McDonald’s or gold: What protects capital when markets fall

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Can McDonald’s replace gold as a defensive asset?

Everything is falling, and traditional defensive assets are no exception

Over the past week, financial markets entered a phase of sharp risk reduction: investors cut positions across a wide range of instruments and increased allocations to liquid assets. This move was reinforced by rising volatility and forced selling due to margin requirements, causing the decline to spread not only to “risk-on” segments but also to some traditionally defensive ones.

Equity markets responded with declines in key indices. Pressure intensified in sectors sensitive to the cost of capital and expectations for corporate earnings, particularly in technology. As a result, index dynamics became a marker of the market’s overall shift into defensive mode rather than a reflection of isolated local problems.

Against this backdrop, precious metals—traditional defensive assets—also showed a correction. After strong gains earlier in the year, gold moved into a sharp decline, while silver, being more volatile, fell even deeper. This highlighted an important point: during periods of liquidity stress, even defensive instruments can fall if market participants simultaneously lock in profits and reduce leveraged positions.

Bitcoin, which some investors had described as a potential hedge just a few months ago, also failed to demonstrate a stabilizing role during this phase and declined even more sharply along with the rest of the crypto market.

Thus, both classic and newer defensive assets partially disappointed in the latest bout of market stress. Against this backdrop, investors began searching for alternative “safe havens” — and found them in unexpected places, including consumer-sector equities. One such unexpectedly resilient investment turned out to be McDonald’s.

McDonald’s: stability despite crisis

Amid the broad sell-off, McDonald’s (MCD) shares look like some of the few that are genuinely “calm”: without sharp drawdowns and without signs of overheating. The company went public back in 1965, so this is not a story of explosive growth, but one of predictability. And it is precisely this quality that often becomes more important than potential returns during periods of market stress. Past crises only reinforce this thesis: the company has repeatedly gone through recessions and demand shocks without severe disruptions to its business, without destroying investor confidence, and with virtually no “red” (loss-making) years.

This resilience is explained not by “brand magic” but by the structure of the business model. First, a significant portion of revenue is generated not so much from food sales as from real estate rent. The company owns the land and buildings of many restaurants and leases them to franchisees, receiving stable rental income.

Second, the network operates under a franchising model: thousands of small operating partners bear daily costs and risks, while McDonald’s collects royalties and rent. This shifts a substantial share of business volatility onto franchisees, insulating the parent corporation from local disruptions.

Third, during crises McDonald’s benefits from shifts in consumer behavior: when incomes fall, people do not stop eating, but they switch to cheaper options. As a result, a menu of burgers and fries can even increase sales when consumers cut food spending. This phenomenon was confirmed both in 2008 and in 2020: during the worst periods for the economy, McDonald’s effectively gained market share from higher-priced dining establishments.

An additional “bonus” of the business model is its global presence. McDonald’s operates in more than 100 countries, and people around the world are well familiar with the brand and its offerings. Such geographic diversification means that local crises or currency fluctuations have little impact on the corporation’s overall results — downturns in some regions are offset by growth in others.

The Big Mac Index and inflation: Food as an economic indicator

An interesting confirmation of McDonald’s global nature is the famous Big Mac Index, introduced by The Economist more than 30 years ago. This tongue-in-cheek indicator compares Big Mac prices across countries to determine purchasing power parity between currencies.

Indirectly, however, it also reflects local inflation levels and the structure of costs within an economy. The price of a Big Mac includes raw materials, labor, rent, logistics, and marketing — essentially the full set of basic expenses that make up everyday consumption. That is why over time the index has become a convenient and intuitive way to compare the real purchasing power of money across countries.

Paradoxically, the most telling fact lies elsewhere: although historically fiat currencies were pegged to gold and macroeconomic models still rely on consumer price indices, in practice inflation is increasingly “explained on fingers” through the Big Mac. Not because a burger is more precise than official statistics, but because it is universal, intuitive, and directly linked to real household expenses. In this sense, McDonald’s has become not just a global business, but an informal economic benchmark that increasingly replaces what gold once represented in discussions of inflation.

McDonald’s versus gold: Volatility and returns

Can McDonald’s shares truly compete with gold as a “defensive” asset? At first glance, these are different worlds: gold is a traditional non-yielding metal whose value is determined by market demand, while McDonald’s is a business with real profits and dividends. However, for investors the key priorities are capital preservation and predictability.

Viewed through this lens, McDonald’s looks like “protection through stability,” while gold resembles “protection through fear,” with sharp phases of overheating and correction. MCD’s volatility is lower than the market’s: the stock’s beta fluctuates around 0.4–0.5, meaning it typically moves with smaller amplitude than the broader market. Returns are also more structured: McDonald’s pays dividends with a current yield of around 2.3% and has a long history of dividend increases spanning nearly half a century. Over a long horizon, a “quiet” model does not mean weak performance: over the past 10 years, MCD’s average annual total return has been about 12.8%.

Gold over the past decade has also delivered strong price appreciation — approximately +276% (around 14% per year on average based on backtests), but without dividends and with a noticeably more jagged trajectory. Recent weeks have only underscored this nature: after a rally to record highs, gold experienced one of its sharpest decline waves in many years, highlighting a simple relationship — the metal can serve as a refuge, but it does not guarantee a smooth capital curve, especially when dollar and interest-rate conditions change.

Ultimately, McDonald’s does not replace gold, but complements it. If gold is a bet on fear, McDonald’s is a bet on the stability of everyday demand. In a world where even traditional “safe havens” are becoming volatile, it is precisely this predictability that makes a business a more reliable form of protection than the abstract value of a metal.

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