Jefferies strategist Christopher Wood has drawn attention to a stark divergence in market performance. Since early 2023, the S&P 500 has doubled when measured in US dollars. Yet when measured against gold, the index has fallen 21%.
The observation underscores how differently the same asset can appear depending on the yardstick used. For investors who think in dollar terms, the rally has been remarkable. For those who measure wealth in gold, the picture is far less rosy.
What is driving the divergence?
Gold has risen sharply over the same period, outpacing the S&P 500 by a wide margin. This means that while the dollar value of US equities has climbed, their purchasing power in terms of gold has declined.
Wood warns that efforts to suppress US bond yields could further weaken the dollar. If the dollar loses value, alternative assets such as gold and Bitcoin may benefit. His comments come as central banks around the world continue to accumulate gold reserves, adding to demand pressure.
Implications for gold investors
The divergence highlights a risk that is easy to overlook when focusing on nominal dollar returns. Gold acts as a store of value that is not tied to any single currency. When the dollar weakens or inflation erodes purchasing power, gold often holds its ground.
For those tracking the live gold price, the data serves as a reminder that currency moves matter. A stock market rally in dollar terms does not necessarily mean real wealth has increased if gold has risen even more.
Key takeaways
- The S&P 500 has doubled in dollar terms since early 2023 but fallen 21% in gold terms.
- Christopher Wood of Jefferies warns that suppressing US bond yields could weaken the dollar.
- A weaker dollar tends to boost alternative assets including gold and Bitcoin.
- The divergence shows how currency moves can dramatically alter perceived returns.
Common questions
Why does the S&P 500 look different in gold terms?
Gold has risen faster than the S&P 500 since early 2023. When you convert the index value into ounces of gold, the purchasing power of the S&P 500 has declined by 21%.
What does Christopher Wood mean by suppressing bond yields?
Central banks or governments may try to keep bond yields low through policy measures. Wood suggests this could reduce the attractiveness of the dollar and push investors toward gold and other alternatives.
The divergence between dollar and gold returns is a useful reminder that the choice of measurement matters. Whether the S&P 500 has performed well depends on whether you count in dollars or in gold.