The stock market got a nice bump on Monday with the news that there was a “truce” in the trade war. That lasted all of one day. The markets tanked on Tuesday as investors realized the “truce” really didn’t mean anything. The Dow Jones plunged 799 points, a 3.1% drop. The S&P 500 declined 3.2%, while the Nasdaq was down 3.8%. As one news outlet put it, “investors are quickly realizing that the US-China trade war is not over. The tariffs already put in place remain. And new tariffs could be implemented if the two sides fail to make progress.”
Well, yeah. Duh.
In his latest podcast, Peter Schiff said he wasn’t surprised at all by the drop.
We talk a lot about bubbles in the economy.
Nick Giambruno simplifies things in an article he recently wrote for the International Man. He just calls it the “everything bubble.” And he says it will pop in the near future thanks to the Federal Reserve.
As Peter Schiff put it in his most recent podcast, Jerome Powell blinked.
In a surprising about-face, the Federal Reserve Chair hinted that interest rates are “just below” neutral, leading to speculation that the central bank might be close to ending its tightening cycle. Peter said the Fed has basically been playing a game of chicken with the markets.
And the way the game of chicken goes is the markets keep moving lower and the Fed keeps talking about how great the economy is and how many rate hikes are coming in the future and somebody his to flinch. Somebody has to blink. It’s like you have these two automobiles driving toward each other and there’s going to be a major crash unless somebody turns the wheel. And it seems like it was Jerome Powell that turned the wheel first and in fact was chicken.”
Stocks rallied and the price of gold got a bounce after Federal Reserve Chair Jerome Powell released a dovish trial balloon on Wednesday.
During a speech at the Economic Club of New York, Powell seemed to indicate interest rates are “just below the broad range of estimates of the level that would be neutral for the economy.” Investors and pundits widely interpreted this to mean the central bank may well be near the end of its tightening cycle.
Peter Schiff appeared on RT Boom Bust last week and reiterated he thinks we have entered a bear market. In fact, what we’re seeing now is a deflating bubble.
Yesterday was another bad Monday on Wall Street. The Dow Jones dropped nearly 400 points and the NASDAQ fell deeper into “correction territory,” dropping another 3%. All five “FAANG” stocks closed in bear territory. These are the tech stocks that have propelled the long bull market. The NASDAQ is down 12.5% this quarter.
Apple’s announcement that it plans to cut production weighed heavily on the markets, along with another sign of trouble in the housing market — a big drop in homebuilder sentiment.
Peter said homebuilder sentiment is the first sign that the confidence bubble has popped.
A rally in the last two days of the month was the lone bright spot in an abysmal October. It was the worst month for global equities in more than six years. Globally, stock markets lost 7.5%, their worst month since May 2012. Even with the late rally, it was the biggest monthly decline in the NASDAQ since ’08.
US stock markets closed up for the second straight day on the final day of the month. It was the first back-to-back days of gains in October. As Peter Schiff put it in his most recent podcast, it may have been Halloween, but the bulls had no fear.