Today the single biggest move in the Compass portfolio came from its China position, a fund that holds the largest Chinese companies. It jumped almost four percent in one day and pulled the whole portfolio up with it, even though the US stock market barely moved and was actually a little lower. When one slice of a portfolio does the heavy lifting like that, it is worth asking whether it was luck or whether it fits the reason we own it in the first place. In this case it fits, and the reason is a framework worth explaining from scratch.
The Compass portfolio is built around an idea that comes from the French investor Charles Gave, who has spent decades studying how money and currencies behave over long cycles. His core claim right now is simple to state: the US dollar is in a slow, multi-year decline in real value, driven by the United States borrowing and spending far more than it takes in. When a country leans on its printing press and its bond market year after year, the currency quietly loses purchasing power even if the headline economy looks fine. Gave calls the response to this an anti-dollar bias, which just means tilting a portfolio toward things that hold their value when the dollar does not: hard money like gold, strong foreign currencies like the Swiss franc, and the stock markets of countries that are gaining ground rather than losing it.
China sits at the center of that tilt, and here is the part that surprises most people. For about forty years, the safest asset in the world was the US government bond, also called a Treasury. The rule was reliable: when stocks fell, Treasuries rose, so they acted like a shock absorber in a portfolio. Gave's observation over the past few years is that this property has broken. US Treasuries no longer reliably rise when stocks fall. Meanwhile Chinese government bonds have started behaving the way Treasuries used to, holding firm or rising during moments of stress. He describes this as antifragility, the quality of an asset that gets stronger when everything around it gets shaky, migrating from the United States to China. If that migration is real, then Chinese assets deserve a bigger place in a portfolio, not a smaller one, regardless of the headlines about China's economy.
There is a second leg to the China case, and it showed up in our own knowledge base this month. China's currency, the renminbi, has been strengthening, and the country is running a trade surplus of more than one trillion dollars a year, meaning it sells far more to the world than it buys. A country in that position is collecting the world's money, and history says its currency is undervalued and its assets are cheap. On top of that, Chinese stocks are one of the only major markets where the earnings yield on stocks is higher than the yield on government bonds. In plain terms, you get paid more to own the businesses than to lend to the government, which has historically been a strong signal that stocks are good value. Put the pieces together and you have a market that is cheap, backed by a rising currency, in a country whose bonds are becoming the new safe haven.
So why did China rise today specifically while US stocks slipped? The immediate trigger was ordinary. US technology stocks had run to record highs and paused, oil prices eased after a tense few days around the Middle East, and money rotated toward markets that had not already sprinted ahead. But the reason we hold the position is not the daily rotation. It is the structural case above. Days like today are simply the structural case occasionally showing up in the price. Most days it does not, and the position does nothing dramatic, which is exactly what patient investing is supposed to feel like.
The honest counterpoint matters too, because intellectual honesty is the whole point of this experiment. China carries real risks that the bull case waves away too easily: a government that can change the rules for entire industries overnight, a property sector that has been wobbly for years, and ongoing tension with the United States over trade and over Taiwan that could turn a slow rotation into a sudden exit. Gave himself says the right move is usually to do nothing and stay positioned for several outcomes at once rather than betting everything on one. That is why China is a meaningful slice of the Compass portfolio but not the whole thing, and why it sits alongside gold, energy, the Swiss franc, and Latin America rather than replacing them.
The practical takeaway for someone learning to invest is this. When a position moves sharply, do not celebrate or panic based on the move itself. Ask whether the move fits the reason you own the thing. If it does, a big day is just confirmation and you hold. If it does not, a big day might be a warning that your thesis is wrong and the market is telling you something. Today China rose for reasons that match exactly why the Compass owns it, so the answer was to hold and keep watching the one signal that would change the picture: whether China's currency keeps strengthening and whether its bonds start outperforming gold, which would tell us the safe-haven migration is accelerating.