By Laila Maidan
Spitznagel still believes we haven't entered the main event and the recent stock-market plunge is just a 'trap'
One of Wall Street's most notoriously pessimistic - and successful - investors, Mark Spitznagel, said the stock-market plunge that's followed President Donald Trump's tariff rollout isn't the epic market crash he has been calling for, but rather the turmoil along the way to the big event.
"I expect an 80% crash when this is over. I just don't think this is it. This is a trap," he wrote in commentary to MarketWatch on Monday, adding that when the real crash happens, investors will know it.
Spitznagel is the founder and chief investment officer of hedge fund Universa Investments, which employs a strategy that aims to take positions that will benefit from rare, unpredictable but highly impactful events. It's known as a "Black Swan" fund - a term to describe such events popularized by scientist, author and former options trader Nassim Nicholas Taleb, who was influential in the firm's strategy.
Universa made headlines in the first quarter of 2020 for returning 4,144% as the market crashed in March from fears of the COVID pandemic. Spitznagel told MarketWatch that Universa is still trading this market like a crash even though he's not convinced one has arrived.
"This is another selloff to shake people out. This isn't Armageddon. That time will come as the bubble bursts," he wrote. "This is a most contrarian view right now. Promise."
Stocks were off session lows but posting losses in a wildly volatile session Monday that saw swings from sharp losses to sharp gains and back again. The Dow Jones Industrial Average DJIA was down more than 200 points, or 0.57%, while the S&P 500 SPX slightly recovered by 0.35%, and the Nasdaq Composite COMP was down 0.84%. The S&P 500 fell a cumulative 10.5% on Thursday and Friday after President Donald Trump last week unveiled sweeping tariff measures. The S&P 500 and other major indexes saw their steepest two-day selloff since March 2020, when stocks plunged as the COVID-19 pandemic forced an economic shutdown.
Spitznagel has been calling for a bigger crash - one that would be the worst since 1929. The investor emphasized he isn't in the business of predicting the timing of market crashes. However, he has previously voiced concerns over mounting U.S. debt, which he sees posing a key risk to markets.
In 2024, he warned investors about not getting caught off guard when the stock market does turn for the worse, and end up being the "sucker" that sells when the market is down and buys when it's up. He advocated having positions agnostic to market turmoil - a difficult ask for the average person.
"We've had our clients riding this bull market for years," Spitznagel wrote on Monday. "All the doom and gloomers think it's over and they have this figured out. Take it from a professional doomer, they don't. And they definitely don't have the right position for it."
In a 2023 interview with Fortune, he noted that retail investors could ride out storms without needing to resort to complex trading strategies by simply buying low-cost, broad index funds, and even adding to their positions when the market is down. The key for retail is to not overextend their exposure to a point of being forced to sell at a bad time in the market.
-Laila Maidan
