Mike McGlone: The Fed’s Greatest Test – Markets or Inflation?

Tom welcomes back Mike McGlone Senior Commodity Strategist for Bloomberg Intelligence to the show. Mike discusses the current state of financial markets, with a particular focus on gold and Bitcoin. He suggested that investors should consider having exposure to both as part of a diversified portfolio, as they serve different purposes. There has been a shift in investor sentiment towards digital assets, with significant outflows from gold ETFs and inflows into Bitcoin ETFs. McGlone also cautioned that the US stock market is overdue for a correction, which could impact both gold and Bitcoin. Regarding the current state of the financial markets, McGlone believes the US stock market is overvalued compared to the rest of the world, and a reversion could lead to a deflationary environment benefiting gold, crude oil, and copper. He also expressed concerns about the relationship between the US and China, stating that a conflict could have significant implications for the global economy. Regarding gold, McGlone noted its outperformance compared to the S&P 500 since the Fed started tightening in late 2021. However, he also mentioned a gap in the S&P 500 E-minis at around 4600, which could lead to a normal correction in the stock market, benefiting gold by flushing out weak longs and creating a more stable environment. The interview also touched upon inflation, deflation, and the US dollar. While there has been a deflationary impulse in commodities, inflation is being driven mostly by services due to unprecedented money pumping measures by the Fed. The US dollar will remain unstoppable compared to other fiat currencies, but open discourse is crucial for maintaining its value and strength. The speaker added that a significant test for the US stock market could trigger a catalyst needed for the West to start driving gold prices along with the East. When this reversion to the mean occurs in the overvalued US stock market, it will have a profound impact on markets. They also suggested following Mike McGlone, an analyst who covers the gold and commodities markets, on Twitter for more information on these topics. Talking Points From This Episode * Mike McGlone recommends considering both gold and some Bitcoin in a diversified portfolio. * He warns of an overdue US stock market correction that could affect markest and potential for deflationary benefits to gold, crude oil, and copper when a reversion occurs. Time Stamp References:0:00 - Introduction0:33 - Bottoms on Commodities3:09 - Gold, ETFs, & Bitcoin8:54 - Metals & Recession Risks11:40 - Thoughts on Silver13:50 - Equity Markets & Recession18:44 - U.S. Recession Risks21:20 - Rate Hike Lag Effects24:06 - Yield Curve Thoughts26:17 - Elections & Market Volatility29:23 - Commodities & Deflation31:12 - Q.E. & The Dollar35:06 - Gold East Vs. West?37:28 - Gold Vs. Equity Returns39:15 - Mean Reversion40:13 - M2 & Equity Prices41:46 - Wrap Up Guest Links:Twitter: https://twitter.com/mikemcglone11LinkedIn: 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,