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Is the market heading toward a crash?
If you ask Mark Spitznagel, founder and chief investment officer of Universa Investments, the answer is yes.
Spitznagel told Reuters (1) in an interview that he expects “an 80% crash” but also noted that he believes it will only happen “after a massive, euphoric, historic blow off rally.”
While the stock market might be headed for an unstable future, he believes that a 20% gain for the S&P 500 index is possible and that there is still some time before the crash.
“I would argue we’re in the middle of that (rally) right now, not at the end of it,” Spitznagel continued.
He believes the economy is being held up by ultra-loose monetary policy and that we have not yet experienced the full impact of the pandemic, noting: “We’re going to see the consequences of that … it takes time.”
Spitznagel is no stranger to such predictions. His company specializes in protecting against such “black swan” events — rare, high-impact situations that disrupt markets — leveraging stock options and credit default swaps to reap the benefits during extreme market disruptions. Since 2007, Universa Investments’ average return on capital has been over 100%.
For example, early into the pandemic, Universa benefited significantly from the market upheaval, achieving a stunning 4,144% return (2).
Spitznagel isn’t the only one sounding the alarm.
A recent survey of U.S. insurance professionals by Goldman Sachs (3) found that 52% of specialists believe inflation is creating major financial risk, while 48% believe a slowdown and potential recession is possible by the end of the year.
Wealth manager Josh Brown, co-founder and CEO of Ritholtz Wealth Management, recently told Scott Galloway’s Prof G Podcast (4) that he believes the AI bubble could also lead to a crash, but that we don’t yet know where we are in that cycle.
“Not every capex bubble has to result in a generational crash,” Brown said. “You could just have a bear market follow this — and what if it starts three years from now? Think of all the money that you are missing out on.”
While the stock market might be headed for a severe correction, there’s no need to panic, as long as your investments remain well diversified.
Alternative investments are how the wealthy protect their riches during down markets. According to The Motley Fool (5), for individuals with at least $30 million invested, alternative investments make up 50% of their assets. For the average investor, that number is closer to 5%.
If you’re interested in further diversifying your portfolio to hedge against a market crash, one reliable option is gold. Gold continues to have a record year, hitting a high of about $4,300 per ounce in October, although it’s since dropped slightly to about $4,150 (6).
One option worth considering is Goldco, which can help you access this alternative asset while also hedging against market factors like inflation.
Goldco offers both traditional and Roth IRAs, and provides access to various types of gold — including American Gold Buffalo coins and gold bars. Even better, Goldco can match up to 10% of qualified purchases in free silver, depending on the size of your investment.
Another notable alternative asset is commercial real estate, which benefits investors 9.5% a year on average, according to Mortgage Professionals America (7).
First National Realty Partners (FNRP) can give you straightforward access to this $22.5 trillion sector without the typical landlord responsibilities.
When investing during a rocky market, sometimes it can be helpful to have someone in your corner ensuring your portfolio is as diversified as it needs to be. There can be a tangible benefit to working with an advisor, as Vanguard reports (8) that those who work with a financial advisor experience a 3% increase in net returns compared to those who don’t.
If you’re looking for a qualified advisor, check out Advisor.com. Just answer a few quick questions, and you’ll be matched with a selection of the best advisors for your needs.
