By Rebekah McMillan, associate portfolio manager at Neuberger
The taxonomy of ‘safe haven’ status has been under the microscope recently, as many traditional shelters have delivered mixed protection during periods of market volatility. Today’s macroeconomic regime, characterised by higher-for-longer rates, geopolitical fragmentation, and a renewed focus on debt sustainability requires a more nuanced definition of security and a broader set of defensive tools.
In this increasingly complicated market environment, an assets’ ‘security’ must be more specifically defined for the particular risk an investor is seeking to hedge, be that nominal volatility, inflation erosion, liquidity stress, or political tail events, rather than using a single, catch-all category.
For liquidity shocks or acute risk-off market moves, nominal stability and depth still matter and the purest play for principal protection remains; major sovereign bills and short-dated notes, agency and supranational paper and money market funds. For inflation protection, real purchasing power is paramount, so instruments that hedge price-level risk such as inflation-linked bonds and select real assets such as gold offer protective characteristics.
Crucially, for a haven to keep functioning in a crisis, markets must trust in the political reliability, fiscal responsibility and credibility of institutions surrounding the asset. The importance of this as a factor is evident in market activity; dollar weakness during the April market sell-off following the US administration’s announcement of extreme tariff measures, the yen’s diminished status under persistent yield-curve control, meanwhile the Swiss franc has remained strong, outperforming. Whilst top-rated government bonds such as bunds or US treasuries retain many safe-haven characteristics, functioning during risk-off episodes has periodically deteriorated, as growing deficits, heavy net issuance and higher term-premiums have introduced volatility and liquidity risk. These instruments do still play a role in portfolio diversification, in particular for hedging growth shocks, but are less reliable against inflation spikes or political tail risks. The implication for allocators is to diversify even within these ‘risk-free’ exposures by tenor, instrument type – such as including inflation-linked bonds –, and jurisdiction – for example adding supranationals or select developed sovereigns with strong balance sheets.
Gold has of course been a shining star of 2025 and continues to offer neutrality, deep liquidity, and a hedge against fiscal and geopolitical stress, despite higher real yields. Central bank sponsorship has provided persistent demand and with the supply-side limited, supports a floor for prices. Historically, gold has performed strongly in similar macro environments, where incidents of inflation volatility are high and stock/bond correlations can be positive, such as during the 1970s stagflation. So too during the post-2008 era of unconventional monetary policy, providing investors with effective protection during periods of monetary debasement, market stress, and declining confidence in fiat assets. While some digital assets may also be complementary in hedging currency debasement risks, at present the volatility profile, liquidity, regulatory and operational risks of stable coins are challenged within a traditional safe haven framework.
Over the coming decade, further fluctuations are expected in certain assets’ ability to deliver security and a safe store of value. Multi-year structural shifts such as de-globalisation, de-carbonisation, evolving demographics and debt-levels will continue to impact asset prices and correlations, requiring a more layered approach to building portfolio defensiveness. Broadening exposures outside of traditional safe haven exposure such as gold, cash, and money-markets to include high quality short-duration corporates, more diversified regional and currency exposures along with the inclusion of alternative assets such as insurance-linked bonds, infrastructure, and hard assets, which can provide less correlated returns and cashflow streams will offer greater portfolio resilience.
