Black Swan Prophecy! Top Hedge Fund Managers Warn: After a 20% Surge, US Stocks Will Face an Epic 80% Crash

The global financial market may be standing at a historic turning point. Mark Spitznagel, the founder of the renowned black swan fund Universa, recently issued a shocking warning: U.S. stocks may first pump 20% to break through 8,000 points, and then face a historic crash comparable to the Great Depression of 1929, triggering a global economic recession. This prediction comes from a top fund manager managing $20 billion in assets, focusing on extreme market risk hedging, and is worthy of investors' high attention.

The frenzy in the US stock market may rise another 20%, with the S&P 500 expected to break 8,000 points

After the Federal Reserve's first rate cut since December last year, the S&P 500 index reached a new high on Monday, having risen about 13% this year. Market sentiment is high, and investors' expectations for a soft landing of the U.S. economy are continuously strengthening.

Spitznagel, in an interview with Reuters 专访, stated: “I do indeed expect the stock market to plummet by 80%… but that will only occur after experiencing a massive, exhilarating historic rebound. I believe we are currently in the middle of this round (of rebound), not at its end.”

According to his forecast, the S&P 500 index (currently around 6,653 points) could rise approximately 20% from its current level, breaking through the 8,000-point barrier and setting a new historical high. This forecast aligns with expectations of the Federal Reserve possibly lowering interest rates further to support a weak labor market, as rate cuts typically increase and amplify stock market pumps.

Unique Perspective of Black Swan Fund

Universa, headquartered in Miami, manages assets totaling $20 billion, focusing on hedging “black swan” events—those rare and impactful market turmoil events—through credit default swaps (CDS), stock options, and derivative instruments.

Since its establishment in 2007, the fund has averaged a capital return rate of over 100%, and it became one of the biggest winners during the market turmoil triggered by the pandemic in 2020. Spitznagel's predictions are worth following, as his fund specializes in extreme market risks and has successfully predicted multiple market crashes in the past.

Historic Crash: 80% Drop Probability

Despite the short-term bullish outlook, Spitznagel warns that a historic crash may follow this pump due to the anticipated collapse of the U.S. economy under the burden of still high borrowing costs. He predicts that the stock market could plummet by as much as 80%, which would be one of the most severe market crashes since the Great Depression of 1929.

The logic behind this prediction lies in the fact that since the 2008 financial crisis, the global economy has relied on unprecedented accommodative monetary policies for support. After the pandemic, central banks around the world have significantly raised interest rates to curb inflation, but the full impact of these policies has yet to be fully realized.

Spitznagel pointed out: “We will see the consequences… it just takes time.” He believes that the current optimistic sentiment in the market is based on an excessive confidence in the Federal Reserve's ability to curb inflation without harming the economy, and this optimistic expectation will ultimately be shattered by reality.

Investors' Conflicted Mindset

Interestingly, Spitznagel points out that while Universa's investment strategy is the “most bearish expression” in the market, investors often use it as leverage to further increase their market positions, creating a contradiction. This reflects the complex psychology of current market participants: on one hand, they worry about potential risks, while on the other hand, they are reluctant to miss out on possible pump opportunities.

Last year, Spitznagel stated that investors should seize the “golden opportunity” in the market, a moment triggered by people's expectations that the Federal Reserve could curb inflation without harming the economy. He predicted that this optimism would further strengthen, ultimately leading to a stock market crash.

Economic Recession Warning: A Matter of Time

Later last year, when the Federal Reserve began to loosen monetary policy, Spitznagel stated in another interview that a recession in the United States was imminent. Although the economy has performed well since then, he insists that it is still supported by the overly loose monetary policy since 2008, and the real test has yet to come.

He believes that the overall impact of significant interest rate hikes after the pandemic will take time to fully manifest in the economy. This lagging effect may gradually emerge over the next few years, ultimately leading to an economic recession and market crash.

How should investors respond?

In the face of this extreme but possible market scenario, how should investors adjust their strategies?

Diversification: Do not concentrate all your funds in the US stock market; consider increasing the allocation of hedging assets such as gold and bonds.

Establish a protection mechanism: Consider using options and other derivatives to provide downside protection for the investment portfolio.

Maintain liquidity: Ensure that you have sufficient cash reserves to seize investment opportunities during significant market adjustments.

Long-term perspective: Avoid short-term market sentiment affecting investment decisions, focus on fundamentally strong assets.