Peter Schiff Sounds The Alarm: 'Same Mistake Again' Could Trigger Economic Firestorm

Stock and ETF investors, take note. Peter Schiff sees trouble ahead and he’s not mincing words. The renowned investor warns that the government and financial media are “making the same mistake again” as they did before the 2008 Global Financial Crisis, Schiff wrote on X.

The culprit this time? A toxic mix of tariffs, rising interest rates and misguided Federal Reserve policies that could unleash an economic firestorm.

Tariffs: A Recipe For Inflation, Rate Hikes

Schiff argues that tariffs won’t just impact trade – they’ll send shockwaves through the economy. “Tariffs mean fewer goods will come into the country, and fewer dollars will go out. More money chasing fewer goods means higher domestic prices. This is an economic certainty,” he said.

For investors, that translates to higher inflation, a weaker consumer and pressure on corporate margins.

But it doesn’t stop there. “Lower trade deficits will result in fewer dollars being recycled into U.S. bonds, sending long-term interest rates higher.” With higher rates, borrowing costs rise for businesses and consumers alike, slowing growth and putting pressure on stocks—especially high-flying tech names.

Read Also: Recession Watch: Small Caps Sound The Alarm, But Credit Markets Shrug

Fed To The Rescue? Not So Fast

Schiff sees the Federal Reserve making the wrong move when the economy starts showing signs of strain. “The Fed will respond to this ‘unexpected’ economic weakness with rate cuts, ignoring the surge in consumer prices as a transitory effect of tariffs.”

Translation? Inflation won’t just persist – it could spiral. And if the Fed resorts to quantitative easing (QE) again, Schiff warns, “throwing gasoline on an already burning inflation fire” could create a crisis far worse than 1970s-style stagflation.

What It Means For Investors

If Schiff’s prediction plays out, stock investors should brace for turbulence. High-growth and rate-sensitive sectors like technology, as tracked by the Invesco QQQ Trust QQQ and the Technology Select Sector SPDR Fund XLK, could face pressure. On the other hand, inflation-resistant assets – such as:

Commodities, as tracked by the Invesco DB Commodity Index Tracking Fund DBC; Gold, as tracked by the SPDR Gold Trust GLD, and select energy stocks – may become safe havens.

Bond investors and those invested in popular Treasury tracking ETFs such as iShares 20+ Year Treasury Bond ETF TLT, the Vanguard Total Bond Market ETF BND and the iShares Core U.S. Aggregate Bond ETF AGG beware: rising long-term rates could send Treasury prices tumbling.

Meanwhile, a “weaker dollar and larger budget deficits” could mean international ETFs and hard assets outperform U.S. equities.

Is This The Next 2008?

Schiff isn’t predicting a simple market correction – he’s warning of something much worse. “This will not be 1970s-style stagflation. It will be something much worse.”

If history is about to repeat itself, as he suggests, investors who ignore the warning signs could be caught in the fire. The question is: Are you ready?

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