The election of Donald Trump to the US presidency in November 2016 sent shockwaves throughout the world. The great majority of political pundits, economists and the public at large had until then underestimated the chances of the New York billionaire to take the White House. The Trump victory has also been a wake up call for investors, who began envisioning a world characterised by increasing protectionism, trade wars, and economic nationalism.
Understanding what scenarios lay before us is of great importance to private individuals
and professional investors alike. The questions to answer are:
• Is populism taking over global politics?
• If yes, what are the potential political and economic effects?
• How can I protect my assets and improve my investment returns in this scenario?
• How can fancy coloured diamonds increase my returns, diversify my portfolio and protect
my wealth in this scenario?
First of all, the rise of a populist political tide is not a uniquely American phenomenon, rather an increasingly global one. Europe is seeing a rapid gain in the popularity of far-right movements, characterised by their anti-EU, anti-trade and anti-immigration positions. While Poland and Hungary are already led by far-right heads of state, France could likely experience the victory of the National Front in the Presidential runoff elections in May 2017. In Asia too, with clear examples such as Duterte in the Philippines and Erdogan in Turkey, investors are increasingly weary of increased government intervention coupled with falling economic freedom. The end result of such policies is always inflation, weaker growth and geopolitical instability. Looking at history can show us the past effect on asset prices of such periods and the 1970s is one of the best examples.
The 1970s, like today, were a period of increasing political and economic unrest in the USA and Europe. The decade was marked by dollar devaluation, the OPEC oil crisis of 1973 and increasing inflation rates. Historically, diamonds have represented a fantastic hedge against the effects of inflation and geopolitical instability. So it is not a coincidence that the 1970s were a period of strong performance for diamonds. The per carat diamond price moved from $6,900 in 1970 to $10,500 in 1980, an increase of 67%. This is almost four times the performance of the S&P 500 equity index, which rose only 17.3% during the same decade. Today, we are facing a similar situation in many ways.
Currency instability is already on the rise in many parts of the world. The Brexit vote of June 2016 brought a swift 20% fall in the British Pound against the US Dollar and the Euro within weeks, wiping out £100s of billions from the net worth of British households. Many emerging markets have experienced even larger falls. Turkey, Brazil and India, suffering from falling GDP growth and increasing debt, have seen their currencies all fall by more than 40% against the USD since 2014. It is not a coincidence that in May 2016 a rare 15.38 carat pink diamond was sold at a Sotheby’s auction to an Asian buyer for the record sum of $31.6 million.
Increasingly more High Net Worth individuals, from both developed and emerging markets, are interested in safe, tangible investments as a protection from financial instability.
Research by consultancy CapGemini and investment bank Barclays convincingly shows that during crises High Net-Worth investors want to invest in high value hard assets like fancy coloured diamonds. In addition, fancy coloured diamonds are among the least correlated of all assets. This provides excellent value to diversify the rest of your portfolio. If for, example your assets are heavily concentrated in real estate or equities, as is the case of most UK investors, fancy coloured diamonds are an excellent addition to reduce your portfolio volatility and boost your overall returns. It is therefore not a surprise that fancy coloured diamonds have already began to experience spectacular price increases. From the start of 2009 to Q3 2016 the price of pink diamonds has increased nearly 180% and is now at record highs. Blue and yellow diamonds are up by around 70% and 90%, respectively, according to data from the Fancy Color Research Foundation. Going back to 2002, the performance is even more impressive, with Fancy Light Pink diamonds delivering 20% every year in 2002-2012 and Fancy Intense Yellow diamonds 18% per year over the same period. As a comparison, the S&P 500 index over the same period delivered less than a 2% annual return, with far higher volatility. The performance of fancy coloured diamonds is even more remarkable considering that this period includes the great financial crisis of 2008-2009, when financial assets collapsed in value.
And today, almost 9 years on, your savings are in potentially even great danger. They are facing the triple threat of inflation, political instability and economic stagnation. Add to this the risk of populist politicians raising taxes, limiting capital flows and strangling economic growth. This is not a scenario where you want to invest your wealth in stocks, real estate, currency savings or other “paper” assets which can be taxed heavily (in the best case) or confiscated (in the worst case).
With increasing social strife, creeping inflation and economic stagnation characterising 2017 so far, the demand and price performance of fancy coloured diamonds is likely to remain strong. Remember, when you invest in fancy coloured diamonds, you are exchanging paper currency for an extremely rare, tangible form of wealth that cannot be taxed, confiscated or replicated. An investment in fancy coloured diamonds can be your lifeguard to keep the purchasing power of your savings from disappearing during uncertain times.
Find out today how Argyle Assets can help you protect and increase your wealth by investing in Fancy Coloured Diamonds. Call at 0207 8560 315 or e-mail at email@example.com for a FREE consultation to help you find the best solution to your investment needs.