Group 1 - Major stock indexes are nearing all-time highs, prompting some investors to consider protecting their gains against potential market downturns [1] - For investors lacking the time or expertise to manage their own hedging strategies, certain ETFs are available to assist [1] - Fred Piard, a quantitative analyst with over 30 years of experience, runs an investing group focused on quality dividend stocks and tech innovation [1] Group 2 - The investing group also provides market risk indicators, real estate strategies, bond strategies, and income strategies through closed-end funds [1] - Fred Piard has been investing in data-driven systematic strategies since 2010 and is the author of three books [1]

Investment Rating - The report recommends positive optimal allocations to both gold and enhanced oil futures in long-run portfolios as strategic hedges [4][55]. Core Insights - The report concludes that positive long-run allocations to gold and enhanced oil futures are optimal for minimizing risk or tail losses in equity-bond portfolios [2][10]. - Gold serves as a hedge against losses in central bank and fiscal credibility, while oil protects against negative supply shocks [2][10]. - Historical data shows that during any 12-month period when real returns for both stocks and bonds were negative, either gold or oil provided positive real returns [9][13]. Summary by Sections Strategic Case for Gold and Oil - Investors are seeking protection for equity-bond portfolios due to recent failures of US bonds to hedge against equity downside and rising borrowing costs [2][7]. - The report emphasizes the importance of gold and oil as hedges against inflation shocks affecting portfolio returns [2][10]. Recommendations for Long-Term Portfolios - A higher-than-usual allocation to gold is recommended due to risks to US institutional credibility and increased central bank demand [2][41]. - A lower-than-usual allocation to oil is advised because of high spare capacity and reduced risk of shortages in 2025-2026 [2][50]. Tactical vs. Strategic Positioning - For tactical positioning (0-2 years), the report suggests using oil puts to hedge against recession risks and benefit from increasing oil supply [2][54]. - For strategic hedging (5+ years), it recommends going long on gold and maintaining a positive but underweight position in oil [2][54][55]. Historical Performance Analysis - Historical analysis indicates that adding gold and enhanced oil futures to a 60/40 equity-bond portfolio can reduce volatility significantly [20][23]. - The report highlights that gold and oil futures have historically provided diversification benefits due to their low correlation with equities and bonds [26][29]. Expected Returns and Risks - The report forecasts a potential gold price increase to $3,700 per ounce by year-end and $4,000 per ounce by mid-2026 due to institutional credibility concerns [43][49]. - It also notes that while oil shortages are less likely in the near term, long-term risks remain due to potential supply growth slowdowns from 2028 [50].