Oil and gold are making big moves in opposite directions, a major warning sign that markets are headed for a severe downturn. Last week marked the first time since the global financial crisis that gold had rallied at least 5.2% and oil plunged by at least 8.7%, and prior to then, such a stark divergence between the two major benchmark commodities has only occurred on two other occasions—both during the bursting of the dotcom bubble. Amid growing global trade tensions, it’s hard not to see last week’s moves as anything but bearish.

“Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions,” macro analyst Tavi Costa of Crescat Capital posted on Twitter, according to MarketWatch. “Buckle up, folks.”

2 Warning Signals From Sharp Divergence in Oil and Gold Prices 2019: Oil has fallen more than 8.7% as gold has soared more than 5.2% in same week;

3 previous instances were during bear markets and recessions;

2 most famous events were 2000-2001 tech crash and 2008 financial crisis. Source: Crescat Capital, MarketWatch

What It Means for Investors

Along with the surging gold-to-oil ratio, Costa noted a number of other bearish signals, including plunging copper prices, and widening corporate credit spreads. He also pointed to Federal Reserve Chairman Jerome Powell’s recent comments in response to the escalating trade war as clearly bearish. Powell suggested the Fed would consider cutting interest rates to maintain economic growth.

“We do not know how or when these trade issues will be resolved,” Powell said Tuesday, according to The Wall Street Journal. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.” The policy stance at the Fed appears to have changed; the debate is no longer about whether or not to hike rates, but about when to cut them.

“Rate-cuts when late in the business cycle have never been a bullish sign,” said Costa. “It reaffirms the many bearish macro signals we have been pointing out. Economic conditions are weakening in the face of asset bubbles everywhere.”

Costa isn’t the only one waving the red flag. Nomura market strategist Masanari Takada is also drawing parallels between today and the lead up to the global financial crisis more than a decade ago. “What we see is that the trend in U.S. stock market sentiment is starting to resemble the pattern observed in the run-up to the Lehman crisis,” Takada told Bloomberg, citing his firm’s proprietary sentiment index. In a worst-case scenario, Takada thinks the S&P 500 could drop by as much as 40%.

The World Bank also came out with data on Tuesday that added to the growing pessimism. Citing ongoing trade conflicts as a major source of downward pressure on growth and trade, the Bank revised its estimate of global economic growth downward from 2.9% to 2.6% and global trade growth from 3.6% to 2.6%, according to The Wall Street Journal. Global economic growth is on track to be its weakest since 2016 and trade growth to be its weakest since the global financial crisis.

Looking Ahead

Despite the pessimism, some see the market’s recent pullback as a buying opportunity. Chief investment officer of Heron Asset Management Alberto Tocchio believes that dovish central banks and stable economic data will help to buoy the economy and markets. If Powell sticks to his word and is willing to add support as needed, Tocchio could be right. Of course, much will also depend on the outcome of future trade talks, especially between the world’s two largest economies.