The US stock market is coming off its worst week since March and is the worst pre-election stock market in history, according to veteran stockbroker Peter Schiff.
He said on his podcast that the weak stock market doesn’t bode well for Donald Trump’s re-election, who had touted the stock market as his great accomplishment. He also doesn’t think that the stock market would ultimately sell off on the reality of a Joe Biden presidency – that it would be “buy the rumor, sell the fact.”
“Well, apparently they’re not waiting for the fact and they’re selling on the rumors. They bought on the rumor Biden was going to win and now they’re selling on the rumor that he’s going to win, because a Biden victory is not good for the stock market. It means much higher taxes and that is not going to be offset by the Federal Reserve.”
Schiff pointed out that most people seem to think that regardless of who wins, it really won’t be a problem for the markets because the Federal Reserve will step in and backstop it.
Everybody seems confident that the Fed has their back, he says, but “The only leg that this market is standing on is the Federal Reserve and money printing.” The economist explains that “ultimately that’s not going to be enough. The market is not going to be able to survive when that is the only support.”
Normally, when people are running to get out of stock, he says, they move into bonds but if both stocks and bonds are falling at the same time, then there are no gains to offset losses. There are just losses on top of losses.
“So, I think this is going to be particularly brutal, because not a lot of people have hedges that are outside of traditional US stocks and bonds,” said Schiff. “There’s not a lot of investors that have gold or gold stocks that are hedging their portfolio. I think eventually they will. As I’ve been saying for a while, I think gold is going to be the last safe haven standing and ultimately that’s where all the safe haven money is going to flow.”
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