"Black Swan" Fund Founder Issues Another Warning: Beware of Gold and US Stocks Crashing Together!
Universa Investments founder Mark Spitznagel warns that as the stock market hits historic highs, investors should be wary of a potential market crash due to economic slowdown. He predicts a global market crash by the end of the year, with gold and cryptocurrencies falling alongside risk assets. Despite most Wall Street analysts being bullish on US stocks continuing to rise, Spitznagel believes that the Fed rate cuts should raise concerns, and volatility will increase in the coming months
Mark Spitznagel, founder and chief investment officer of Universa Investments, stated that as the stock market hits new historical highs, traders are increasingly confident in an economic soft landing, and the stock market seems to be in the "blonde zone".
However, in an interview on Thursday, he warned investors to be cautious of "second-order effects", such as an economic slowdown that could lead to a sudden market crash, even with Fed rate cuts. Spitznagel expects that a "collapse" in the global markets will occur by the end of this year, possibly driven by an economic slowdown.
Spitznagel said, "When the yield curve inverts and then reverses, you are in the countdown to the black swan territory." His company is advised by Nassim Nicholas Taleb, the author of "The Black Swan". "Black swans are always lurking, but now we are entering their territory."
The S&P 500 index hit 42 historical highs in 2024, benefiting from strong corporate earnings, Fed rate cuts, and expectations that the U.S. economy can avoid a recession. However, Spitznagel believes that investors should be concerned about the Fed lowering borrowing costs and should consider where stock prices will be next year.
He said, "Gold will fall, and cryptocurrencies will fall along with risk assets." He also added that bonds may be a safe haven. He also expects volatility to rise in the coming months.
Nevertheless, Spitznagel's views remain in the minority on Wall Street, with most major banks still expecting U.S. stocks to continue hitting new highs, even rising to 6000 points.
Goldman Sachs' chief U.S. stock strategist stated in an interview on Tuesday that he expects the S&P 500 index to trade near 6000 points in a year. This forecast implies an increase of about 5% from the record closing level of 5719 points on Monday, with the index having risen about 20% so far this year. However, he noted that investors may have to go through some market turbulence in the coming weeks as the election between Vice President Harris and former President Trump enters its final stage. He said that historically, this is a period of increased volatility and falling stock prices