Renowned "Black Swan Fund" founder warns: S&P 500 may plummet after reaching 8,000 points

Odaily Planet Daily reports: Mark Spitznagel, founder and chief investment officer of the “Black Swan Fund” Universa Investments, stated that the upward trend of the U.S. stock market has not yet ended — at least for now.

In a recent letter to investors, Spitznagel wrote that over the next year, the market will continue to be in the “Goldilocks zone — inflation and interest rates declining, economic slowdown but not excessive, market sentiment turning euphoric — stocks will keep rising and end with a surge.” However, he added that “the biggest bubble in human history” is now in its final stage.

Spitznagel’s hedge fund has nearly twenty years of history, focusing on tail risk hedging, which aims to protect investors’ portfolios from the impact of the next major crash. He stated that as long as the economy remains resilient, the stock market will continue to rise — a view he has maintained since the end of 2022. In an interview, he said market euphoria could push the S&P 500 to 8,000 points or higher — followed by a sharp reversal.

Worryingly: if the Federal Reserve maintains current interest rates for a long time, companies will begin to struggle to raise funds. Spitznagel noted that although the economy appears resilient, monetary policy has a lagging effect, and the Fed’s excessive focus on lagging indicators like inflation has fallen behind the situation.

“The Fed is currently on hold, and as the economy gradually worsens, markets will expect more easing policies,” he said. In this context, the stock market will rise on expectations of more rate cuts, then quickly fall during economic slowdown. “At some point, the Fed will be powerless to stop it, just like in 2007 and 2008.”