Exploring the Dynamics of Risk Assets: Gold vs. T-Bills

Tom welcomes back Mike McGlone, senior commodity strategist for Bloomberg Intelligence. McGlone offers a nuanced perspective on current economic trends, focusing on potential deflationary forces and market corrections. He argues that commodities are experiencing a significant downturn, with crude oil down 9% and grains down 16% for the year, primarily due to their previous inflationary peaks in 2022.

McGlone anticipates a potential market correction, particularly in the U.S. stock market, which he believes is overvalued and approaching a critical point of reversion. He highlights historical parallels with market peaks in 1929 and 1989, suggesting that the current market conditions share similar characteristics of excessive valuation and speculative sentiment. Gold and U.S. Treasury bonds are Mike’s preferred assets for the remainder of the year. He notes that gold ETF holdings are up 10% this year, after four consecutive years of decline, and predicts gold could reach $4,000 per ounce. Central bank buying and a potential stock market pullback could further drive gold’s performance.

They also explore the potential impacts of tariffs, particularly on industrial metals like copper, and the changing dynamics of global trade. Mike argues that the U.S. is reshaping international trade relationships, which could pressure corporate profits and contribute to market volatility.

Regarding cryptocurrencies, McGlone is cautious, viewing them as highly correlated with the stock market and potentially vulnerable to a correction. He suggests that the proliferation of stablecoins represents a more practical application of blockchain technology for financial transactions.

His overall thesis centers on the cyclical nature of markets, emphasizing that periods of inflation are typically followed by deflationary corrections. He warns investors to be wary of consensus thinking and to pay attention to historical patterns and market signals that suggest a potential downturn.

Timestamps:
00:00:00 – Introduction
00:01:03 – Commodities & ‘flation Cycles
00:05:40 – Deflation Expectations
00:11:15 – Gold, T-Bills, & Risk Assets
00:15:26 – Equity Correction & Tariffs
00:21:09 – Volatility & Base Metals
00:24:02 – Gold & ETF Prices
00:28:40 – Reactionary Fed
00:32:40 – Dollar & Accomodative Fed
00:36:53 – Stablecoin Demand
00:40:59 – Investor Psychology
00:44:00 – Contrarian Approach
00:46:02 – Concluding Thoughts

Guest Links:
X: https://x.com/mikemcglone11
LinkedIn: https://www.linkedin.com/in/mike-mcglone-a8442513/

Mike McGlone is a senior commodity strategist for Bloomberg Intelligence, a unique research platform that provides context on industries, companies, and government policy, available on the Bloomberg Professional service at BI(GO). Mr. McGlone specializes in the broad investible commodity markets. Mr. McGlone joined Bloomberg in 2016 with over 25 years of futures and commodity trading and investing experience, beginning at the Chicago Board of Trade. Prior to joining Bloomberg, he was a head of US research at ETF Securities. Prior to ETF Securities, Mr. McGlone headed the commodity business at S&P Indices. His previous roles included head of futures research at ABN Amro and VP research, analyst, trader, sales at Aubrey G. Lanston / IBJ Futures.

Mr. McGlone has an MBA from DePaul University in Chicago and bachelor’s of science and arts degrees from Illinois State University. He is a CFA Charter holder and has earned a Financial Risk Manager designation.