One of the most pessimistic hedge fund managers on Wall Street and the founder of the "Black Swan Fund", which specializes in profiting from tail risks, recently stated that the US stock market is heading towards a historic sell-off. He once again issued an extremely pessimistic warning to investors who are satisfied with the steady rise of the US stock market in the artificial intelligence boom.
In a recent interview, Mark Spitznagel, founder of the Black Swan Fund Universa Investments, said that the rebound of the US stock market for several years was equivalent to "the largest foam in human history".
He pointed out the similarities with the Internet foam, when investors put a lot of money into technology stocks, then the craze subsided, and the NASDAQ index collapsed in 2000.
You won't feel like a fool just because you make a bearish view, "he added.
Spitznagel was once a trader and a disciple of Nassim Nicholas Taleb, the author of the 2007 bestselling book "Black Swan". During the stock market crash in 2008, the flash crash in 2015 and the outbreak of COVID-19 in early 2020, he made billions of dollars.
Over the past week, the US stock market has experienced consecutive declines, with both the Nasdaq and S&P 500 indices recording their largest weekly declines since April. At present, the market needs to assess the impact of various factors, including the Federal Reserve, earnings season, and the progress of the US election. Biden's announcement of his official withdrawal from the US presidential race has injected more uncertainty into the market outlook at this critical moment.
Glen Smith, Chief Investment Officer of GDS Wealth Management, stated that the stock market is experiencing a long overdue rotation, as investors are withdrawing their funds from large tech stocks and shifting them to other areas of the market.
The impact may be more extreme
Spitznagel further warned that the impact of the foam and its bursting will be more extreme, because the US $34 trillion of government debt will make it more difficult for the Federal Reserve to reverse the economic situation in time to avoid economic recession.
He pointed out that as inflation continues to fall and the Federal Reserve relaxes monetary policy, the current uptrend may continue for several months, but added that the US stock market may soon lose more than half of its value in the subsequent sell-off.
In short, Spitznagel stated that the market situation is a 'giant powder box time bomb'.
I think we are heading towards very, very bad things, "he said.
This is not the first time Spitznagel has issued such a warning, as he has been warning of an economic collapse since January 2023. But he said this time that the timetable for the upcoming crisis is now clearer, and an economic recession may occur before the end of this year.
He had previously warned that the S&P 500 index was expected to experience the worst stock market crash since the Great Depression in 1929 after breaking through 6000 points for the first time. He said, "Investors' excitement will reach its peak, and then the market collapse will be even more severe than the global financial crisis