February 23, 2024

Kara Gotkins | Bloomberg | Getty Images

Americans are bullish on gold and bearish on stocks — and that might work against them.

According to a recent Gallup survey, 26% of Americans rank gold as the best long-term investment in 2023, almost double the 15% in 2022 polling.

That share outpaces stocks: 18% of Americans rank stocks as their most important long-term holding, down from 24% last year, the survey showed.

This is the first time since 2013 that they have a lower view on stocks than gold. Both rank after real estate.

More from FA Playbook:

Here are other stories impacting the financial advisor business.

Gallup, which surveyed a random sample of 1,013 adults between April 3 and 25, said that while Americans were asked to gauge long-term sentiment, public perception was driven more by short-term differences in investment performance. The impact of fluctuations.

This near-term bias can be dangerous for investors saving for goals like retirement, which could be decades away.

“As a long-term investment, (gold) is a very poor solution,” says Charlie Fitzgerald, a certified financial planner and principal at Moisand Fitzgerald Tamayo in Orlando, Florida.

“It’s more of a guess,” he added.

Stocks outperform gold in the long run

Stocks are often the long-term growth engine of a portfolio, financial advisors say.

this S&P 500 Stocks Based on an average annual total return of 10.43% from 1970 to 2022 analyze Provided by Securian Asset Management. Gold has returned 7.7% over the same period. (After the end of the U.S. gold standard in 1971, the price of gold was no longer fixed, making the early 1970s a good starting point for comparing prices.)

The price of gold, often considered a safe haven, typically rises during times of fear and economic downturn. Gold prices, for example, surged to multi-year highs early in the Covid-19 pandemic and soared after Russia invaded Ukraine.

The SPDR Gold Shares ETF (GLD) — an exchange-traded fund that tracks the price of gold — is up 8.6% so far in 2023. S&P 500 Index rose 7.6%.

Investors’ enthusiasm for gold comes from the recent turmoil in the banking sector and the Federal Reserve’s aggressive interest rate hikes since early last year to curb high inflation. The U.S. central bank, the Federal Reserve, expects the country to slip into a mild recession later this year.

Meanwhile, 2022 is Wall Street’s worst performance since 2008, with the S&P 500 down more than 19%. U.S. bonds have had their worst year in history.

The impasse over the debt ceiling means the US is also considering the possibility of not being able to pay its bills for weeks – for the first time in the country’s history and potentially sparking economic chaos.

“Gold is doing well right now because of the current economic conditions,” said Ivory Johnson, CFP and founder of Washington-based Delancey Wealth Management.

Johnson, who sits on CNBC’s advisory board, has spent the past year or so recommending more gold to clients.

However, Johnson said it was more of a short-term holding — a hedge for investors when both gross domestic product (a measure of U.S. economic output) and inflation are decelerating, as they are now. If GDP starts to rebound, he usually recommends selling gold and buying growth stocks instead.

“Gold is not a long-term investment,” Johnson said. “It’s not something you just put in your portfolio and leave it there.”