"A ticking time bomb:" Why Peter Schiff says this market rally is a trap

Wall Street is celebrating markets sitting at all- time highs, but not everyone is convinced the optimism will last. EuroPac.com Chief Economist and Global Strategist Peter Schiff is sounding an urgent, yet familiar alarm. 

Schiff sat down with TheStreet’s Caroline Woods and argued that the current rally is built on “hope, not reality” and warned that a massive repricing is inevitable. 

Schiff: Stocks are overpriced; a correction is imminent

Schiff believes the current market strength is a distraction from deteriorating fundamentals. He argues that stocks eventually have to answer to economic reality. “I think investors have gotten a lot of things wrong, but that hasn’t stopped the market from going up,” Schiff says. “In the long run, the fundamentals are going to ultimately bring the market back down. You have to be prepared for that.”

He believes the U.S. is on the verge of more than just a typical market correction. Schiff says the country is on the “verge of not just a financial crisis, but a U.S. dollar and sovereign debt crisis.”

A major concern he highlights is the current valuation of U.S. equities. Schiff points out that even bullish analysts admit stocks are expensive, but argues that investors should be more concerned about the current geopolitical and economic headwinds: “People are underestimating the significance of this war, how much damage it’s going to do to the U.S. economy, to the budget of the United States, to the credibility of the United States, and, to long term interest rates and inflation.”

While Schiff acknowledges that the U.S. market has had a huge run over the last decade, he believes it’s “a ticking time bomb.” He urges American investors to increase their allocation to foreign stocks, bonds, and other lower-risk assets to mitigate risk. Schiff’s overall message is simple: Take your profits while you can and look toward the exit.  

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