Nvidia Rivals Gold as Shield Against Inflation, Survey Shows

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(Bloomberg) — The biggest U.S. technology stocks are not only betting on innovation, they're also a potential hedge against inflation, according to some respondents in the latest Bloomberg Markets Live Pulse survey.

Gold, the haven of choice for decades, is still considered the best insurance against the risks of rising prices, according to 46% of survey respondents. But nearly a third said giant tech companies were their first choice for the role.

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The response highlights the dominant role played by companies such as Nvidia Corp., Amazon.com Inc. and Meta Platforms Inc. In the American financial markets, it expanded its influence over large areas of the economy. This has allowed them to achieve consistent profits, resulting in rallies that have investors confident that they will continue to be a source of strong gains.

U.S. inflation has fallen significantly from its scorching levels in 2022, but it beat economists' expectations through the first three months of the year and has remained stubbornly above the Fed's 2% target.

This has left higher prices overall a greater concern among investors. The majority of survey participants – 59% of 393 – cited the return of inflation as the top risk facing financial markets between now and the end of the year. The next CPI reading is due on Wednesday and is likely to be around 3.4%.

For example, Nvidia has risen more than six times since inflation first rose above 2% in March 2021. Even Apple Inc., which has seen peaks and troughs, has outperformed the broader market in that time frame, with Gained more than 50% for the S&P. 500 approximately 30% However, like other growth stocks, technology companies are sensitive to changes in inflation and interest rates, because their valuations depend largely on future earnings.

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About a quarter of survey respondents cited a U.S. economic recession as the biggest risk for 2024. In that case, Treasuries, not stocks, would provide a better shield, the poll shows.

Read more: We need to talk about recession risks again: MacroScope

The economy's surprising resilience despite the Federal Reserve's tight monetary policy has kept cash flowing into the United States, where bond yields are high and corporate profits continue to grow.

This influx has led to a renewed rally in the US dollar, which is overwhelmingly seen as the currency best able to weather times of market turmoil.

Nearly three-quarters of survey participants said that the dollar was the best safe-haven currency, with the Swiss franc receiving about 23% of the votes, while the Japanese yen received about six times less. Among participants from the United States and Canada, the dollar received 86% of the votes, while in Europe, 43% of participants voted for the Swiss currency.

The survey showed that the yen lost its status as a safe haven due to the decline in its value against the dollar and because of Japan's ultra-accommodative monetary policy. The widening gap between interest rates in Japan and the United States pushed the yen to its lowest levels since 1990 earlier this year.

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Read more: Gold's rise makes it look more like a hedge than a safe haven: Macro view

Gold is up nearly 15% this year with the People's Bank of China one of the biggest sources of demand. With the confiscation of Russian dollar assets following the war in Ukraine, many countries are trying to diversify their economies away from the dollar, with gold becoming the natural beneficiary. Only 13% of MLIV Pulse survey respondents said that the search for geopolitically misaligned assets has benefited Bitcoin.

The MLIV Pulse survey is conducted among Bloomberg readers on-platform and online by Bloomberg's Markets Live team. Sign up here to receive future surveys.

– With assistance from Simon White.

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