Stocks versus gold: what really protects capital today

SP500

Key zone: 6,900 - 7,000

Buy: 7,050(on a confident breakout of the 7,000 level); target 7,150; StopLoss 7,000

Sell: 6,880(on strong negative fundamentals); target 6,880-6,850; StopLoss 6,930

Investment sentiment in global markets is shifting into negative territory: stock indices are correcting, the precious metals market has entered a decline phase, and traditional currency “safe havens” no longer provide unequivocal protection. Amid aggressive fundamental pressure, virtually all asset classes are showing declines, and defensive instruments are no exception.

In such conditions, it is logical to consider non-traditional forms of hedging, including within the equity market itself.

In recent weeks, markets have gone through a phase of sharp risk reduction: participants cut positions in major instruments and increased their cash holdings. The situation was exacerbated by a wave of forced selling driven by margin requirements. The pressure proved especially strong in sectors sensitive to the cost of capital and corporate earnings expectations, primarily in the technology segment. As a result, index dynamics began to reflect the overall transition of the market into a defensive mode.

Gold and silver also moved into a correction after strong growth at the beginning of the year. This once again confirmed that during periods of liquidity stress even defensive assets can decline if investors simultaneously take profits and reduce positions. The cryptocurrency market found itself in an even more vulnerable position and demonstrated a large-scale падение, from which it is unlikely to recover quickly.

Against this backdrop, consumer sector stocks turned out to be unexpectedly resilient, with the most illustrative example being McDonald’s.

During the broad sell-off, McDonald’s (MCD) shares showed calm dynamics without sharp drawdowns and without signs of overheating.

Let us recall:

The company has been listed since 1965, and its key characteristic is not rapid growth, but high predictability. Over decades, the business has repeatedly gone through recessions and demand crises without destruction of its operating model and almost without unprofitable periods.

Such resilience is a result of the business structure.

• A significant portion of revenue is generated not only from product sales, but also from real estate ownership: the corporation controls the land and premises of most restaurants and leases them to franchisees, receiving stable rental income.
• Thousands of operating partners bear current costs and local risks, which insulates the parent company from operational volatility.
• An additional factor is the behavioral effect. During periods of declining incomes, consumers do not abandon eating out, but shift to a more affordable price segment. As a result, McDonald’s effectively redistributes demand in its favor, taking market share from more expensive establishments.
• Another element of stability is the company’s global presence in more than 100 countries. This ensures geographical diversification and allows smoothing local economic downturns through growth in other regions.

Confirmation of the global nature of McDonald’s business is provided by the so-called Big Mac Index, introduced by The Economist magazine more than 30 years ago. This informal indicator compares the price of the same product in different countries to assess purchasing power parity of currencies.

Indirectly, it also reflects the level of inflation, since the price of a burger includes raw materials, labor costs, rent, logistics, and marketing — that is, the main elements of the consumer spending structure.

Historically, fiat currencies were pegged to gold, and macroeconomic models operate with consumer price indices. However, in practical perception, inflation is increasingly explained through the Big Mac not because a burger is more accurate than official statistics, but because it is universal, visual, and directly connected to real household expenses.

Can McDonald’s shares compete with gold as a defensive asset?

Yes, if the investor’s priority is capital preservation and predictability of returns. In this sense, McDonald’s represents protection through stability, while gold represents protection through fear, accompanied by phases of overheating and sharp corrections.

MCD volatility is lower than the market’s, the company pays dividends with a current yield of about 2.3% and has an almost half-century history of regular increases. Over the past 10 years, the average annual total return of McDonald’s shares has been about 12.8%.

Gold over the same period has risen by almost 276%, which corresponds to roughly 14% per year, but without a dividend stream and with noticeably more нервная dynamics. The metal can indeed perform the function of a safe haven, but it does not guarantee a smooth capital trajectory.

As a result, McDonald’s does not replace gold, but logically complements it. If gold is a bet on systemic fear, then McDonald’s is a bet on the stability of everyday consumer demand. In an environment where even classic defensive assets become a source of volatility, such diversification of capital becomes increasingly relevant.

So we act wisely and avoid unnecessary risks.

Profits to y’all!