Schiff: The Bounce Is Just A Bear Market Rally

Via SchiffGold.com,

Peter returned to the mic to analyze a volatile week on Wall Street. He unpacks the market’s recent surge, the political pressures buffeting the Federal Reserve, and the deeper consequences of unsound economic policy. From the opaque motives driving central bankers to the misleading optimism embedded in public statements about tariffs and trade, Peter reveals why investors should remain cautious, not complacent.

Peter opens the show with his signature skepticism toward market mood swings, reminding listeners that bear markets are notorious for sharp, misleading rallies:

This is another Sunday night podcast following what was a big turnaround week for the markets. It really started on turnaround Tuesday, but it lasted the entire week. Now, I don’t think it’s a permanent turnaround. I think it’s a bear market rally, a counter trend move in pretty much all of the markets. This is how bear markets work. You get some pretty big short-term counter movements that serve the purpose of creating a false sense of hope that the market is bottomed out.

He critiques Trump’s approach to monetary policy, noting that Trump only wants lower rates for political reasons:

He basically started calling Jerome Powell names, you know, like they’re at a playground, calling him ‘too late Powell.’And he said that Powell needs to cut rates and he can’t go soon enough. We got to get rid of Powell. He’s screwing up by not cutting rates. And so the markets didn’t like that type of pressure on Powell from the White House to not only cut rates but risk being fired if he didn’t.

Peter compares the post-2008 Fed policy to today. He argues that Janet Yellen, who led the Federal Reserve under President Obama, was motivated by politics rather than economics, just like Powell:

I’m sure that he’s not the only one. I’m sure Yellen was very much a team player for Obama. That’s why she never even raised rates once when Obama was president. She kept them at zero the whole time. She didn’t start hiking rates until Trump won. And then she started hiking rates. So she kept rates at zero. That was very political. And Trump was right when he ran against Hillary Clinton back in 2016 for pointing out that the Fed was political.

Turning to the week’s market rally, Peter calls out the engineered optimism around the trade war, warning listeners that it’s built on hollow promises rather than substantive breakthroughs:

But the big movers were in the stock market, and it wasn’t just because of the damage control that was done on Tuesday. We got more crafted statements from the Trump administration, especially, I think, from Scott Bessent, about the trade war and the tariffs, and some positive statements that I think the tariffs will come down soon. Things are going well, the negotiations are going good, so a lot of positive comments that I think were all a bunch of BS. I think these comments were deliberately floated out there to get the markets to rise, to get them to think, oh, okay, it’s almost over, we’re going to know the war is going to be over. And we got this big relief rally really on nothing.

Finally, Peter contends that China might ultimately benefit from disentangling itself from the U.S. financially, a view that breaks sharply with conventional wisdom on global trade. He argues China’s ongoing export relationship is propping up a debtor—one that pays with increasingly dubious U.S. IOUs:

And as far as I’m concerned, in the long run, it’s the best thing that could happen to China. Because China needs to stop trading with the United States to the degree that it does, because we’re screwing them over. Because we’re not paying; we’re just giving them IOUs that are basically not going to be worth anything. So their economy is getting all screwed up, maintaining this vendor financing of a customer that’s never going to pay. And it’s doing real damage to their economy, and the sooner they can repair that damage, the better for them.

If you missed it, make sure you check out Peter’s latest interview on the Young & Profiting podcast!