Gold Performance under Republican Administrations

In this analysis, we will cover gold’s returns, risk-adjusted performance, drawdowns, and correlations with the equity market over the last four Republican terms.

The chart above illustrates gold’s performance across the last four Republican administrations. Gold delivered positive returns during two of these periods: the Trump administration, with a gain of +54.67%, and the George W. Bush administration, with a substantial increase of +221.16%. In contrast, gold experienced negative returns under the Reagan and George H. W. Bush administrations, with declines of -27.8% and -18.5%, respectively. The data shows that even though there is a 50% chance, the risk-reward is asymmetric to the upside.

The chart above presents the cumulative performance of gold over the last four Republican terms in chronological order. Over this period, gold achieved a total cumulative gain of 192%.

Return Statistics:

The table above provides the performance statistics for gold during each Republican term. On average, gold has generated an annualized return of 4.39% with a standard deviation of 16.77%. Assuming returns follow a normal distribution, we can expect, with 60% confidence, that gold’s annual return will range between +20% and -12.4%. With an average Sharpe ratio of 0.17 (assuming a 2.2% risk-free rate), this implies that for each 1% of risk taken, investors have earned an excess return of 0.17%.

Drawdowns:

As shown in the table above, gold has suffered on average a max drawdown of -28.98% and has never recovered from them during republican terms.

Diversification:

The table above displays the daily return correlation and alpha generated by gold relative to the S&P 500 across different Republican administrations. Gold maintained an average correlation of -2.20% with the S&P 500, highlighting its effectiveness as a diversification tool within an equity-focused portfolio. Furthermore, when adjusted for risk (beta), gold delivered an average excess return (alpha) of 6.05% relative to the S&P 500, underscoring its higher risk adjusted performance relative to broad equities.

Conclusion:

Despite the high volatility and limited statistical significance of gold’s absolute performance during Republican terms, its consistently low correlation with equities and positive average return have historically enhanced portfolio diversification. We believe that gold’s diversification benefits remain intact, as we see no fundamental factors that would alter its role as an effective hedge within a well-balanced portfolio.

Disclaimer:

Past performance does not guarantee future results, which may vary. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Copyright Alpha Rho Technologies LLC. All rights reserved.