In his latest podcast, Peter Schiff looked back at the third quarter and ahead to Q4. He said we may well see fireworks next quarter. Of course, a big factor will be the presidential election. Peter talked about the prospects for the economy in the wake of the election, and he also broke down what he called “a debate to forget.”
Stocks finished the month down modestly, but they were up on the quarter. In fact, virtually everything was up in Q3. As Peter said, it was purely a function of the Fed.
“It was the Federal Reserve’s commitment to keep interest rates low and to continue to monetize debt that drove the gains in the equity markets.”
Despite the big selloff in September, gold ended Q3 up about 6%. Silver was hit the hardest last month, falling about 18%. But despite the big drop, it still gained 27% on the quarter and outperformed all of the major stock market indexes.
The dollar was the mirror image of precious metals and equities. It was up on the month in September, but down on the quarter. The dollar index gained nearly 2% in September but ended down just over 3.5% on the quarter.
“So, pretty much September was a counter-trend move in every asset. Everything that was up on the quarter well, it was down on the month, and vice versa.”
Bonds were relatively flat. Peter said he still expects a big uptick in interest rates with a corresponding drop in bond prices.
“That move continues to elude me, but I do believe it is coming. And I think the longer it takes to happen, the bigger it’s going to be when it does happen.”
Peter said looking ahead, there could be a lot of fireworks in the fourth quarter.
“I think it can be a particularly negative quarter for the dollar — maybe even for the bond market as well, and the stock market.”
Peter referenced the op-ed by Yale economist Stephen Roach projecting the dollar could fall as much as 35% in 2021.
“Thirty-five percent in the world of currencies is enormous, especially to happen in one year. And this is from a guy who’s maybe on the fringe of the mainstream, but still within the mainstream.”
A 35% decline in the dollar index would put it barely above 60. The all-time record low was just above 70 back in 2008. Peter said he doesn’t disagree with anything Roach wrote. We could see that kind of decline in 2021.
“And if it doesn’t happen in 2021, well, then it may happen in 2022. But ultimately, I think the dollar index could go a lot lower than 60. I wouldn’t be surprised to see it down at 40. I think there is tremendous downside risk.”
One thing that could have a major impact on the fourth quarter is the election results – both for the presidency and Congress.
“I think the dollar is going to go down regardless of who the next president is and which party controls Congress. I mean, that should be abundantly clear based on the debate. Anybody who harbors any kind of hope that Donald Trump is going to turn the situation around, I mean, you certainly had those hopes dashed as a result of the debate. … It’s clear to me that the policies that are going to be rammed through a Democratic Congress and signed by President Biden will put even more downward pressure than the downward pressure that would be applied from Trump and a Republican Congress.”
Peter said a Biden win would also be more negative for stocks given that the Democratic Party nominee is promising to raise corporate taxes.
“The only positive for the stock market in a Biden administration will be that the economy is so bad that the Fed will be doing even more money printing to monetize the larger debts produced by Biden and the Democrats than the money they’re going to print to monetize the somewhat less enormous deficits produced by the Republicans. And so, it’s all that money printing that may make stock prices go up. But in real terms, stock prices will fall even further because those monetary policies will be more bullish for gold and silver than it will for US stocks. And of course, it will be far more bullish for global stocks than it will for domestic stocks. So, I think however the election ends up, I think you’re much better off being invested outside the US — foreign stocks, foreign markets, gold, silver, anything that unrelated to the US economy or the US dollar.”
In this podcast, Peter also talks about the big news story related to Donald Trump’s taxes, and he also analyzes the presidential debate, calling it, “A debate to forget.”
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