(Kitco News) As U.S. equity markets close out 2025 near record highs, Bloomberg Intelligence Senior Commodity Strategist Mike McGlone says markets are sending conflicting signals that point to a volatile reset in 2026 rather than a smooth continuation of the current cycle.
Speaking to Kitco News, McGlone described a widening divide between the paper economy and the physical economy. While the S&P 500 and Nasdaq continue to price in a soft landing and continued growth, commodities and real-world inputs are signaling something very different. “When you have gold just grabbing alpha like it has this year, up 65% and beating everything on a cost-adjusted basis, and crude oil collapsing on a global basis, that’s a global recessionary trajectory,” he said.
McGlone said the divergence is not a sign of strength, but a warning that markets are nearing a turning point. “Since Halloween, I’ve been using the word frightening,” he said, pointing to gold trading above $4,300 an ounce, oil slipping into the mid-$50s, and Bitcoin lagging equities by one of the widest margins of the modern cycle.
Historic Equity vs. Gold Inflection Point
One of McGlone’s core signals heading into 2026 is the ratio of the S&P 500 to gold, which he says is approaching a level with deep historical significance.“Right now it’s about 1.55 ounces of gold to 1 S&P 500,” McGlone, adding, “That was the peak in 1929.”
He pointed to past episodes when that ratio moved down from that level, including the 1970s and 2008, and that, in his view, the key question for 2026 is not whether gold continues higher, but whether equities finally reprice lower relative to gold. “I think the stock market’s going to continue going lower versus gold,” he forecasted.
McGlone added that volatility suppression itself has become a risk, with the S&P 500’s 120-day volatility near 11%, far below long-term averages. He said markets are pricing calm that rarely lasts. “It never stays low there forever,” he said.
Energy Prices Challenge the Growth Narrative
McGlone said oil prices are one of the clearest forward-looking signals for 2026. Despite widespread narratives around artificial intelligence, electrification, and rising power demand, crude oil continues to weaken. With WTI near current levels, McGlone expects prices to revisit the lower end of their long-term range. “it’s normal for WTI crude, which is $56 right now, to bottom around $40.”
He noted that similar post-inflation deflationary patterns are already visible across grains and industrial commodities. In his framework, even a modest equity correction could accelerate those trends, as “just a little pickup in U.S. stock market volatility” could push broader deflationary pressure through global markets.
Bitcoin and Risk Assets Face Mean Reversion
McGlone also warned that Bitcoin remains vulnerable as a high-beta risk asset if equities roll over, comparing the current setup to past speculative peaks, pointing to extreme back-tested performance and rapid product proliferation. “When you have stock market volatility this buried, you typically don’t want to buy cryptos,” he said.
He added that Bitcoin’s recent decline relative to gold may not be complete, noting the current ratio on December 18, 2025, of around 20:1. “The high when Trump got elected was that it took about 40 ounces of gold for one Bitcoin. So that’s dropped from that high 50%,” McGlone said. “What stops it from dropping to 10%?”
Gold Strength Comes With 2026 Volatility
Despite his long-term constructive view on gold, McGlone cautioned that the metal’s rapid rise has increased the likelihood of wide trading ranges next year. “Gold’s annual volatility is around 16%,” he said, adding, “a first standard deviation move from current levels next year is around $5,000, or down around $3,500.”
McGlone emphasized that similar volatility followed past parabolic rallies and warned investors not to confuse strong performance with low risk. “When they get this stretched, be very careful,” he said.
Treasuries and the Defensive Shift in 2026
Looking ahead, McGlone said U.S. Treasuries could become one of the most important assets in 2026 if equity volatility returns. He expects long-term yields to fall sharply in a risk-off environment, forecasting that “10-year yield right now at 4% is going to drop below three.”
He added that central bank buying of Treasuries reinforces that outlook, particularly if deflationary pressures deepen and equity markets lose momentum.
The 2026 Outlook
McGlone said 2026 is shaping up as a year defined by mean reversion, rising volatility, and a shift away from crowded trades that benefited from years of suppressed risk. He cautioned against equating asset prices with economic health: “Do not mistake a bull market in prices for a healthy economy.”
Watch the full interview with Mike McGlone on Kitco News for his in-depth analysis of equity risk, gold volatility, oil’s deflationary signal, Bitcoin’s downside exposure, and what the “Great Reversion” could mean for markets in 2026.
Sponsored by Discovery Silver Corp. - Learn more about the company, its latest news, and investor materials.
Visit https://discoverysilver.com/
