At this delicate conjuncture for markets, bonds, money market funds and gold are the international investors’ sanctuaries. The uncertainties about economic growth, the (often proven) fears that big companies are engaging in creative accounting to inflate profits, experts’ estimates that shares are generally overvalued and the possibility of a military strike against Iraq are some of the complicated factors contributing to the present climate of uncertainty. Investors are attracted to traditional safe havens: Bond prices have rallied like shares usually do, money market funds are drawing huge amounts of capital and the price of gold has rallied to levels not seen in years. Globalization Stocks are now the markets’ black sheep. As we all know, our own market, the Athens Stock Exchange, has been declining for just over three years now. But for the duration of the crisis, other mature markets in Europe and America are not in much better shape. The London, Paris, Frankfurt and New York bourses, among others, are back to 1998 levels, or worse. Institutional investors’ portfolio managers appear very reserved about making predictions, even for the near future. Many analysts decouple stock prices from what is happening in the real economy. They believe that, worldwide, stock prices are inflated and that a correction is inevitable, irrespective of actual economic developments. The rapid decline in stocks has shifted funds toward bonds, «steady-state» mutual funds such as securites, money market funds and gold. The latter began its rally last month at $250 per ounce and has now risen to over $320. In its wake, mutual funds based on the price of gold also benefit. The bond rally The rally in international bond prices began in May. Even the daily fluctuations are more like those of stock markets. The (negative) correlation of bond and stock markets is remarkable. When the one is depressed the other thrives, a sign of how quickly capital shifts from one to another. In both Europe and the United States, bond prices are near their post-September 11 highs, when investor sentiment was at its darkest. The same holds true for the domestic bond market, where trading is breaking records. In August, the secondary electronic bond market (HDAT) set a new record in the value of transactions with 57.23 billion euros, breaking the old record of 56.69 billion set in November 2001. This rise is also reflected in bond funds, which, after a particularly shaky start to the year, now show satisfactory yields. Change in tactics Experts are not in agreement about the future course of bond prices. Some say bond prices may have risen too high and there is a danger that investors may be buying high and will be forced to sell low at some future point. Institutional portfolio managers say that developments do not warrant such high bond prices. Greek investors, having turned their back on the ASE, are adopting a wait-and-see posture. During the summer, outflows from domestic equity funds reached 35 million euros and liquidations of shares in securities funds reached 240 million euros. This latter move must be attributed to their poor performance earlier in the year; in the first quarter of 2002, the average securities fund’s yield was minus 0.51 percent, as a result of the decline of bond prices in the HDAT. This decline was a unique experience for investors, who had lived for many years on the assumption that securities funds provided a steady income. Investors are flocking to money market funds, more supple in their management, which provide satisfactory yields in a short space of time. Thus, during the summer, about 200 million euros was invested in money market funds. Golden takeoff However, the most impressive yields were found in funds that are based on gold. There are such funds in Europe and the United States with sky-high yields. The annual yield of First Eagle SogeGold was at 91.84 percent at the end of last week; that of Tocqueville Gold, at 80.40 percent; and VaEck Int’l Investors Gold A was yielding 77 percent. Uncertainty about the global economy and the specter of war have created intense interest in precious metals. Analysts, however, warn about a possible correction in this category as well.