(Bloomberg) — As stocks hit record highs and traders grow increasingly confident of an economic soft landing, the stock market appears to be in a “Goldilocks zone,” said Mark Spitznagel, founder and chief investment officer of Universa Investments.
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But investors should be wary of second-order effects, such as an economic slowdown that could cause the market to collapse abruptly even if the Federal Reserve cuts interest rates, he said in an interview with Bloomberg Television on Thursday. Spitznagel expects a “crush” on global markets until the end of this year, which could be caused by a slowdown in economies.
“When the yield curve first inverts and then inverts again, the clock starts ticking and that’s when you enter black swan territory,” says Spitznagel, whose firm is advised by Black Swan author Nassim Nicholas Taleb. “Black swans are always lurking, but now we are in their territory.”
The S&P 500 Index has hit 42 record highs in 2024, boosted by resilient corporate earnings, the Fed’s rate-cutting cycle and expectations that the U.S. economy can avoid a recession. But Spitznagel believes investors should be concerned if the Fed cuts borrowing costs and should be more concerned about where stock prices will be next year.
“Gold will fall, cryptocurrencies will fall, along with risky assets,” he said, adding that bonds could be a place to hide. He also sees a spike in volatility in the coming months.
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