S&P 500 vs gold vs copper

The gold rally provides vital context for the stock market. The ratio of the S&P 500 to the gold price, which effectively prices the index in gold rather than dollars, has tanked this year and is almost back to its pandemic-era low.

Combining gold with copper provides another alarming recession signal. The former rises when people are worried, while a gain in the latter shows that economic activity is expanding. So when copper drops to its lowest in gold terms in at least 38 years, that’s concerning (although it’s worth noting that the previous low in 1987 didn’t prefigure a recession):

Looking at U.S. recession's odds causes some to see red

Anyone who “can’t see the recession” coming to the U.S. isn’t looking at a key indicator, according to David Rosenberg, Gluskin Sheff & Associates Inc.’s chief economist and strategist. Rosenberg featured a gauge compiled by the Federal Reserve Bank of New York in a Twitter post Monday.

The monthly indicator is based on the gap between yields on three-month Treasury bills and 10-year notes, and shows recession probabilities over 12 months. The latest reading was 32.9%, a 12-year high. Rosenberg’s post followed a report last week by Morgan Stanley Wealth Management that cited the New York Fed’s indicator.

** 3 years later **