Peter Schiff warns a crash could hit before the midterms — beware ‘the most expensive stock market in history’

Although Schiff is no stranger to dire forecasts — he, for example, warned about the housing bubble before the 2008 financial crisis and has repeatedly cautioned about an inflationary debt spiral — his latest warning comes as several of the risks he identified on X have become more pronounced.

The 10-year Treasury yield climbed from a low of 3.96% before the Iran war began in February to more than 5.3% in late September, its highest level in more than two decades. The nearly 140-basis-point jump has pushed borrowing costs higher across the economy.

The war has also driven energy prices sharply higher, contributing to renewed inflation as both the Consumer Price Index and Producer Price Index have accelerated. At the same time, the labor market has weakened. Hiring in 2025 was the slowest outside a recession since 2002, and recent job growth has fallen well short of economists’ forecasts.

Meanwhile, Wall Street’s heavy reliance on artificial intelligence stocks has become another source of concern. The Philadelphia Semiconductor Index (SOX), a bellwether for chipmakers, recently recorded its longest losing streak since 2008, declining for eight consecutive trading sessions.

Years of gains in AI-related stocks have also pushed valuations higher and left the broader market increasingly dependent on a relatively small group of companies. JPMorgan’s basket of 41 AI-related companies accounts for 49% of the S&P 500’s total market value, a level of concentration not seen since the 19th-century railroad boom, according to Seeking Alpha.

Other valuation measures suggest stocks are historically expensive, too. The ratio of total stock market capitalization to U.S. gross domestic product has reached historic highs, with veteran investor Jeremy Grantham telling CNBC over the summer that “this is the most expensive market in American history.”

Does an expensive stock market mean a crash is coming?

An expensive stock market doesn’t mean a crash is imminent. But historically high valuations can make stocks more vulnerable to a sell-off and undermine future returns.

“While high valuations act as a drag on expected returns, they are a poor signal of the timing of any market correction,” said John Bilton, JPMorgan’s global head of strategic research, in a blog post.

Wei-Yin Hu, Edelman Financial’s president of financial research and strategy, makes a similar distinction.

“While high valuations can raise concerns, they don’t automatically mean a market crash is imminent,” Hu wrote, adding that investors should also consider “valuation metrics, economic conditions [and] sector-specific trends.”

The recent sell-off in chip stocks is one example. Although the Philadelphia Semiconductor Index has suffered a significant pullback, it followed a nearly 100% rally between January and its June peak.

Much of the current debate centers on AI stocks and whether future revenue growth and productivity gains can justify the enormous sums being invested into the technology. Citadel CEO Ken Griffin recently said at an investor conference that AI is “almost certainly” in a bubble, drawing parallels with the dot-com era.

Despite concerns over valuations and AI spending, not everyone on Wall Street expects a crash.

“The market is strong, expensive and [...] not obviously headed for a crash,” Doug Goldstein, a financial planner at Profile Investment Services, told U.S. News.

What could the midterms mean for stocks?

Schiff’s warning of a potential crash before the midterms comes as Republicans face the prospect of losing control of Congress on Nov. 3.