The S&P 500’s performance relative to gold is flashing a potential warning of global deflation, according to analysis by Bloomberg Intelligence strategist Mike McGlone.
The warning comes at a time when both asset classes have had a stellar run in 2025, hitting new all-time highs despite periods of market volatility.
McGlone noted that historically, elevated risk assets like equities tend to falter following major liquidity surges. In this case, data suggests U.S. stocks may be peaking relative to the precious metal.
Interestingly, gold has matched the total return of the S&P 500 since 2017, a rare occurrence often tied to macroeconomic inflection points, McGlone said in a post on X on August 8.
Historically, when yields fall and the S&P 500/gold ratio declines or stagnates, it signals deflationary pressures and a shift in investor preference from equities to hard assets like gold.
“History casts a bearish shadow over elevated risk assets following big liquidity spikes, and gold matching the S&P 500’s total return since 2017 may be pointing to global deflation,” he said.
S&P 500/gold signalling a pullback
The S&P 500/gold ratio is now hovering near levels seen at previous cycle tops in 2000 and 2018, just before significant market pullbacks. With yields remaining below historic highs and liquidity tightening, the setup resembles past deflationary environments.
At the same time, gold’s continued strength in 2025, on track to outperform stocks again, further supports this thesis. Looking ahead to 2026, McGlone suggested gold may reassert its dominance, especially if deflationary forces intensify.
This latest outlook follows another cautionary take by McGlone, who warned that 2025 could usher in a major stock market downturn, potentially the third 50% decline since 2000.
As previously reported by Finbold, McGlone sees capital flowing into safe havens like gold and U.S. Treasuries, which are outperforming risk assets. He expects gold and bonds to continue leading, while crypto underperforms.
Featured image via Shutterstock
