Crisis Hedging
Match the Hedge to the Inflation Regime
March 2026 · YK Research · Macro
Core Thesis
The right crisis hedge depends on one thing: is the shock inflationary or deflationary? Three post-pandemic crises prove the point. Different assets protected portfolios in each episode. Hedges suited to the regime performed better.
Three Crises, Three Playbooks
Playbook
Match your hedge to the inflation regime
📈 Live Market: Key Haven Assets
Crisis Period Comparison: Asset Returns
Returns measured from crisis onset to resolution/present. Gold = TVC:GOLD, TLT = iShares 20+ Year Treasury Bond ETF, DXY = US Dollar Index.
1. SVB / Regional Banks (March 2023)
Silicon Valley Bank collapsed. Biggest US bank failure since 2008. The fear: credit contraction spreading through the system, echoing the 2008 playbook. A crisis that threatens to break the financial system is implicitly deflationary. Banks restrict credit. Economic activity slows. Losses cascade.
Treasuries rallied hard. Investors sought safer assets. The market priced in rate cuts and recession risk.
Gold also rallied. Not as an inflation hedge. Gold has zero counterparty risk. Credit Suisse collapsed days before SVB. Gold became a way to reduce exposure to financial counterparties. In a banking crisis, counterparty risk matters more than inflation expectations.
2. Trump Tariffs (April 2025)
Steep global tariffs created a completely different risk profile. There was no credit event or banking contagion. The threat was supply constraints and rising costs. Inflationary by nature. Retaliatory tariffs from trading partners raised US-specific risks for the first time.
Treasuries AND the dollar sold off. Traditional US haven assets failed to protect portfolios in this episode. US assets had inflated valuations and sat at the epicenter of the shock. The “Sell America” trade was born.
Gold Provided Protection When bonds and the currency fall together, gold offers an alternative without sovereign credit risk.
3. Iran War (2026)
The market responded differently from both prior crises. Inflation is again the risk: oil prices, supply disruptions, energy costs. But unlike tariffs, this is not a US self-inflicted wound.
Treasuries performed poorly. Again, they cannot hedge equity losses when inflation is the threat. But the dollar reclaimed its haven status. The US economy is relatively more resilient than Europe and Asia, which depend more on Middle Eastern energy. Higher yields to fight inflation attract global capital.
Gold has disappointed. It hasn't soared like in the tariff episode because the dollar is strong. Gold and the dollar typically move inversely. US equities have actually outperformed global peers.
Why Is the Dollar Strong During an Inflationary War?
Inflation erodes purchasing power. Why would the dollar rise? Four forces explain the move:
1. Energy independence gap. The US produces ~13M barrels/day of crude. It's the world's largest oil producer. Europe imports ~60% of its energy. Japan imports ~90%. When Middle Eastern supply gets disrupted, energy costs hit Europe and Asia far harder than the US. Their economies slow more. Their currencies weaken more. Capital flows to where the pain is least: the dollar.
2. Interest rate differential. The Fed raises rates to fight inflation. 5%+ US Treasury yields vs 2-3% European bonds. Higher yields attract capital. Every dollar of foreign capital buying US assets pushes the dollar higher. That's the carry trade in action.
3. Reserve currency demand. Global trade still settles in dollars. Oil is priced in dollars. Countries need dollar reserves to pay for energy imports. War increases energy costs. That increases demand for dollars to pay those costs. Dollar rises. Self-reinforcing loop.
4. Relative safe haven. The US has the deepest, most liquid capital markets on earth. In a global shock, investors favor the most resilient economy with the most liquid markets. In this framework, that favors the US.
Contrast this with the tariff crisis: the US was the SOURCE of the shock. Capital fled FROM the US, not toward it. The dollar fell because the US was hurting itself. In the Iran conflict, the US is a bystander with a strong energy position. Opposite dynamic.
Bitcoin: Not a Hedge
Bitcoin is higher now than before the Iran war started. That's not haven demand. BTC tracks the Nasdaq 100. It mirrors tech stock moves. The recent rally is mean reversion from the fall below $125,000. Not safety bidding.
If you own tech stocks and BTC, you have less diversification than you think. In a deflationary crash, BTC can fall with equities. Its behavior in an inflationary crisis is uncertain. Gold offers crisis protection. Bitcoin can amplify equity risk.
SGD: Managed Exchange Rate and Regional Resilience
The Singapore dollar is managed, not free-floating. MAS uses the exchange rate as its primary monetary policy tool. It adjusts the SGD NEER band instead of setting interest rates. This makes SGD behave differently from most currencies in a crisis.
Zero bank exposure to SVB. MAS runs the tightest-regulated banking system in Asia. Capital flowed to Singapore as an Asian safe haven.
Weakened initially (trade-dependent economy). Recovered as “Sell America” weakened USD. Held up better than most Asian FX. Diversified trade base + MAS band management.
Weakened to 1.278 vs USD. Singapore imports ~100% of energy. Oil spikes hit hard. Still outperforming EUR, JPY, and most EM currencies.
Why SGD Outperforms Regional Peers
Massive fiscal reserves. GIC + Temasek manage $700B+. Singapore can defend its currency far longer than most countries.
MAS NEER band. MAS can tighten (appreciate SGD) to fight imported inflation. Active currency management helps limit imported inflation.
Refining hub paradox. Singapore is Asia's largest oil refining center. Higher crude prices actually boost refining margins. Shell, ExxonMobil, and local refiners benefit.
No geopolitical exposure. Neutral foreign policy. No military involvement. Pure economic actor in a world of political risk.
For SGD-denominated investors: You're losing on the USD cross but winning vs EUR, GBP, JPY, and most of Asia. USD assets (US equities, dollar deposits) get a tailwind from SGD weakness. The play: stay in USD-denominated assets during external inflationary shocks. Add gold as a hedge if Iran drags on and triggers a global recession.
Key Takeaways
Treasuries only work in deflation. If inflation is the risk, bonds can fall alongside stocks. The 1970s proved this. 2025 and 2026 confirmed it.
Gold is the universal crisis asset. But the reasons change each time. Counterparty risk (SVB). Inflation hedge (tariffs). Earnings recession hedge (if Iran drags on).
The dollar depends on whether the US caused the shock. US-specific risk (tariffs) = dollar falls. External risk (Iran) = dollar rises. Relative resilience drives it.
Diagnose first, hedge second. A hedge that worked in the last crisis may fail in a different regime. Start by assessing inflation and deflation risk.