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I started working in financial markets in 2006. For most of the period since then, during which I’ve developed my understanding and intuition of markets, the US sovereign bond market was a remarkable safe-haven asset. In good times, when equity markets were delivering attractive returns, investors would earn a positive return from the bond market (in dollars). And, in times of market stress, or risk aversion, the bond market would gain in value as real yields and inflation compensation would decline.

Table 1 shows the returns for developed markets equity (the MSCI World Index), emerging markets equity (the MSCI Emerging Markets Index), the US sovereign bond market (US 10-yr bonds) and the dollar index (DXY) after the bursting of the dotcom bubble, the global financial crisis and the Covid-19 pandemic shock.

Table 1: US dollar returns during times of stress

Source: Refinitiv and Denker Capital calculations. *Price returns are reflected. **Total return assuming a constant maturity instrument with coupons reinvested.

Negative correlations and portfolio stability

For the 20-year period between 2000 and 2020, correlations between risky equity assets and the US bond market were consistently negative. Hence, the moniker ‘safe-haven asset’ (an asset that appreciates when growth/risk assets sell off). In times of stress, the US dollar and the US sovereign bond market provided portfolio stability. These were the best of times.

In Table 2, each cell shows the correlation between the returns of the asset in the row and the asset in the column, with positive values indicating assets that move together and negative values indicating assets that tend to move in opposite directions.

Table 2: Correlations between equity markets, sovereign bond market and US dollar returns – monthly data from January 2000 to December 2020

Source: Refinitiv and Denker Capital calculations

A regime shift: bond behaviour to growth risks changed

The central problem today is that US bond duration has shifted from an asset that hedged against growth risks to an asset subject to growth risks.

Since the start of 2021, the relationship between risky equity assets and the US bond market has dramatically altered and is now (unfortunately) positive. The US dollar remains a safe place to hide, but the US bond market is now an asset that declines in value as risk aversion rises and/or growth prospects deteriorate.

Table 3: Correlations between equity markets, sovereign bond market and US dollar returns – monthly data from January 2021 to April 2026

Figure 1 shows the yield to maturity and subsequent 10-year returns earned by owning 10-year maturity US sovereign debt.

Three things are worth highlighting:

1. the yield at which you buy is a very good indicator of the return you are likely to earn. When yields are low returns are low. When yields are high, returns are higher. When yields go up, it drags on returns and when yields decline, it provides a tailwind to returns;
2. investors earned modest, but (mostly) positive returns, from the safe-haven assets in their portfolio; and
3. yields are at least higher than they were. This provides some relief to investors that now have far fewer options for building hedged portfolios.

Figure 1: 10-year US Treasury yield vs. next 10-year bond returns

Source: Refinitiv and Denker Capital calculations. *Price returns are reflected. **Total return assuming a constant maturity instrument with coupons reinvested.

There is a clear difference between Table 1 and Table 4. In the former, equity market stress saw positive returns for the US dollar index (DXY) and the US bond market (US 10-yr). In Table 4, the DXY weakened in the week in question in April 2025 and strengthened in March 2026. The bond market in both episodes closed lower.

What is clear from the table is that the different behaviour of the US bond market makes it far harder to protect investors’ capital in times of stress. Bond market duration used to assist in preserving capital values and, although US bonds are not high beta assets (i.e. they decline by less than the equity markets), they do decline.

The rand investor’s experience is different

In our daily lives the volatile rand is usually thought of as a curse but, for the rand investor’s savings, it is an invaluable tool for constructing resilient portfolios. The rand is one of the most volatile currencies globally. This makes the value of offshore assets unusually volatile in rand terms, but during market stress the weaker rand often offsets falls in offshore asset values. For the rand investor, the combination of dollar strength and attractive bond returns in times of stress was doubly valuable.

Building diversified portfolios for the world we have

It is still too early to declare, with confidence, that we have entered a permanent new regime. But the evidence since 2021 is strong enough to change how investors should think about portfolio construction to achieve attractive risk-adjusted returns: US duration can no longer be relied upon to rise when equities sell off.

For most investors, the path of returns matters as much as the destination because:

• drawdowns affect behaviour,
• liquidity needs are real, and
• volatility can reduce compounded wealth.

The practical implication is simple: if the traditional safety of the US bond market is less dependable, investors must be more deliberate about where diversification and protection will come from. For rand-based investors the dollar may still provide valuable protection in stress, but the combination of dollar strength and positive bond returns can no longer be taken for granted.

We may miss the good old days – but portfolios should be built for the world we have, not the world we wish would return.

1 Current and Historical Market-Based Probabilities | Federal Reserve Bank of Minneapolis

In 1998, Iridium launched a constellation of 66 satellites to deliver global mobile coverage. It was a marvel of engineering and yet, nine months after launching services, Iridium was bankrupt. The economics simply did not work at the launch costs of the day.

A quarter-century later, almost every assumption that underpinned Iridium’s failure has been rewritten. Today there are thousands of satellites in orbit, serving millions of broadband subscribers globally. The cost of launching a kilogram into low Earth orbit has fallen by more than 95%, and companies such as SpaceX are still driving costs lower. Another tenfold decline is possible by the mid-2030s. Investors now face a different question: not whether space is reachable, but which space businesses will prove durable.

That shift from cost-prohibitive to cost-competitive is the kind of inflection that, in other industries, has marked the start of multi-decade infrastructure buildouts. Railways and telecoms followed that trajectory, beginning as curiosities and novelties, then quietly settling in as the everyday backbone of the economy. Space is following the same script, and the listed equity universe is only barely beginning to reflect it.

Two forces are driving the renaissance

The acceleration in space activity is not accidental; it is being propelled by two powerful, converging forces:

1. A revolutionary collapse in launch costs, driven by reusability

At the height of the space shuttle era, launching a kilogram into low Earth orbit cost roughly $54,500/kg. SpaceX’s Falcon 9 has brought that down to around $2,700/kg, and Falcon Heavy to $1,400/kg. ¹Starship, SpaceX’s next-generation reusable vehicle, targets below $200/kg. If achieved, that would be a 200-fold reduction in six decades, with most of the decline concentrated in the past ten years.

At $54,500/kg, space is a government programme. At a few hundred dollars per kilogram, it’s a logistics network embedded in everyday economic activity. Almost every commercial space opportunity that exists today either did not exist or was not economically viable before this cost collapse. Launching heavy equipment into orbit accounts for roughly 70% of total mission cost, so further reductions there would unlock many more opportunities.

2. A looming crisis in the infrastructure on Earth required for AI

There is no AI without electricity, and AI’s appetite for electricity has become structural. The International Energy Agency expects global data-centre electricity consumption to roughly double by 2030, while Morgan Stanley estimates that US data-centre consumption could rise from about 6% of total power use in 2024 to close to 20% by the mid-2030s. Local grids are already under strain. A single 1 GW campus consumes as much power as roughly 20% of New York City². Elon Musk has spoken of hundreds of GW of new data-centre capacity per year³. Most analysts treat that figure with scepticism, but even a fraction of it implies a power problem Earth cannot solve alone.

This is why putting compute in orbit no longer looks far-fetched. In the right orbit, a satellite’s solar panels receive near-continuous sunshine, yielding up to eight times the annual energy of equivalent panels on Earth and largely eliminating the need for battery storage⁴. Cooling, the perennial headache of every terrestrial data-centre, is also easier in space. On Earth, data-centres consume rivers of water to dissipate heat. In orbit, large radiators can do the same job by shedding heat directly into the cold vacuum. Space-based facilities can also be deployed faster, bypassing the multi-year permitting, grid-connection and environmental approvals on Earth.

Early trials are already underway, with companies like Google (Project Suncatcher), SpaceX and the start-up Starcloud, supported by NVIDIA and Crusoe, testing AI computing in orbit. For now, the investment case still has its feet firmly on the ground. Realistically, orbital data-centres are a 2030s story, requiring launch costs to fall further before the economics work and launch capacity to increase. The upfront capital expenditure will be far higher than for terrestrial equivalents, but lifetime operating costs could be materially lower. That is the bet serious capital is already making.

The opportunity set is broader than the AI angle

Space is more than an AI trade as it offers a wide range of opportunities:

• Defence and national security. Satellites are now central to modern warfare and defence: communications, navigation, intelligence gathering and increasingly offensive capabilities. The war in Ukraine underscored how strategic this infrastructure has become, and JP Morgan expects the defence layer alone to more than double by 2035. The Pentagon’s ‘Golden Dome’ missile-defence concept requires thousands of new satellites to function – and that is one programme, in one country.
• Earth observation. Satellite imagery has quietly become an input to industries from agriculture (predicting yields and optimising fertiliser) to insurance (data-driven underwriting and disaster monitoring) to shipping (real-time vessel and container tracking). It is, in effect, a data business operating from a very particular vantage point. Anyone using Google Maps or tracking shipping flows on Bloomberg is, in effect, interacting with the space economy.
• Satellite broadband. Perhaps the most visible commercial success. Constellations like Starlink and Amazon’s Project Kuiper aim to provide high-speed internet to the two billion people globally who lack reliable access. The economic value unlocked by connecting them is difficult to quantify, but almost certainly enormous.
• Frontier markets. Emerging but high-potential areas include in-space manufacturing, space mining, resource extraction and even space tourism. While they may offer long-term potential, they have not yet been proven commercially.

Today, the global space economy is around $615 billion and growing at roughly 8% a year, with the commercial sector accounting for 78% of the total⁵. The drivers above could push it toward $1 trillion within a decade.

What this means for investors

The honest takeaway for investors: the opportunity is real, structural and early. But it is also imperfect.

Much of the most compelling value sits in private markets, and SpaceX is the standout example.

Founded by Elon Musk in 2002, SpaceX has rewritten the economics of spaceflight through two design choices: reusability and vertical integration. Falcon 9 boosters, once treated as disposable, now routinely return, land, and re-fly, with individual boosters having flown more than 20 missions. Furthermore, by building most components in-house, SpaceX has sidestepped the cost-plus contracting model that has historically inflated aerospace pricing.

These advantages are now evident in SpaceX’s operating footprint. Its Falcon 9 and Falcon Heavy rockets dominate global launches, accounting for roughly 80% of mass put into orbit in 2025. Starship, its next-generation rocket, is targeting a dramatic drop in launch costs to levels where orbital data-centres make economic sense. Starlink, its satellite network, has grown to over 9,600 satellites and 10.3 million subscribers, generating $11.4 billion in revenue in 2025, representing a growth rate of 50% y/y.  Starshield is its dedicated military business. Lastly, they run a vertically integrated AI platform spanning compute infrastructure, the Grok model, AI solutions, and the X platform.

The prospect of a SpaceX initial public offering (IPO) has attracted enormous attention, along with valuation expectations that should give investors pause. Recent press reports suggest a listing valuation approaching $1.75 trillion, which would be the largest in history and is likely to draw even greater attention to the whole sector. Until then, public-market exposure to SpaceX remains limited. EchoStar is one of the few proxies. As part of a spectrum deal, it is set to receive SpaceX shares.

SpaceX’s achievements to date are real, but investors should not overlook the risks. The valuation already assumes years of strong future growth. Key-person dependency is unusually high, with Musk’s attention divided across multiple companies. A dual-class share structure will leave minority investors with limited governance influence, while a meaningful share of revenue still depends on US government and defence contracts, bringing political exposure with it.

The listed opportunity set spans the full value chain.

The value chain runs from materials and space-grade semiconductor suppliers to spacecraft builders and satellite operators, with a wide range of space enablers in between.

The listed pure-play space companies carry high risks. Names like Rocket Lab, Planet Labs, AST SpaceMobile, Iridium, Viasat, Redwire, MDA Space and newer listed players like Intuitive Machines and Firefly Aerospace, are mostly not yet profitable and are burning cash. The first generation of satellite broadband companies went bankrupt, despite genuine technological achievement, because costs were too high. Investors who lived through telecoms in 1999 will recognise the pattern: the technology and the demand are real, but separating winners from cautionary tales requires patience and selectivity.

For most investors, indirect exposure through diversified companies may be the more practical option. Large technology companies like Amazon, Alphabet, and Microsoft all have meaningful and growing space programmes from satellite broadband to orbital infrastructure investments. Picks-and-shovels suppliers offer exposure to the build-out itself. Defence primes like Lockheed Martin, Northrop Grumman and L3Harris supply satellites and launch systems to commercial and government customers; BAE Systems and Microchip make the radiation-hardened semiconductors that survive orbit; and Airbus and Thales Alenia Space⁶ specialise in thermal management and satellite systems.

It is, in fact, rocket science.

Commercialising space carries unique risks. Beyond intense capital burn and regulatory hurdles, hardware must survive radiation and thermal cycling, and on-orbit repair is essentially impossible. When a satellite fails, the usual answer is to write it off and launch a replacement. Space is also becoming crowded enough that a single collision could, in the worst case, trigger a chain reaction severe enough to render an entire orbit commercially unusable for years. This is a tail risk known as Kessler syndrome.

The closing thought

Twenty years ago, this was science fiction. Today, it is just science and edging into infrastructure.  For the thesis to hold, a few things need to go right:

• launch costs must continue to fall and launch cadence must continue to rise,
• orbital congestion must remain manageable, and
• demand for space-based services must prove durable.

None of these are guaranteed, and the path will almost certainly be uneven.

What is available in listed markets today is, for now, imperfect. Much of the cleanest value is held privately, by backers willing to operate on timescales that conventional funds often do not. The most attractive long-term opportunities are likely not the rocket builders themselves, but the picks-and-shovels plays and, over time, the software and service businesses that the space ecosystem will enable.  Good businesses do not always make good investments, and patience is part of the cost of admission.

However, investors do not need perfect foresight on timing or outcomes. What matters is recognising the direction of travel. A new layer of infrastructure is taking shape, incrementally, expensively, and largely out of sight, but with the potential to become as embedded and indispensable as the networks that came before it. The opportunity today is not to make concentrated bets on uncertain end-states, but to begin making sense of a world in which space is no longer a frontier market, but part of the global economic backbone.

The sky, as it turns out, was never really the limit.

Note: SpaceX plans to IPO on 12 June 2026. For more information, please refer to their prospectus.

1 https://ntrs.nasa.gov/api/citations/20200001093/downloads/2020 0001093.pdf; Aerospace Security,                            https://www.sec.gov/Archives/edgar/data/1181412/000162828026036936/spaceexplorationtechnologi.htm

2 Mirion fourth quarter and full year 2025 earnings presentation (slide11)

3 https://www.dwarkesh.com/p/elon-musk

4 Google Research, Towards a future space-based, highly scalable AI infrastructure system design (2025).

5 Bernstein, Space Opportunities (March 2026), citing The Space Foundation.

6 Not listed separately but owned by Thales Group and Leonardo that are both listed

View Alex’s bio

It has been an incredible experience so far. While many companies say their people are their greatest asset, at Denker Capital this value is truly lived every day. The people culture is exceptional, and the depth of expertise and experience across the team is genuinely impressive.

What are you most looking forward to in the year ahead?

I’m really looking forward to building relationships with clients and supporting them through what will no doubt be another interesting year in markets. I’m also looking forward to spending time with the investment team and gaining a deeper understanding of how they view the world.

What do you enjoy most about working with clients?

I love the people side of the role – getting to know clients, understanding what matters to them, and being a trusted partner in their journey.

What is your idea of a perfect weekend, after a busy week?

Spending time with the special people in my life – my hubby and daughter, along with our friends and family – always makes me happy, especially when it includes some time at the beach and in the sea.

Beach, bush or city break?

I grew up in a small town close to the Kruger National Park, so the bush will always have a special place in my heart. These days I’m lucky to live close to the sea, which I absolutely love.

So, if I had to choose, I’d say bush and beach are hard to beat!

Contact Robyn

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