- Michael Burry, Elon Musk, and Jeremy Grantham foresee potential pain for stocks and the economy.
- “Black Swan” specialists Nassim Taleb and Mark Spitznagel also see a troublesome road ahead for investors.
- Rising rates of interest are exerting pressure on US asset prices and the economy.
Michael Burry, Jeremy Grantham, and Elon Musk are bracing for stocks to tumble and the US economy to slump into recession.
“The Black Swan” writer Nassim Taleb and Universa Investments’ Mark Spitznagel, who specialise in protecting portfolios against unpredictable events with extreme impacts, also expect asset prices to plummet and a painful downturn to take hold.
Here’s a roundup of those 5 experts’ latest warnings:
1. Michael Burry
Burry is one in every of a handful of individuals to predict and make the most of the collapse of the mid-2000s housing bubble. He tweeted a single-word message to investors this week: “Sell.”
The fund manager of “The Big Short” fame has compared the S&P 500’s rebound this yr to the benchmark’s short-lived rally through the dot-com boom. He’s previously cautioned the index could plunge over 50% from its current level to below 1,900 points, and suggested a multiyear US recession is a virtual certainty.
2. Jeremy Grantham
Grantham acknowledged the numerous scale of the market selloff last yr in his latest research note, but noted the pain may not removed from over.
“While probably the most extreme froth has been wiped off the market, valuations are still nowhere near their long-term averages,” the market historian and GMO cofounder said.
“If something does break and the world falls right into a severe recession, the market could fall a stomach-turning 50% from here,” he continued. “At best there’s more likely to be at the very least an additional modest decline.”
The veteran investor said the S&P 500 would probably drop 23% to around 3,200 points this yr or next, and spend a while below that level. He also suggested the index could plunge 50% in real terms from its peak initially of 2022.
3. Elon Musk
Musk raised the prospect of a severe economic downturn during Tesla’s latest earnings call, and warned fear could send stocks spiraling downward.
“We’ll probably have a reasonably difficult recession this yr,” he said. “When there is a recession and other people panic within the stock market, then the worth of stocks can drop sometimes to surprisingly low levels.”
The Tesla, SpaceX, and Twitter CEO has advised people to navigate the tough road ahead by conserving money, avoiding debt, and taking fewer risks.
4. Nassim Taleb
Stocks soared after the financial crisis attributable to near-zero rates of interest, which made it easy for corporations to fuel their growth with low-cost debt, and secure inflated valuations from cash-rich investors with few higher options. Nevertheless, the Federal Reserve has now hiked rates to just about 5% in a bid to curb historic inflation, worsening the market backdrop.
Taleb, a Universa adviser and statistics guru, made that argument to Bloomberg this week.
“The stock market is way too overvalued for rates of interest that aren’t 1%,” he said. “I feel that we could have a collapse in lots of, many prices.”
“It doesn’t rain money anymore,” Taleb continued. “Disneyland is over.”
5. Mark Spitznagel
Spitznagel predicted massive economic and financial fallout, after years of freewheeling government spending and rock-bottom rates of interest.
“It’s objectively the best tinderbox-timebomb in financial history — greater than the late Twenties, and sure with similar market consequences,” he said in a letter to investors viewed by Bloomberg.
The Universa chief, who previously ran the now-defunct Empirica Capital hedge fund with Taleb, warned of a looming downturn that might have disastrous consequences.
“The correction that was once natural and healthy has as a substitute grow to be a contagious inferno able to destroying the system entirely,” he said.