- Bearish investor Mark Spitznagel predicts stocks could soon lose over half their value in a steep sell-off.
- He says a recession could happen by the of the year, fueled by the government's $34 trillion debt.
- His fund, Universa Investments, has made billions from past stock market crises.
Black Swan investor Mark Spitznagel says the stock market is heading for a historic sell-off, reiterating an uber-bearish warning for investors who are getting comfortable with steady stock gains amid the frenzy for AI.
Spitznagel said the years-long rally in the stock market amounts to the "greatest bubble in human history" in a recent interview with the Wall Street Journal.
He points to similarities with the dot-com bubble when investors poured money into tech stocks before the frenzy fizzled and the Nasdaq crashed in 2000.
"You don't feel like a fool for making a bearish argument," he told the Journal.
But Spitznagel says the bubble—and the impact of its bursting—will be even more extreme this time around, as the government's $34 trillion debt makes it more difficult for the Federal Reserve to turn the economy around in time to avoid a potential recession.
Spitznagel says the current rally will likely continue for months as inflation continues to fall and the Fed eases monetary policy, and that stocks could soon lose over half their value in a subsequent sell-off.
In short, Spitznagel says the situation in markets is a "Mega-Tinderbox-Timebomb."
"I think we're on the way to something really, really bad—but of course I'd say that," Spitznagel said.
Spitznagel's fund Universa Investments bets on "black swan" events moving markets. He made billions during the 2008 stock market crash, the 2015 Flash Crash, and at the onset of COVID-19 in early 2020.
Spitznagel has been warning of a potential crash since January 2023, so while it's not the first time he's sounded the alarm, he says the timeline of a coming crisis is clearer now, and that a recession is potentially in sight before the end of the year.