‘Too little, too late’: Peter Schiff wants you to 'sell the rip' during the stock market bounce — and warns even 'cash is not safe.' Here are his 'still buys'

“Markets are now pricing in a near 100% probability of a 50 basis point Sept. rate cut. I think that comfort caused a knee-jerk reaction to buy the dip,” Schiff, chief economist and global strategist at Euro Pacific Asset Management, wrote on Aug. 5 in a post on X.

At the Federal Open Market Committee’s latest meeting in July, members voted to maintain the target range for the federal funds rate at 5.25% to 5.50%.

According to the CME FedWatch Tool, which track the probabilities of changes to the Fed rate using pricing data from 30-Day Fed Funds futures, market participants now see a 54.5% probability that the federal funds rate will be 4.75% to 5.00% at the September meeting — a 50 basis point cut from the current level. A week ago on Aug. 2, they saw a 74% probability of a 50 basis point cut.

Rate cut expectations have obviously shifted since Schiff’s tweet, but the market still sees a 100% probability of a rate reduction in September.

While lower interest rates can stimulate the economy and potentially boost investor sentiment, Schiff remains skeptical. He cautioned, “But that's too little, too late, especially when any hotter than expect #inflation data could lower those odds. Sell the rip!”

“Sell the rip” is a strategy that involves selling assets when their prices experience a surge. Schiff clarified that he was specifically referring to “risk assets like tech and crypto.”

Stagflation threat

Schiff has been warning about inflation for some time.

Earlier this year, he stated, “By 2025 inflation will likely be in double digits, and the first digit may not be a one!”

Americans have grappled with rising price levels in recent years. In June 2022, the U.S. consumer price index saw an annual increase of 9.1%, the largest since November 1981.

However, after significant interest rate hikes by the Fed, headline inflation in the U.S. has subsided. In June 2024, the CPI declined 0.1% month over month and rose by 3% over the past 12 months. Meanwhile, the Personal Consumption Expenditures (PCE) price index — the Fed’s preferred inflation gauge — showed a 2.5% increase in June from a year ago.

Despite this moderation, Schiff is now sounding the alarm on something worse than inflation: stagflation.

“Stagflation is still the biggest risk, so cash is not safe,” he wrote earlier this week.

‘Still buys’

Stagflation refers to an economy that’s experiencing high inflation, but without the economic growth that usually comes with it. And just like inflation, stagflation can erode the purchasing power of your hard-earned money.

Given this dire prediction, Schiff points to several areas of refuge.

“So value, dividend paying stocks, as well as gold and the miners are still buys,” he wrote.

Schiff is putting his money where his mouth is. According to the latest 13F filing from Euro Pacific Asset Management, these investment themes are clearly evident at Schiff’s firm.

For instance, at the end of June 2024, the sixth-largest holding at Euro Pacific is cigarette giant British American Tobacco (BTI), which offers a generous dividend policy with yield of over 8%.

Schiff’s firm also owns over 148,000 shares of Philip Morris International (PM), another tobacco titan with a dividend yield of 4.5%.