There’s a divergence happening between gold and the S & P 500. That may spell bad news for stocks. Stifel’s chief equity strategist Barry Bannister said that the S & P 500 is moving lower relative to gold . This comes as the precious metal continues surging to record highs — it hit $5,300 per ounce for the first time on Wednesday — while the S & P 500 is stalls around the 7,000 level. Over the past year, gold futures have soared 90%, while the benchmark stock index has climbed just 15%. Instances of stocks lagging gold to this extent are rare. Bannister noted such relative breakdowns have occurred only four times in the past century. What ensued was not positive for stock market investors. “The S & P 500 was range-bound for years after the S & P 500 relative to gold crossed this threshold in the past,” wrote Bannister. “Perhaps ‘this time is different’ and both the S & P 500 and gold will continue to soar, but to us that sounds like wholesale flight from fiat money, which has never ended well in history.” Indeed, much of gold’s advance comes as investors around the world move away from the U.S. dollar. Some are paring exposure due to expected rate cuts from the Federal Reserve. Others are hedging against policy uncertainty from the Trump administration and shifts in the U.S. National Security Strategy . The dollar index , which measures the greenback’s performance against six other leading currencies, although not the Chinese renminbi, is down more than 10% over the past 12 months. The dollar is also coming off its worst one-day slide since April of last year on Tuesday, driven by President Donald Trump saying the currency hasn’t fallen too low. “After three ebullient ‘double-digit’ (S & P 500 percent gain) years in a row, the S & P 500 may just consolidate,” Bannister wrote. Markets could get a jolt Wednesday after the Fed announces its latest policy decision at 2 p.m. That will be followed by commentary from Chair Jerome Powell, starting at 2:30 p.m. ET.
The S&P 500 is falling vs. gold. History shows that’s a bad omen for stocks
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