Investment guru Peter Schiff warns savvy investors that the current bull market is really just an ever-growing bubble that keeps “getting bigger.”
Schiff recently explained to The Street how ironic it was that President Donald Trump called the stock market under Barack Obama as a "big fat ugly bubble" as a candidate.
“He was right then. He's wrong now because he denies it's a bubble because he's now the president. And so it's his bubble, and he'd rather it be a bull market," Schiff told The Street.
“The bubble keeps getting bigger," Schiff said, calling today’s stock-market valuations "extreme."
“Investors are willing to pay very high prices and have very little worry that the stock market is going to go down. People have very short memories," the CEO and chief global strategist of Euro Pacific Capital Inc. said.
"We've had two major 50% declines in the stock market this century - since 2000. So, we've had the market cut in half twice and it could easily happen again. Yet nobody seems concerned," he said.
“I think one of the reasons is because the last two times the market went down, the Fed was able to bail out investors who bet on one bubble by inflating a bigger one. So, a lot of investors may have been conditioned to believe that even if the market implodes, if they hold on, they'll get their money back. But you know, the third time may not be the charm."
To be sure, Trump has taken credit for record-high stock prices with his pledge to cut taxes and make business-friendly reforms.
Despite not having a single major legislative victory and with prospects for a government shutdown in December looming, stocks have not looked back in the Trump era, Reuters reported.
The S&P 500 is up 21.1 percent since the 2016 election, while the Dow has gained 28.5 percent in that period and the Nasdaq Composite is up 30.3 percent.
Banks and technology have been the best performers over the past year, with telecommunication services the weakest performer.
The Dow has closed at a record high more than 70 times since election day 2016 and the S&P 500 has closed at a record on 52 days in 2017 -- the fifth-most in any year, but it could challenge the 59 record closes in 1928 for third place or the 62 in 1964 for second, according to S&P Dow Jones Indices data.
The year with the most S&P record closing highs is 1995 with 77. There were 53 in 2014.
Economic growth across the globe, alongside stimulative monetary policy from the world's largest central banks, have been behind the market's rally.
The expectation of pro-growth and business-friendly policies from the Trump administration as well as bets on deregulation, gave investors further reasons to invest in stocks.
For his part, Trump sent tweets Tuesday morning pointing to the "great confidence" in his administration’s efforts, noting the record level the stock market hit on Monday.
He added that the administration is at work on cutting taxes.
U.S. equities hit records highs on Monday as Wall Street noted news of corporate dealmaking, according to CNBC.
Schiff isn't alone in his hesitation about the market's future.
"This is kind of how bull markets end," Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, said on the CNBC business news channel. "What we're in right now is this sort of euphoria around stocks that's been missing for this entire bull market."
(Newsmax wire services contributed to this report).
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