOR WEALTH PRESERVER Update: Astrazenec­a While Astrazenec­a’s shares have risen by 39pc and outperform­ed the

Wall Street’s recent surge to a new record high has prompted some investors to declare it a bubble ready to burst. They argue that heightened political risks, sticky inflation and global economic challenges are not fully reflected in share prices.

Others reject the idea that the S&P 500 is grossly overvalued. They point to the growth potential offered by major technology companies, impending interest rate cuts and the US economy’s strong recent performanc­e to justify today’s sky-high market valuations. In Questor’s view, it is impossible for anyone to predict whether further record highs or a market crash are ahead because of the infinite number of variables that can affect share prices in the short run. Bubbles have previously always burst, but have often lasted for longer than many investors expected.

Therefore, it seems logical to maintain significan­t exposure to shares but ensure that individual holdings continue to offer fair value for money on a case-by-case basis. Furthermor­e, keeping our Wealth Preserver portfolio’s existing allocation to gold is likely to be a sensible move. The metal has historical­ly provided a degree of ballast during periods of elevated stock market volatility, hence its “safe haven” status. It is therefore likely to be a popular option among fearftse riddled investors during any prospectiv­e market crash, which would be good for its price.

Moreover, the gold price is likely to be helped by expected interest rate cuts because they reduce the relative appeal of income-producing assets such as cash and bonds. Should lower rates fail to materialis­e in the short run owing to persistent above-target inflation, gold’s status as a store of wealth is also likely to mean it produces favourable returns.

Indeed, the metal has generated a gain of 31.4pc in sterling terms since we added it to our portfolio in April 2021. Although it has benefited from favourable currency effects during that time, the bulk of our return is from a price rise in dollar terms. Its performanc­e is well ahead of inflation – price rises amount to roughly 19pc during the holding period – and is significan­tly better than Bitcoin’s 15.1pc gain in the same period.

Clearly, gold’s short-term returns could be dwarfed by a surging stock market as investors continue to pile into the likes of Nvidia, the AI chip maker. Ultimately, though, it is likely to be viewed as a highly-prized holding if the tech bubble on Wall Street eventually bursts. Hold. 100 by 34 percentage points since we tipped them in August 2019, they continue to offer excellent value for money.

The drugs maker trades at around 18 times earnings but, according to its full-year results released last month, should produce percentage growth in revenues and earnings in the low double digits or low teens in the current year. When combined with its relatively defensive characteri­stics, which are further enhanced by a solid financial position, its risk/reward trade-off remains highly appealing.

The annual results were somewhat disappoint­ing and prompted a 6pc share price decline on the day. This was largely because the company missed analysts’ earnings expectatio­ns: earnings before interest, tax, depreciati­on and amortisati­on (Ebitda) were $13.5bn (£10.6bn), against analysts’ average forecast of $14.5bn, as a result of heightened costs associated with the launch of new drugs.

Encouragin­gly, revenues rose by 6pc during the year. When the impact of a decline in Covid medicines is excluded, sales were up 15pc, while revenues for its key oncology and cardiovasc­ular, renal and metabolism segments both rose at a double-digit pace. Astra also raised research and developmen­t spending by 15pc. It now amounts to 24pc of revenue, against 23pc in the previous year, as the company remains on track to launch at least 15 new medicines by 2030.

Astrazenec­a is a relatively recent addition to our Wealth Preserver portfolio; we bought it in December. While its share price has fallen by 2pc since then, the company offers significan­t long-term capital growth potential. Its attractive valuation, growth opportunit­ies and defensive qualities mean that index-beating performanc­e is ahead. The stock is a hold as it is already in our portfolio, but readers without a holding may want to consider a purchase.

‘It is impossible to predict whether record highs or a market crash are ahead – there are infinite variables’

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