The 'Unravelling' That Triggers Biggest Market Reset Ever | Peter Grandich

Peter Grandich · Peter Grandich & Company

Oil will stay elevated because the Iran conflict is unresolved and not won, despite reports of normal flows.

Grandich says oil is elevated and will stay that way. The war, now about eight or nine months old, was supposed to be won months ago, yet oil is making near-new highs since the conflict began, with Brent around $115 to $120. He argues more damage is being done by the opposing side than by the supposed victor. He is skeptical of reports that Strait of Hormuz throughput is back to prewar levels: the US keeps drawing down its strategic petroleum reserve, which he says doesn't make sense if oil flows had normalised and which he says cannot be sustained much longer. He also flags diesel as more important than gasoline, because trucking is the main way goods move in the US and diesel is trucking's biggest cost.

“And so I think that's part of the reason why oil is elevated and will stay elevated.”at 3:11

Peter Grandich · Peter Grandich & Company

Energy stocks can still perform but are no longer undervalued after his recent buying.

Grandich says he started buying energy stocks several weeks ago and that they can still perform well, but he does not see any undervaluation there. He suggests that if investors have not participated by now, they may be late, since the group has already moved.

“They can still perform well, but I don't see any undervalue in this there.”at 12:14

Peter Grandich · Peter Grandich & Company

Unravelling of the AI bubble is as important a driver of the stock decline as the Middle East.

Grandich argues the AI bubble's unravelling is as important to the current stock decline as the Middle East crisis. He expects historians to call it the biggest bubble ever on Wall Street, built on one kind of asset passed around with many claiming everyone will benefit. He believes investors have concluded AI is not a win-all for every company, and that technology is finally breaking down stocks. He points to big technology companies whose free cash flow has turned negative over the last couple of years, and says that without technology the market would be down a lot, since tech has carried breadth. Its rollover is why he sees a significant correction coming.

“I also believe as important as the Middle East is to the stock market right now decline, so is the unraveling of this enormous AI bubble.”at 4:51

Peter Grandich · Peter Grandich & Company

Mega-cap companies treated like countries is a mistake; he would run from them.

Grandich argues that people shifted their trust from countries to corporations, creating companies that are treated like countries. He says a public company lacks what a government has, including taxation and powers it can use, so when any one company grows that large and is treated bigger than a country, he would be looking to run from it, not into it. He says a $4 trillion company would have seemed impossible to him in the 1980s, when countries were seen as more reliable than any corporation.

“I think that's a huge mistake. I don't think any public company because the public company doesn't have some of the things a government can do including taxation.”at 35:16

Peter Grandich · Peter Grandich & Company

Expects at least a significant correction, possibly a bear market, with breadth and passive flows the key risk.

Grandich says the market is anticipating at least a significant correction. Hedge funds have become very short while the public has aggressively moved into technology funds. Several hundred S&P 500 stocks are already down 20% or more from their highs, which qualifies as a bear market for them, and new lows outnumber new highs. He says the market has run out of steam since Labor Day and could see significant declines. The key question is whether passive investment flows slow, dry up or turn negative; if they do, a simple correction could become a bear market. He says that if a serious correction is coming, it needs to show itself by the end of November, otherwise it likely begins in January. He also says the worst decline ever, possibly worse than 1929, is coming.

“Well, market is anticipating at least a significant correction. Think at the very minimum, we've seen hedge funds become very short.”at 17:11

Peter Grandich · Peter Grandich & Company

Passive-flow reversal could trigger a decline worse than 1929; buy-the-dip advice would then fail.

Two-thirds of financial advisors have never been in a bear market and tell clients to buy every dip, which works only while money keeps flowing into passive funds. Passive investing is a major reason that buy-the-dip has worked. If flows turn into net outflows, the decline could be the worst ever, perhaps worse than 1929. Even the buy-everything mentality would fail then, because the economy is in far worse shape economically, socially and politically than in any period in US history. He hedges that this is not happening. He also argues circuit breakers cannot stop a 20% fall over five or twenty days, and that after ten days the outcome is similar whether losses came in one day or ten.

“And the day passive investing flips and it's no longer certainty money flows in, but money starts coming out of passive investments, you're gonna have the worst decline ever, maybe even worse than 1929. I'm not saying it's happening...”at 40:37

Peter Grandich · Peter Grandich & Company

A Democratic sweep would stall Washington and could push Trump out early; gridlock is bad for small business.

Grandich calls the midterms the most important election since he has been in the business. If Democrats capture the House and Senate, he says he personally believes Trump will not finish his term, citing infighting, revenge threats from Democrats at every level, and Trump's intolerance of criticism; he expects Trump to leave as Biden did, with pardons. He also believes Democrats would stop funding large-scale war under Trump, which is why Trump may act before January. He says small businesses, roughly half his firm's clients, have seen legislation favour large corporations and big tech for decades, so the election can only be more negative for them, with more standstill in Washington. He flags this as opinion, not gospel.

“If for some reason they also capture the senate, it's my personal opinion, it's just a thought. It's not gospel. I believe Trump won't finish out his administration.”at 9:27

Peter Grandich · Peter Grandich & Company

Fertiliser shortages from the Middle East crisis will cause food shortages in some regions in 2027.

Grandich believes the effects of the Middle East crisis will show up more in 2027 through a coming world food shortage. The Gulf disruption reduced fertiliser supply, so farmers could not do normal planting, growing and feeding of animals. He expects some areas of the world to see dramatic food shortages. He sees this as under-discussed relative to its importance.

“And that is how this coming food shortage that's gonna be in the world because of the lack of fertilization that was able to get out and do the typical planting and growing.”at 13:41

Peter Grandich · Peter Grandich & Company

The Middle East situation is much worse than the administration has admitted; the Iran conflict is a quagmire.

Grandich argues the Middle East situation is far worse than the current administration has let on for many months. The group that was supposed to be annihilated still has the capacity to cause harm, and more damage is being done by the opposing side than by the supposed victor. He says this could end up being one of the biggest quagmires in US history. He thinks the administration has massaged things to keep stocks up. He also suggests Trump may try to fit military action in before a Democratic Congress takes office in January, since Democrats would be unlikely to fund a continuing large-scale war while Trump is in charge.

“So the Middle East situation is a lot worse than we've been led to believe by this current administration for many months.”at 13:47

Peter Grandich · Peter Grandich & Company

Gold and silver have technical damage that needs repair; expects a base near $4,000 before a major move up.

Grandich says gold has broken key technical supports since late August and has made two lower highs while still holding around $4,000. A previous high near $4,800 would need to be taken out to avoid a retest of $4,000, and a break below could bring the next support near $3,400 to $3,500. He says that is not his primary case, but the bears' argument is legitimate. He expects a base of at least a few weeks at $4,000 before people believe that level is supportive. He notes the season is turning from weak to stronger for gold.

“And the technical aspect now is gold and silver even more so has seen technical damage that needs to be repaired before we can expect a major move back up.”at 26:57

Peter Grandich · Peter Grandich & Company

Expects the 10-year Treasury yield to reach 5.5-6% in 2027 as the US struggles to fund its deficits.

Grandich believes rates are going up, not mainly because of inflation or war, but because the US is finding it harder to keep borrowing more than it takes in and will eventually struggle to make interest payments on time. Lenders will therefore demand higher yields. He cites $40 trillion of debt and $2 to $3 trillion of annual deficits, and says foreign ownership has been selling heavily. Competition for capital has also grown: China's yields have dropped to cheap levels, so investors feel safer there than in Treasuries. Hedge funds using leverage to buy Treasuries are the only reason yields are not higher.

“And that's why I still believe that we will see a 5.5, six percent ten year in 2027.”at 29:09

Peter Grandich · Peter Grandich & Company

Low-end corporate bonds are very weak; distressed issuers may recover only 10-30 cents on the dollar.

Grandich says the low end of the corporate bond market is becoming terribly weak. At yields of 15 to 16%, the question is whether issuers can keep paying interest, let alone repay principal, and more and more issuers fit that profile. Institutions have bought insurance-type products to hedge losses, but he is very concerned about these groups. He expects that if they default, bondholders may get back only 10 to 30 cents on the dollar, because that is all the companies can pay on their bonds.

“I'm very concerned about the groups that you spoke about... there'd be maybe ten, twenty, thirty cents on the dollar return back because that's all they can on their bonds.”at 29:22

Peter Grandich · Peter Grandich & Company

The US is worse off than in 1987, 2000 or 2008 because it can no longer print trillions to fix a crisis.

Grandich argues this downturn will be worse than the 1987, 2000 and 2008 bear markets. In those periods the US could act to eradicate the crisis; he believes it can no longer create trillions of dollars on demand, as it did during COVID. Given $40 trillion of debt and rising interest burdens, investors may doubt they will get principal back or be paid interest on time. He says the US is economically, socially and politically worse off than in those three periods.

“What's different now is I think we're worse off than any of those three periods.”at 36:22

Peter Grandich · Peter Grandich & Company

Copper supply is far short of normal growth needs, so the metal should rise over time despite corrections.

Even without AI demand, meeting normal global growth requires six tier-one copper projects to come online between now and 2050. Only six have come online since 2020, so the supply-demand gap is very large. He calls the copper supply-demand picture overwhelmingly bullish and expects corrective phases, but a metal that will work higher over time. He cites Robert Friedland as the best source on the topic.

“Without AI, just normal expectation of growth in the world, we need six tier one copper projects to come online between now and 2050... Right now, we've only had six since the year 2020. So the supply and demand scenario... for copper is so overwhelmingly bullish.”at 41:29

Peter Grandich · Peter Grandich & Company

Most American families live above their means, spending more than they earn, which must reverse.

Based on what he sees across a wide range of Americans, from professionals to hourly workers to professional athletes, seven out of ten families live at least one lifestyle above their finances. The only way to do that is to spend more than they earn. He argues that until Americans spend less than they make, the country will keep having problems.

“Seven out of 10 families we see... they live at least one lifestyle above their finances. And the only way you can do that is you're spending more than you make.”at 44:18

Peter Grandich · Peter Grandich & Company

Average stock holding period fell from 8.5 years to six months, making markets more volatile and emotional.

The average stock was held 8.5 years in 1980 and about six months at the end of 2025, so investors are no longer truly long-term holders. Shorter holding periods mean more volatility and more emotional decisions, which are usually worse than decisions based on fundamentals.

“In 1980, the average stock was held eight point five years. At the end of 2025, the average hold was six months.”at 45:38