Gold Is 10% Underweight in Most Portfolios — WisdomTree's CIO on What to Own Now | Jeremy Schwartz
Summary
- Inflation is viewed as a temporary disruption rather than a prolonged structural issue, supported by normalized money supply growth running in the mid-4% range.
- AI is expected to trigger a massive productivity boom rather than widespread structural unemployment, potentially leading to shorter work weeks and higher real wages.
- A decade-long "Defense Tech Super Cycle" is underway, driven by global governments modernizing depleted arsenals in response to rising conflicts in the Middle East, Ukraine, and potential threats regarding Taiwan.
- The average investor is severely underexposed to commodities; a mathematically neutral portfolio allocation to gold should be roughly 13%, yet most are underweight by at least 10%.
- The recent 40-50% selloff in private credit asset managers is viewed as an overreaction, presenting a buying opportunity, while energy stocks are ripe for profit-taking after a 30% run-up.
- The market is overly bearish on the US Dollar, ignoring its safe-haven appeal and the yield support provided by a resilient US economy.
Trade Ideas
I've been using the tagline a defense tech super cycle... even the US rebuilding its arsenal to modernize... it's going to be a 10-year period of tremendous innovation. Rising geopolitical tensions are forcing global governments to modernize and rebuild depleted arsenals with next-generation technology (like drone defenses). This guarantees a decade-long pipeline of elevated government spending flowing directly into aerospace and defense contractors. Go long the defense and aerospace sector to capture the structural increase in global military spending. Unexpected global peace treaties or severe government austerity measures could slash defense budgets and halt the modernization super cycle.
Korea's two leading companies, Samsung and Hynix... have been on fire, but they've actually been getting cheaper... they're like small single-digit PEs, like 5 PE when the S&P is 20. The market is treating the AI-driven earnings surge in Asian memory chipmakers as a temporary bubble, pricing them at distressed multiples. However, AI infrastructure demand is a structural shift, meaning these elevated earnings are sustainable and the stocks are deeply undervalued relative to US tech. Go long Korean semiconductor leaders and broad Korean equities to capture mispriced AI supply chain fundamentals. A cyclical downturn in consumer electronics or an oversupply of memory chips could compress margins and validate the low P/E multiples.
People talk about copper as like one of the strategic metals that you really need to do this AI and energy buildout. The exponential energy demands of AI data centers require a massive, physical infrastructure buildout. This creates a structural, multi-year supply and demand imbalance for copper and other strategic metals, driving prices higher. Go long copper and copper miners as a derivative play on the physical infrastructure required for the AI boom. A global manufacturing recession or breakthroughs in alternative conductive materials could severely reduce the industrial demand for copper.
We've had some big gains in things like Exxon and Chevron and some big energy names. Taking some chips because they've been up so much. Energy stocks have experienced massive run-ups due to geopolitical risk premiums, specifically the Iran conflict. With global oil markets remaining fundamentally well-supplied, the risk/reward is no longer favorable, making it prudent to rotate capital out of energy and into beaten-down sectors. Take profits and move to a neutral stance on major energy producers. A severe escalation in the Middle East that permanently closes the Strait of Hormuz would cause a massive supply shock, sending oil majors significantly higher.
Things like Owl and Ares and KKR and all these big private credit names really selling off... I'm looking at some of this selloff as being a little overdone. The market is mispricing private credit risk by incorrectly comparing it to the 2008 bank leverage cycle. Without a broad economic recession or surging corporate defaults, the massive 40-50% selloff in these alternative asset managers presents a deep-value entry point. Go long top-tier private credit and alternative asset managers that have been unfairly punished by macro fears. If the US economy enters a severe recession, corporate defaults will spike, leading to actual structural losses and liquidity gates in private credit funds.
People are underexposed to the dollar. Actually, they've been overexposed to the euro, the yen, the pound... in risk-off moments the dollar tends to go up. Consensus positioning has become overly bearish on the USD, driven by premature expectations of aggressive Fed rate cuts. With the Fed likely holding rates higher for longer and rising global risk-off catalysts, the dollar will catch a bid as a high-yielding safe haven. Go long the US Dollar against a basket of foreign currencies to exploit offside bearish positioning. If the Fed unexpectedly slashes interest rates due to a sudden domestic economic contraction, the yield differential will collapse, weakening the dollar.
If you were just neutral to equities, fixed income and alternatives, how much would you have in gold? It would be about 13% in gold. So people might be 10% underweight just being neutral. Institutional and retail portfolios are structurally underweight gold compared to a true neutral weighting. As investors realize this deficiency and seek to hedge rising geopolitical and margin risks, capital will systematically flow into gold ETFs to close this allocation gap. Go long gold as a structural portfolio diversifier and catch-up trade for under-allocated investors. A sudden resolution to global conflicts and a massive acceleration in real economic growth could reduce the safe-haven demand for precious metals.
Up Next
This Wealthion video, published March 10, 2026, features Jeremy Schwartz discussing ITA, XAR, EWY, SSNLF, CPER, COPX, CVX, XOM, ARES, KKR, OWL, UUP, GLD. 7 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Jeremy Schwartz · Tickers: ITA, XAR, EWY, SSNLF, CPER, COPX, CVX, XOM, ARES, KKR, OWL, UUP, GLD