BusinessPostCorner.com
No Result
View All Result
Thursday, May 15, 2025
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
BusinessPostCorner.com
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
No Result
View All Result
BusinessPostCorner.com
No Result
View All Result

August’s stock market fiasco is a ‘stark red flag’ for what’s to come, veteran hedge funder warns

August 18, 2024
in Business
Reading Time: 3 mins read
A A
0
August’s stock market fiasco is a ‘stark red flag’ for what’s to come, veteran hedge funder warns
ShareShareShareShareShare

August 5, 2024 was a trying day for investors worldwide, as stock markets from Japan to the U.S. were whipsawed without much warning, leaving analysts and economists scrambling to provide answers. A weak jobs report that triggered a key recession indicator, and the unwinding of some popular and influential trades amid changing central bank policies, were blamed for the fiasco.

As investors watched stocks plummet, the panic on Wall Street even led to calls for emergency rate cuts from veteran economists.

“It was amateur hour,” Mark Spitznagel, founder and CIO of the private hedge fund Universa Investments, said of the market drama. “I have never seen anything like that in my career.”

Since then, markets worldwide have mostly recovered from the pain, with the U.S. S&P 500 up roughly 5% from its Aug. 5 low. And while there are still concerns that the U.S. economy could be slowing, recession fears have largely been brushed off.

But Spitznagel, who is known for preparing for and profiting from big market crashes, warns the recent market volatility is simply another sign we’re nearing the peak of the biggest stock market bubble in history—and most investors aren’t prepared for the pain that will come when it pops. “These whips are the market process. This is the market zigging in order to zag.” he told Fortune. “This is a stark red flag, it’s a stark warning sign.”

A 2007 redux—with a tighter timeline

Spitznagel said prior to past market crashes—including in 2007 before the Global Financial Crisis, and 2000 before the dot-com bust—stocks have seen periods of increased volatility. Euphoric stock market runs often end with increasingly extreme swings in investor sentiment. We could be seeing that again today, and on an accelerated timeline, according to the hedge funder.

“[It’s] a great comparison to 2007. But I think we’re going to see a compressed path,” he said. “I don’t think we’ve got a year of this…because the connectivity is greater…the fragility is greater.”

Spitznagel has argued for years that the Federal Reserve helped create the greatest credit bubble in human history by keeping interest rates near-zero for over a decade following the Global Financial Crisis, leaving the economy in a fragile state. Now, he says this bubble will soon pop under the weight of the Fed’s rate hikes, and the impact will be even more dire than during past market blowups because we’re living in an interconnected global economy where the Fed’s policies move markets worldwide.

“Dips are the price of stock market gains. You’ve got to be able to pay that price. The problem is, the big ones. They’re too destructive of a price,” he said. “That’s where we could be headed.”

Don’t risk it all betting against a bubble

A quick “conscience clearing” moment here: Spitznagel, who has been bullish over the past few years because of his belief that the Fed’s tightening takes time to impact the economy, noted that before bubbles pop, they tend to hit euphoric highs, which means his investors shouldn’t attempt to bet against the market or run for the hills.

“I think if anybody shorts the market or is too under invested relative to their temperament, they’re going to get squeezed in at a euphoric height that is probably still coming in the months ahead,” he said.

For retail investors, the hedge funder always preaches patience, investing in basic S&P 500 index funds, and having a margin of safety so that if stocks do fall, you aren’t forced to sell at the worst moment. The biggest mistakes in investing are made when people sell near market lows, or buy near market peaks, according to Spitznagel.

“I think people just kind of need to have this come-to-Jesus moment. Close your eyes, think about a world where the market is down 50 to 75% and then think about opening your portfolio. Are you going to do something crazy? And now, think about it [being] up 20%, and open your portfolio. Are you going to do something crazy?” he said. “That’s the question you should be asking.”

Recommended Newsletter: CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about–and from inside–the C-suite. Subscribe Now.

Credit: Source link

ShareTweetSendPinShare
Previous Post

We must save Ukrainians from catastrophic winter energy shortages

Next Post

Ted Baker closes final stores putting 500 jobs at risk

Next Post
Ted Baker closes final stores putting 500 jobs at risk

Ted Baker closes final stores putting 500 jobs at risk

GOP eyes endowment tax hike in escalation of Ivy League feud

GOP eyes endowment tax hike in escalation of Ivy League feud

May 9, 2025
Trump hints tariffs on China may drop as talks set to begin

Trump hints tariffs on China may drop as talks set to begin

May 9, 2025
Goodyear sees itself in prime position to capitalize on Trump auto tariffs: ‘We have a lot of opportunity in front of us’

Goodyear sees itself in prime position to capitalize on Trump auto tariffs: ‘We have a lot of opportunity in front of us’

May 9, 2025
US-UK trade deal squeezes China supply chains

US-UK trade deal squeezes China supply chains

May 9, 2025
Does Quora work for marketing?

Does Quora work for marketing?

May 13, 2025
Surge in Chinese listings drives boom for US small-cap IPO market

Surge in Chinese listings drives boom for US small-cap IPO market

May 13, 2025
BusinessPostCorner.com

BusinessPostCorner.com is an online news portal that aims to share the latest news about following topics: Accounting, Tax, Business, Finance, Crypto, Management, Human resources and Marketing. Feel free to get in touch with us!

Recent News

PCAOB shares insights from audit committee leaders

PCAOB shares insights from audit committee leaders

May 15, 2025
Ukraine Drafts Bill to Add Bitcoin to War Chest – Is a National Reserve Next?

Ukraine Drafts Bill to Add Bitcoin to War Chest – Is a National Reserve Next?

May 15, 2025

Our Newsletter!

Loading
  • Contact Us
  • Privacy Policy
  • Terms of Use
  • DMCA

© 2023 businesspostcorner.com - All Rights Reserved!

No Result
View All Result
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources

© 2023 businesspostcorner.com - All Rights Reserved!