Unit 1 · Level 3 · Risk-on / risk-off
Flight to safety
The classic havens: US Treasuries, the dollar, gold, the Swiss franc. But shelters can leak. In March 2020 even gold and Treasuries dipped for days as funds sold anything liquid to raise cash. In 2022 government bonds had one of their worst years in decades, and stocks fell too. 'Safe' is a probability, not a promise.
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What you get asked
Why does the US dollar often RISE during global panics?
So much of the world's debt and trade is priced in dollars that crises create forced demand for them. The FX unit called it the world's crisis currency.
In March 2020, even gold briefly FELL during the panic. Why?
In a scramble for cash, you sell what you CAN sell, not what you want to sell. Even havens get dumped for a few days when liquidity is the emergency.
Match each haven to its honest track record
Each haven has a failure mode: Treasuries fear inflation, gold fears rising real rates, currencies fear their own central banks. Know the leak before you trust the roof.
In 2022 the classic shelter failed: stocks AND ___ fell together.
When inflation forces rates up fast, bonds fall WITH stocks instead of cushioning them. 2022 made that painfully clear.
The honest takeaway on safe havens:
Match the shelter to the storm: bonds for growth scares, gold for real-rate collapses, dollars for global funding panics. No single roof covers all weather. 🐜
The rest of this unit
Markets have two moods. Learn what rallies, what hides, and how fast the switch flips.