Gold vs. S&P 500: What the Performance Gap Reveals About Your Portfolio

Nov 19

Written By: Ryan Morrison

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Most investors assume equities beat gold over any meaningful time horizon. The data since 2008 challenges that assumption and for investors running concentrated domestic portfolios, the more important question isn't which asset won. It's what gold's outperformance reveals about the purchasing power of the dollars in your portfolio.

Dan Altman is an economist, active investor, and the creator of the Baseline Profitability Index, a tool for evaluating foreign direct investment attractiveness across countries. He holds a PhD in economics from Harvard, served as an economic advisor to the British government, spent years as an economics correspondent and columnist at The Economist and The New York Times, and served as chief economist at InstaWork.

He also co-invests in soccer clubs across multiple continents. On this episode of Navigating Wealth, he makes the case that U.S. investors are carrying currency and inflation risk they have not named — and that the tools to evaluate international opportunity are more accessible than most realize.

TL;DR

Gold outperformed the S&P 500 over the 20-year period ending in 2024 on a price return basis, roughly 433% vs. 358%, driven by the 2008 financial crisis and sustained dollar weakness
The more important question for HNW investors isn't gold vs. stocks. It's whether a domestic-only portfolio is taking on currency risk without accounting for it
Dollar depreciation of roughly 10-15% against the euro in 2025 alone means foreign assets appreciated in real terms with no change in their underlying fundamentals
An international equity index doesn't fully capture a foreign market's growth — foreign direct investment and direct asset ownership capture real exchange rate appreciation that index exposure misses
Sovereign debt levels exceeding 100% of GDP across six major economies create structural inflation and devaluation pressure that purely domestic portfolios don't hedge
Sports investing at the non-major-league level follows a coherent PE thesis built on promotion economics and media rights step-changes, not novelty

  
    Gold has outperformed U.S. stocks since the Great Recession — and that's not the most important finding
  

Gold outperformed the S&P 500 over the 20-year period ending in 2024 on a price return basis, roughly 433% vs. 358%, driven primarily by the 2008 financial crisis and the decade of sovereign debt expansion that followed. And in 2025, gold returned approximately 61%, its strongest calendar year since 1979, while the S&P 500 returned roughly 16%.

Most articles that cover this topic immediately pivot to the familiar conclusion: hold both, size appropriately, rebalance periodically. That's not wrong. It's just incomplete. For investors who've spent the last decade in domestic equity and are evaluating their portfolio for the first time with fresh eyes, the more important question is what gold's performance is actually measuring.

Altman's answer: "I think a lot of it is an inflation play that's driven by these enormous debt ratios that we now see in most of the major economies."

He points to a specific and verifiable condition. The U.S., Canada, Spain, France, Italy, the UK, and Japan are all running debt-to-GDP ratios above 100%. When governments carry debt at that scale, their options narrow. Raising taxes is politically difficult. Cutting spending is politically difficult. What remains is devaluation — reducing the real value of that debt by allowing inflation to erode it. That is the structural force Altman argues gold investors have been pricing in for years.

This is not a gold-bull argument. Altman is not recommending a particular allocation to precious metals. He is pointing out that gold's sustained outperformance over 20 years is a signal about something real, not a commodity cycle or a panic trade, and that investors who ignore it are making an implicit bet that governments across six major developed economies will successfully reduce their debt burdens through fiscal discipline. He is skeptical of that bet.

Why sovereign debt levels are driving gold demand

Central banks are not buying gold at record levels out of sentiment. According to data cited across multiple institutional sources, China, India, Japan, Turkey and Poland have all significantly increased their gold reserves over the past five years. The Reserve Bank of India reduced its U.S. Treasury holdings by approximately 6% between mid-2024 and mid-2025 while increasing gold reserves by approximately 5%. These are not retail investors chasing recent performance. These are institutions reducing dollar exposure systematically.

The mechanism Altman describes is straightforward: when debt-to-GDP ratios reach levels where countries cannot service their obligations through taxation alone, the most politically available option is to let inflation run. That reduces the real value of the debt over time. It also reduces the real purchasing power of anyone holding assets denominated in that currency. Gold, priced globally and not issued by any government, is the natural hedge against that scenario.

What gold's performance reveals about dollar concentration risk

The standard framing is that gold is an inflation hedge or a crisis insurance policy. Altman's framing is more precise: gold is appreciating because the currencies of the world's major economies are being debased, and gold is the clearest signal of that debasement.

For a U.S. investor holding an entirely domestic portfolio, the implicit assumption is that the dollar will maintain its purchasing power — or at least that equity returns will keep pace with any erosion. Gold's 20-year outperformance is a market verdict on that assumption. It is not conclusive. But it is worth taking seriously.

According to Long Angle's 2026 High-Net-Worth Asset Allocation Study, the average HNW investor holds half of their net worth in public equities, with U.S. stock funds as the primary driver. Precious metals represent a fraction of portfolio allocation — outpaced more than 2:1 by crypto. Whether that allocation reflects a genuine strategic view on currency risk, or simply inertia built on two decades of domestic equity outperformance, is the question worth asking.

For a deeper look at how HNW investors are accessing gold exposure across physical holdings, ETFs, and mining stocks, see How to Invest in Gold.

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Why buying an international index fund doesn't capture what you think it does

The most counterintuitive argument Altman makes in this conversation is about index funds, not gold. His claim: owning an international equity index does not cleanly capture a foreign market's growth.

"A lot of U.S. companies earn a huge amount of their profits overseas," Altman explains, "and a lot of foreign companies earn a lot of their profits in the United States. So it's not really foreign markets versus U.S. markets in terms of just shares."

This is a structural point, not a market timing call. When you buy a world ex-U.S. index, you own shares in companies whose revenues and earnings are distributed across multiple geographies. The connection between their stock price and the underlying economic growth of the country they're headquartered in is real but imperfect. You're getting earnings exposure, not asset exposure.

"If you want to capture a foreign market's growth, foreign direct investment makes more sense because you actually own assets in country," Altman says. "And so it's the asset value that's driving your return."

Real exchange rate appreciation and why it matters for portfolio returns

This is the mechanism that most individual investors miss. When an economy grows faster than the U.S. in real terms, its currency tends to appreciate in real terms against the dollar. That means a factory, a building, or a business you own in that country is worth more dollars every year — not because the business itself has grown, but because the unit of account has shifted in your favor.

Altman offers a concrete example: "If you think about how much money it would take to buy a factory in the U.S. right now and you compare it to how much money it would take to buy the same factory in India, there's a big difference. But that difference is shrinking as India grows. And so your factory in India in terms of real stuff — in terms of factories in the U.S. — is actually appreciating in value from year to year."

An index fund captures the earnings of companies listed on Indian exchanges. It does not capture the real exchange rate appreciation of the underlying assets those companies own. For investors who want genuine exposure to an economy's growth — rather than exposure to the earnings of companies that happen to be domiciled there — direct asset ownership or foreign direct investment is the more precise vehicle.

This distinction becomes more important when supply chains are being reoriented. With tariff-driven manufacturing relocation already underway, investors evaluating where to position production assets need a framework for assessing not just growth rates but how much of that return actually comes home.

The two ways to evaluate foreign investment: governance quality and growth rate

Altman's Baseline Profitability Index assesses foreign direct investment across two dimensions. The first is governance quality — the degree to which a country offers legal certainty, protection from expropriation, low corruption, transparent financial systems, and low insecurity risk. The second is real exchange rate appreciation — the degree to which a fast-growing economy is likely to see its currency appreciate against the investor's home currency, boosting the dollar value of assets held in-country.

Countries that score well on both — Singapore, the Scandinavian countries, certain Eastern European former socialist economies — represent the strongest cases. Countries like India represent a different profile: less institutional perfection, but fast enough real growth that exchange rate appreciation can drive meaningful returns even through friction. The U.S., by Altman's assessment, sits in the middle of the global pack on this index. Not a warning sign for domestic investors, but not a case for ignoring the rest of the world either.

The practical implication for an investor with operating businesses or supply chain exposure abroad: evaluating where to hold assets is now an active decision, not a default. Currency, governance, and growth all factor into how much of a foreign investment's return actually comes home.

The dollar's structural position and what it means for purchasing power

"We are going to get poorer as Americans because of the depreciation of the dollar. We can't avoid that."

Altman's framing here is deliberate and worth pausing on. He is not predicting a dollar collapse. He is describing a mathematical consequence of the policies already in place. Tariffs reduce import purchasing power directly. Dollar depreciation reduces it further by making imported goods more expensive in dollar terms. For investors who measure their wealth in dollars and spend primarily in dollars, the impact is easy to miss until it accumulates.

The dollar fell approximately 10-15% against the euro in the first half of 2025 — the largest decline against a basket of major currencies in more than 50 years, according to Morgan Stanley data. For an investor who held European bonds paying 3% during that period, the total return was close to 15% in dollar terms — comparable to the S&P 500, and with a different risk profile.

How to think about currency exposure if you're primarily a dollar spender

Altman is careful to calibrate the stakes. "If you are just trying to maximize returns in dollars and that's all you care about, then hey, maybe you don't have to diversify quite as much." The qualification matters. For investors who live entirely in dollars, spend entirely in dollars, and measure their wealth in dollars, currency diversification is less urgent.

But approximately 10-11% of U.S. consumer spending is on imported goods — and that percentage rises meaningfully for investors who travel internationally, own foreign property, buy imported vehicles or luxury goods, or whose businesses have international cost exposure. Altman puts it plainly: "Those things get more expensive. It's not just tariffs. It's also exchange rate changes that make those things more expensive."

For the Long Angle audience — investors with meaningful wealth, international travel patterns, and often real estate or business exposure across geographies — the purely dollar-denominated portfolio assumption deserves a second look.

What Altman's Baseline Profitability Index measures and why individual investors can use the same framework

The BPI is not a subscription product. It's a framework. The underlying logic — that investment return is a function of what you earn in-country minus what gets eroded by corruption, expropriation, currency crises, capital controls, and real exchange rate fluctuation before it reaches your pocket — is applicable at any scale.

For an individual investor evaluating a direct real estate purchase in Portugal, a manufacturing investment in Vietnam, or a minority stake in a European business, the same checklist applies. How strong is the legal system? How stable is the currency? What are the capital repatriation rules? How fast is the underlying economy growing in real terms? The BPI makes these factors systematic. Even as a mental checklist, it is more rigorous than comparing nominal returns across geographies without accounting for what erodes them.

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    Sports investing as a private equity thesis — the framework behind non-obvious asset classes
  

Altman has invested in soccer clubs on two continents, including a successful exit from a third-division English club and a current position in the new Canadian women's soccer league. The way he describes these investments is worth examining carefully, because the mental model he uses is not about sports fandom. It is straightforward private equity.

"We bought a third division team thinking if we could get it to the second division, then we would have a three X or four X on our hands easily. And we wanted to do that within sort of a five to seven year timeframe, kind of classic private equity play."

The mechanism he describes: in European soccer, promotion to a higher league triggers a step-change in broadcast revenue. Moving from League One (third division) to the Championship (second division) produces a material increase in media rights income immediately. Moving to the Premier League produces another step-change — both in revenue and in the pool of potential acquirers. A club acquired by a buyer who wants a Premier League franchise commands a premium that makes the entry price at lower divisions look modest.

Why live content is the scarcest asset in entertainment

The investment thesis in Canadian women's soccer starts from a different place. "Content is king and live content is really the emperor," Altman says. "The things that distinguish streaming services are not just the shows, but the live content that they can offer. That's something that can't easily be replaced."

Women's soccer in Canada represents a first-mover position in a country with strong soccer participation and no professional women's league until recently. Canada ranks among the top five to ten women's soccer countries globally, and the market was simply untapped. Altman compares it directly to the U.S. women's professional league, which faced the same dynamic — a sport with broad cultural penetration and no professional pathway for players or role models for fans — before it found its audience.

The relatability factor matters here too. Unlike traditional sports investments where the enterprise value is driven primarily by broadcast rights and real estate, women's sports investments at the early-league stage are more dependent on fan connection and personality-driven engagement. These are entertainment businesses where the athletes are the product.

How to evaluate sports club investments using a PE framework

The practical lesson from Altman's sourcing story is also worth noting. He did not find these deals through a placement agent or a fund. He researched which clubs were good targets based on catchment area and player pipeline, then cold-called the chairman. The chairman said no. Then called back later and sold his shares.

"Once we did one deal, deals started coming to us on a regular basis."

This is the standard pattern of deal flow compounding in any illiquid asset class. The first transaction is sourced manually and expensively. Subsequent transactions come inbound once you have a track record and a reputation as a buyer who can close. The same dynamic applies in small-market real estate, lower-middle-market private equity, and direct lending. The barrier is not information — it is willingness to do the work before the deal flow starts.

The exit from the English club also illustrates something important about downside protection. The club had a corrupt CEO and implicated board members. The investment thesis — promotion — did not materialize. But the exit was still profitable: "We were able to get out of there at a very good price, quite a lot earlier in the process than we thought we were going to." The reason: enterprise value had still moved, even without promotion, because the underlying asset — a soccer club in a catchment area with strong demographics — was worth more at exit than at entry. Asset quality matters more than thesis execution when things go wrong.

For context on how Long Angle members are approaching geographic diversification and non-traditional asset classes in the current environment, see Steady Hands: How High-Net-Worth Investors Are Navigating Market Volatility.

  
    The AI-driven concentration risk inside the S&P 500 and what it means for diversification
  

The standard defense of the S&P 500 as a diversified portfolio is becoming harder to sustain. The index's top ten holdings now represent approximately 40-41% of total index market capitalization — a level that exceeds the peak concentration seen during the dot-com bubble in 2000, when the same figure was roughly 29%. Most of that concentration is in AI-linked technology companies. An investor holding a passive S&P 500 index fund is making a concentrated bet on AI adoption, whether they know it or not.

Altman's valuation concern is direct: "I think some of these valuations are pretty insane for the Magnificent Seven and other companies that are driving these major indices." His recommendation is not to abandon domestic equity, but to look more carefully at what the index exposure actually represents. "If you are trying to have a diversified portfolio, I don't think you can ignore these foreign options."

The second-order concern Altman raises is more structural. Generative AI is already displacing white-collar work in ways that are gradual but accumulating. He draws an explicit parallel to what happened with blue-collar workers during the globalization wave of the last 30-40 years: "A lot of those blue collar jobs disappeared. And that was a huge dislocation in our economy and other economies around the world that we didn't really manage."

The political consequence of that mismanaged transition — workers who felt left out and unprotected — is, in Altman's reading, a direct cause of the current political environment. His concern is that a similar wave hitting white-collar workers, without a systematic retraining program equivalent to a new GI Bill, would produce an even more destabilizing political result. "I shudder to think what our politics would look like then."

This is not a market timing call. It is a structural observation about second-order risk that belongs in any serious conversation about portfolio construction over a 10-year horizon. An investor whose income is in white-collar knowledge work, whose wealth is concentrated in domestic equity, and who spends in a dollar that is being gradually debased against major trading currencies is running more correlated risk than a diversified label would suggest.

The historical resonance Altman reaches for is the Gilded Age — a period of concentrated wealth accumulation, government-business entanglement, and growing political instability that required substantial legislative intervention to correct. The more proximate analogy he offers is the Kirchner administration in Argentina: high tariffs, large deficits, state involvement in private corporations, and the real threat of currency devaluation. "This looks a lot to me like what I experienced living under Christina Kirchner in Argentina."

The corrective, if there is one, is portfolio construction that doesn't assume the last 15 years of U.S. equity dominance represents the default state of the world.

Frequently Asked Questions

Has gold outperformed the S&P 500 long-term?

Over the 20-year period ending in 2024, gold outperformed the S&P 500 on a price return basis — approximately 433% vs. 358% — driven primarily by the 2008 financial crisis and the sustained dollar weakness that followed. Over a 30-year period, the S&P 500 outperforms when dividends are reinvested, with annualized total returns of approximately 10.67% for equities vs. 7.96% for gold according to Morningstar Direct data. The comparison depends heavily on the starting date and whether dividends are included. Over the period since the Great Recession, gold has held a meaningful edge on a price return basis.

Is gold a hedge against dollar depreciation?

Yes, structurally. Gold is priced globally in dollars, so when the dollar weakens, gold becomes cheaper for non-dollar buyers, which increases demand and pushes the price higher in dollar terms. Beyond this mechanical relationship, gold also serves as a hedge against the sovereign debt conditions that tend to produce dollar depreciation in the first place — large fiscal deficits, monetization of debt, and the erosion of purchasing power over time.

How much gold should I hold in my portfolio?

Most institutional research and financial advisor guidance suggests a 5-15% allocation for investors seeking inflation protection and portfolio diversification. Ray Dalio has publicly advocated for allocations toward the high end of that range. According to Long Angle's 2026 HNW Asset Allocation Study, precious metals represent a relatively small share of HNW investor portfolios — outpaced more than 2:1 by crypto on average. The right allocation depends on portfolio construction, spending currency exposure, and the degree to which other holdings already hedge against currency and inflation risk.

Why did gold outperform the stock market in 2025?

Gold returned approximately 61% in 2025, its strongest year since 1979. The primary drivers were central bank accumulation — particularly from China, India, Turkey and Poland — sustained dollar depreciation, rising sovereign debt levels across major economies, and geopolitical uncertainty. The dollar fell approximately 10-15% against a basket of major currencies in the first half of 2025 alone, the largest such decline in over 50 years, which directly boosted gold's return in dollar terms.

What's the difference between owning international stocks and foreign direct investment?

An international equity index provides exposure to companies whose earnings happen to be reported in a foreign currency, but those companies may earn profits across multiple geographies. Foreign direct investment — owning assets in a country directly — captures real exchange rate appreciation as the local economy grows. When an emerging economy grows faster than the U.S. in real terms, the local currency tends to appreciate, meaning your in-country assets are worth more dollars every year even before the business itself grows. This is the mechanism index ownership misses.

What is the Baseline Profitability Index?

The Baseline Profitability Index, developed by economist Dan Altman, evaluates the attractiveness of foreign direct investment across countries by measuring not just economic growth rates but the factors that determine how much of a return actually reaches the investor: governance quality, legal certainty, corruption risk, capital controls, potential for currency crises, and real exchange rate trends. Countries with strong governance include Singapore and the Scandinavian nations. Countries with strong growth trajectories include India and select African and Eastern European economies. The U.S. currently sits in the middle of the global pack on this index.

How should I think about the S&P 500's concentration in AI stocks?

The S&P 500's top ten holdings represent approximately 40-41% of total index weighting — above the dot-com peak concentration of roughly 29%. Most of that concentration is in AI-linked technology companies. A passive S&P 500 position is therefore more concentrated than the 500-company label implies, and its performance is more dependent on AI adoption outcomes than a diversified index position would typically carry. This concentration risk is one of the reasons Altman argues domestic-only investors should not treat their index allocation as a sufficient hedge against portfolio risk.

Final Thoughts

The question Altman keeps returning to is not whether gold beats stocks or whether international diversification belongs in every portfolio. It's whether investors who've spent the past decade rewarded for ignoring these questions have mistaken a favorable cycle for a permanent condition. Sovereign debt above 100% of GDP across six major economies, a dollar that fell more against major currencies in the first half of 2025 than in any comparable period in 50 years, and an S&P 500 more concentrated in a single sector theme than at any point since the dot-com peak are not individually conclusive signals.

Together, they describe a portfolio environment that looks meaningfully different from the one that made domestic equity concentration feel like a rational default. The investors best positioned for what comes next are not necessarily the ones who called the turn correctly — they're the ones who built portfolios that didn't require calling it at all.

The questions this episode covers are live discussions inside Long Angle right now: how much currency risk you're carrying, whether your international exposure is doing what you think, and what peers at similar net worth are actually allocating.

Long Angle is a private, vetted community of high-net-worth entrepreneurs, executives and investors. Members compare notes on portfolio construction, sanity-check allocation decisions with peers who have been in the same chair, and get signal that no advisor or financial media outlet can provide. It comes from people with real capital at stake, posting with their names attached, in a vendor-free environment.

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