"Black Swan" investors issue another warning: Market collapse is imminent!

A top economist and risk expert has stated that the United States is currently in one of the most unstable investment environments in decades. While some investors are jubilant about the stock market rebound, he is focusing on the potential market collapse.

Nassim Taleb, the author of "The Black Swan," recently expressed concerns about the market conditions in an interview. He stated that the current environment seems similar to past collapses and added that he is focused on preparing for such events.

"We have accumulated a lot of risks," the Universa Investments advisor said last Friday. "I want to say... my focus is more on hedging against the eventual market collapse, because we are more fragile than at any time in the past 20 or even 30 years," he later added.

Taleb pointed out that despite the stock market's rise over the past year, there are still risks in the market.

He mentioned that stock prices seem "crazy," noting that most of the gains in the S&P 500 index are concentrated in a few companies related to artificial intelligence.

However, he said it is unclear whether these companies have the greatest growth potential and highlighted the rotation of companies that performed best during the internet bubble period. "Artificial intelligence will be the best investment. But maybe not these companies," he said.

Meanwhile, Taleb stated that the U.S. economy has been "perplexing," and it is uncertain whether some industries are overheated.

With the increased level of globalization since the pandemic, the world economy is more interdependent. He pointed out that this means external shocks can spread more easily, which is another factor making the investment environment more complex.

Taleb stated that the debt held by Western countries "exceeds our capacity," with the U.S. debt reaching 124% of GDP by the end of September. He previously predicted that high debt levels combined with external shocks could lead to a "death spiral."

At the same time, investors are moving away from the era dominated by low interest rates. He noted that many market participants are accustomed to avoiding more "conservative" assets, and this risky attitude could leave traders in a vulnerable position.

"These crises happen when you least expect them," Taleb said. "I think we are very similar to the environment of past collapses, where the market becomes complacent. People are used to it. They may have taken some precautions at first, but then they throw caution to the wind... at that point, vulnerability reaches its maximum."

However, Taleb and other forecasters at Universa Investments have repeatedly made pessimistic forecasts about the short-term stock market and economy. Universa founder Mark Spitznagel earlier this year stated that he expects the S&P 500 index to enter a "brutal rally" and then experience the most severe collapse since 1929, partly due to the dangerous conditions brewing in the credit markets Compared to this pessimistic forecast, Piper Sandler stated in a report on Monday that investors concerned about the stock market being overvalued should not sell stocks.

The investment portfolio strategy team of this Wall Street firm is led by its Chief Investment Strategist Michael Kantrowitz, who estimates that the S&P 500 index is overvalued by about 8%. "An 8% overvaluation is not a reason to be bearish. As long as common factors such as interest rates, employment, or inflation do not trigger a 'fear' catalyst, stocks can maintain a higher valuation."

Kantrowitz stated that in the absence of imminent interest rate hikes, unemployment, or inflation, even if the stock market is overvalued, it should continue its upward trend. "Tightened credit spreads, a robust labor market, and sustained GDP growth are all signals that investors should remain bullish, even if stock market valuations are slightly high."