Looking to Protect Your Wealth In Crazy Markets? Here's How.
Mar 14, 2025
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Sebastian Lyon, founder and chief investment officer of Troy Asset Management, dives into safeguarding wealth in unpredictable markets. He shares insights on the challenges faced by the UK investment trust industry due to low interest rates and offers a hopeful outlook for its recovery. Lyon discusses the nuances of American investment strategies, urging caution, while highlighting gold's enduring value against the backdrop of fluctuating economic conditions. Get ready for practical tips and a thorough exploration of investment strategies!
The podcast emphasizes the importance of diversifying investment strategies beyond traditional bond-equity models to navigate current high inflation and rising yield environments.
A significant discussion revolves around gold as a safe-haven asset, highlighting its increasing demand amid geopolitical tensions and the shift away from the U.S. dollar.
Deep dives
Investment Trust Performance and Challenges
The podcast discusses the current performance of the Monks Investment Trust and emphasizes the trust's long-term strategy to help investors grow their wealth through a three-dimensional approach: cyclical, rapid, and steady growth. In particular, it highlights the pioneering role of Troy Asset Management, which has successfully managed the Personal Assets Trust since 2009, achieving a 204% increase compared to the UK retail price index's 85% rise over the same period. The discussion also addresses recent challenges in the investment trust sector, notably disruptions caused by the Saba saga, where liquidity issues and discounts have affected several trusts. Furthermore, there is an optimistic outlook for the sector, suggesting that mergers and improved governance practices could strengthen the investment trust landscape moving forward.
Cautious Outlook on Investment Trust Issuance
The conversation further explores investment trust issuance trends over the past decade, where £25 billion of new shares were issued as investors sought higher yields in a low-interest-rate environment. However, with the recent increase in interest rates and inflation, the demand for these investment trusts has dwindled, leading to liquidity challenges. The podcast emphasizes that many trusts failed to manage the related risks effectively, making it hard for investors to liquidate their investments when needed. Going forward, the need for caution is underscored, as market dynamics shift and value remains elusive for smaller and illiquid trusts.
The Role of Gold in Investment Strategies
A significant portion of the discussion centers on gold as an essential component of an investment strategy, as it remains a preferred asset for preserving wealth. The podcast points to a notable shift in gold market dynamics, driven by increased buying from central banks, which changes the historical reliance on the U.S. dollar as the primary reserve currency. It is noted that the demand for gold has spiked since the 2022 geopolitical tensions, accentuating its role as a safe-haven asset. Maintaining a solid position in gold bullion rather than gold mining stocks is deemed prudent, as mining operations can be unpredictable and affected by various factors.
Macroeconomic Trends and Investment Diversification
The podcast highlights ongoing macroeconomic trends, particularly the persistence of high inflation and rising yield environments, marking a shift from the historical bond bull market. Investors are encouraged to adjust their portfolios to diversify beyond traditional bond-equity pairs, as these have proved less reliable amid current conditions. Observations are made regarding the moving investment focus from the U.S. towards undervalued European markets, with firms considered strong candidates for future growth. The impact of fiscal policy changes and increased defense spending are also tied to inflationary pressures, shaping the investment landscape as it evolves in response to global events.
Troy Asset Management founder Sebastian Lyon joins Merryn this week to talk strategies for protecting your capital in these crazy markets. They also discuss how the low interest-rate environment hit the UK investment trust industry hard, and the way he sees it rebounding, as well as American exceptionalism and why there are good reasons to be cautious about investing in the US, and his outlook for gold.