• Schiff sees the weak dollar as a threat to the global economy
• Stocks and cryptocurrencies gone too far?
• Schiff recommends gold as a hedge against recession and inflation
After the first half of 2024, stock market volatility has increased significantly again in recent weeks. The “Black Monday” mini disaster on August 5th was quickly found. However, the beginning of September, which often proved to be very weak in the history of the stock market, was more than bumpy on the international stock markets. At the same time, there are growing voices of caution that believe the rally in stocks – especially those in technology companies – has gone too far. The stock markets are in dire straits. Economist Peter Schiff, a well-known critic of US economic policy, has once again made a gloomy prediction about the future of global markets.
US dollar crisis: Peter Schiff warns that the recession is approaching
The main reason for Schiff’s pessimism: the weakening of the US dollar. Recently the US dollar index, which compares the value of the “green period” with other leading currencies such as the euro, the British pound, the Swiss franc and the Japanese yen, reached a 13-month low.
Schiff sees this as a great danger and is alarmed by the coming recession. Schiff sees a dangerous downward trend in the US dollar that could put the American economy in crisis. He predicts the dollar index will fall further below 90 by the end of the year, which could lead to sharp increases in consumer prices and higher long-term interest rates. “I think this low will be broken again in 2025, which would trigger a crisis in the US dollar,” Schiff said. According to “MarketWatch”, the US dollar index is currently 100.54 (as of September 26, 2024). For comparison: at the end of June it was still trading at more than 106.
Interest rate policy in focus: Is there a risk of another burst of inflation?
Another central aspect of Schiff’s careful analysis is the interest rate policy of the US Federal Reserve (Fed). Although the inflation rate has fallen in recent months, Schiff sees a rate cut as dangerous. For him, this move could further weaken the dollar and promote inflation. “The Fed is using ‘low’ inflation as an excuse to cut interest rates, but cutting rates will crash the dollar and drive up inflation,” he said. In view of the stabilized inflation rates, Schiff expects – as the market has already priced – a rate cut at the upcoming FOMC meeting on September 18. In his view, the reduction in the interest rate will stabilize the markets in the short term. In the longer term, however, he fears the economic problems will worsen, as lower interest rates and a weakening US dollar will once again provide a strong boost to prices.
Schiff sees black for stocks and cryptocurrencies
Schiff sees not only the dollar, but also the stock and crypto markets under strong pressure. He points to the poor performance of the US technical index NASDAQ 100 and the recent losses of cryptocurrencies such as Bitcoin and Ether. Schiff, who is considered a harsh critic of the crypto industry, interprets the weakness of cryptocurrencies as a clear sign of an impending market correction. The outflows from Grayscale Ethereum Trust ETF (ETHE) in particular increased its concerns about an impending recession.
Schiff: Here’s how investors can prepare themselves for an economic downturn
As stocks and crypto markets weaken, gold remains Schiff’s best hedge against the coming turmoil. The economist regularly recommends gold as an important component of a crisis-resilient portfolio and this is confirmed by the current gold rush. In his opinion, the end of the road for the yellow precious metal is far from being reached: Schiff explains that the growing uncertainties in the markets and the weak performance of the dollar are strengthening the confidence of investors in alternative asset classes like gold.
Schiff sees gold as a safe alternative to cryptocurrencies, which he believes could be hit hard by the recession. Although many investors rely on Bitcoin as digital gold, Schiff remains skeptical and warns about sharp price drops in times of crisis. For him, only gold offers real protection against the coming economic turmoil – including the shares of gold mining companies.
Finanzen.ch editorial team
This text is for informational purposes only and finanzen.net GmbH is not an investment recommendation without any claim on trust.