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What Bonds, Oil & Gold Are Telling Us | Michael Lebowitz

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News and Commentary

Big picture: cross-asset moves share the same drivers

Michael Lebowitz (interviewed on Thoughtful Money) argues that bonds, oil, and gold are being driven by the same underlying forces right now—primarily the Iran/war premium and its spillover effects through:

  • Real rates
  • Inflation expectations
  • Liquidity

He describes the market tone as “complacently optimistic” on the surface—like a calm “duck”—while cross-asset stresses build underneath.

Bonds: why yields look “weird” versus inflation expectations

Lebowitz points to a high positive correlation between crude oil and 5-year Treasury yields, saying that oil is dominating what bonds do more than usual (relative to longer-run drivers like the economy/inflation history).

The key divergence

  • 5-year inflation expectations (e.g., TIPS breakevens / market pricing) have fallen since the Iran conflict began.
  • Yet nominal yields and especially real yields have risen materially.

This implies yields are moving higher despite falling expected inflation.

His interpretation

  • The bond market is likely pricing a temporary “war premium” / deficit-and-supply premium, not a durable inflation regime.

What he rejects

  • He argues this is not mainly a credit/liquidity crunch.
  • If it were, you’d typically see:
    • widening credit spreads
    • falling Treasury yields more broadly
  • Instead, he frames it as a transitory distortion rather than a systemic collapse.

Outlook (with a caveat)

  • He expects normalization once oil/war pricing settles.
  • However, if the conflict escalates out of control, the bond picture could worsen.

Bonds/credit markets: spreads suggest complacency (not panic yet)

Lebowitz adds a “credit-spread dashboard” framing using BofA ICE indexes by rating tiers.

Main points

  • Investment-grade spreads (e.g., BBB) are elevated versus very recent lows, but still near the bottom over longer historical windows.
    • Translation: sentiment/liquidity are not in a true crisis.
  • Spreads are treated as an early-warning indicator:
    • They typically don’t jump overnight from complacency to fear.
    • Watch for momentum/acceleration.
  • Monitor whether lower-quality tiers (e.g., single-B) start widening faster than higher tiers.
    • That divergence would suggest stress is building.

Oil: the “equilibrium” between escalation and election politics

Oil has been volatile as Iran tension has resumed. Lebowitz ties price action to diplomatic/military brinkmanship and argues oil effectively helps govern incentives on both sides:

  • If oil gets too high:
    • incentives shift toward de-escalation/negotiation
    • this hurts economies and especially gas prices ahead of political deadlines
  • If oil gets too low:
    • incentives can shift toward more leverage/escalation

With the (midterm) election context mentioned in the discussion, he suggests political incentives may help keep oil constrained unless the equilibrium breaks.

Scenario planning for very high oil (e.g., $150)

Lebowitz anticipates a severe oil spike could trigger:

  • Stocks down
  • Bond yields up
  • Inflation temporarily worse
  • GDP weaken

He emphasizes avoiding a single precise target and recommends a “cone of uncertainty” approach (hurricane-forecast mindset), with playbooks for multiple outcomes, such as:

  • peaceful resolution
  • a $150 oil pathway
  • a $50 oil glut

Gold: a “bet on the Fed,” driven by rising real rates (and thus oil/war conditions)

Lebowitz links gold primarily to real rates:

  • Historically, gold tends to move inversely with real interest rates
  • He characterizes current policy as restrictive, with real rates above ~2%, which typically weighs on gold
  • Earlier gold strength is framed as part of a momentum/speculative unwind (meme/crypto-like behavior), followed by a shift as the war/oil dynamic reasserted itself

Conclusion on direction

He argues gold’s direction is likely still tied to the bond market’s real-rate trend, and therefore to oil-driven inflation/war premium dynamics.

Practical portfolio implication (precious metals miners vs. bullion)

For those considering precious metals miners versus bullion:

  • Compare convergence/divergence between bullion proxies (e.g., GLD) and miners proxies (e.g., GDX/GDXJ).
  • The general idea: miners may lag and require confirmation of the gold move before being added.
  • He warns against assuming a bottom based only on a short-term bounce.

Presenters / contributors

  • Adam Tagert — host, Thoughtful Money
  • Michael Lebowitz / Michael Liowitz — guest; partner/associated with Lance Roberts (per the discussion)

Original video