Benjamin Cowen highlights a long-term chart that compares the S&P 500 to gold. Historically, this ratio has been an early warning signal for major market shifts, and it’s now sitting at a level that deserves close attention.
Key Points
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The chart tracks how expensive stocks are relative to gold
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Historically, breakdowns in this ratio often happened before recessions
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Similar levels preceded downturns in the 1970s, 2008, and 2020
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The ratio is currently near 1.44–1.45, a critical support zone
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A sustained drop below ~1.4 would significantly raise recession odds
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This doesn’t mean stocks must crash, sometimes stocks move sideways while gold rises
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Stocks have already underperformed gold by roughly 45% since 2021
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Strong stock prices today are supported by pockets of economic strength, not broad hiring
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Youth unemployment is rising, while companies slow new hiring
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As long as some areas stay strong, markets can “climb the wall of worry”
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If stocks fall while gold keeps rising, layoffs could follow, increasing recession risk
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Cowen stays cautious, noting central banks could still intervene with liquidity
Takeaway
Cowen’s message isn’t panic, it’s awareness. If stocks break down against gold, history suggests rising recession risk and continued strength in hard assets. This chart doesn’t predict exact outcomes, but it’s a key signal for navigating the months ahead.
