The stock market now functions as the economy, and metals are its puppets in the ups and downs, senior commodity strategist at Bloomberg Intelligence, Mike McGlone says.  

“It is the economy and the metals are complete stock puppets, unfortunately, as a broad sector,” he told MINING.COM host Devan Murugan in a recent Top of Mine episode.    

McGlone argues that, out of all metals, copper is the one that follows the stock market the most. 

“Copper is just a stock puppet. Stock market goes up, it goes up at a higher volatility and a lesser performance. Stock market goes down, it’s the same thing,” he said. “But the key thing is if and when we ever get that normal 10% correction in the stock market, copper will probably drop 20 or 30%.” 

This is also the time for investors to be cautious about what to do with gold, according to McGlone. 

“The signals are very scary. I point out the basic facts, but you have to point out the stuff behind the market that are the warning signals and that to me is a warning sign,” he said. “The bottom line I repeat is when gold gets exciting it’s usually best for investors to be cautious. You’re supposed to be selling when they’re yelling and this is just too peakish for me and I have to be bold enough to say it.” 

Fed hikes, checks and balances 

For McGlone, the Fed’s recent decision to increase interest rates shows how the US government still balances power. 

“The first time I heard Mr. Warsh speak, I [thought] ‘this might be a guy who’s willing to push back and actually hike rates when the person who hired him asked him to cut rates,’” he said. “It’s just such an example of the checks and balances and the self-correcting mechanism of this country kicking in.” 

“This is the best thing to curtail inflation, which is the number one issue. It’s going to bring down mortgage rates, but it shows the responsibility of the system,” he added. 

McGlone warns that the first sign we’ll see of post-inflation deflation will be the stock market going down.  

“That’s the number one force for the Fed to reverse and the number one force to alleviate this massive wealth effect inflation in this country,” he says. 

Watch the full episode: