(Kitco News) - With the U.S. stock market reaching unprecedented heights, Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, is urging investors to prepare for a potential correction. Speaking from the 2025 Mines and Money Miami conference, McGlone highlighted key factors suggesting that the time for caution is now.
Stock market vulnerability
McGlone pointed to the unsustainable pace of wealth creation in the stock market, stating, "Last year, $12 trillion of stock market wealth was created in this country," he told Kitco Mining. "That was 40 percent of GDP. It's the most ever."
Such rapid growth, he cautioned, is unlikely to continue and sets the stage for a significant market adjustment. He notes that the market has not had a 10% correction since Q4 2023 and is overdue for normalization.
Impact on commodities
McGlone warned that a stock market correction could trigger a domino effect across various asset classes. "The number one factor for all markets is when you have the U.S. stock market running two times GDP, it has to keep going up."
Should the market falter, commodities, including copper and crude oil, could face substantial declines. "Typically, crude oil drops 20%, and copper drops 20%."
Copper's cautionary tale
Given its close ties to economic trends, copper is particularly vulnerable. McGlone emphasized China's influence on the industrial metal, observing, "China is, via the bond market, showing severe deflationary forces." Concerns over tariffs and their impact on global demand further cloud the outlook for copper.
Gold as a potential safe haven
While also subject to market fluctuations, gold may offer some protection during a downturn. McGlone noted its recent outperformance against the S&P 500. "The underlying, the actual spot gold price is up about 65%. The total return at S&P 500, it's maybe 40%."
Strategic moves
McGlone suggested U.S. Treasury long bonds as a potential investment. "The next big trade is going to be the U.S. Treasury long bonds." He cited attractive yields compared to global counterparts and the prospect of lower inflation as supporting factors. "U.S. bond yields are extraordinarily cheap on a global basis, particularly versus gold."
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