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“We’re in a boom-and-bust cycle, an epic, monumental boom-bust cycle and this is really what a strategy like Universa’s is here for.”
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Mark Spitznagel, founder of Universa Investments, told CNBC during a Monday interview why he thinks market participants should apply a modicum of caution like the S&P 500 SPX,
near its first plate closes high since the routing coronavirus that shook the economy.
Shares plummeted by more than 30% amid the pandemic that has put millions of Americans out of work and forced corporate scores into bankruptcy.
Universa, a hedge fund designed to take advantage of stock risks – those unpredictable events that can occur more often than one might think, and are therefore often underestimated by the wider investment community – enjoyed a remarkable upturn in the time of COVID-19.
And while Spitznagel does not seem ready to predict more carnage ahead for investors, he suggested that the current environment is full of land mines for smart investors, with the broader market considered overvalued because of its stunning rally against an economic that is still on different feet.
To read: Stock exchange, which called rally off March low, now says S&P 500 is up 5% to 10%
The S&P 500 has more than 51% rally from its lows on March 23, the Dow Jones Industrial Average DJIA,
has gained nearly 50% from that point, while the Nasdaq Composite Index COMP,
has climbed more than 62%, according to FactSet data.
To look: If history repeats itself, the stock market will see a new high at the end of August
“Stock market crashes happen as a direct result of over-appreciation. “I do not think there are many people at the moment who will argue against the fact that brands are quite undervalued,” Spitznagel told CNBC on Monday.
‘Maybe they will be more appreciated. I think the argument for today is long that … continuous appreciation and [they can] get even more. But they are to be appreciated and this is the setup for events with left-handedness in stock markets, ”he explained.
To read: Author ‘Black Swan’ says that if investors do not ‘use sturgeon’, he advises ‘not to be in the market’: ‘We face an enormous amount of uncertainty’
“Black Swan: The Impact of the Unpredictable” author Nassim Nicholas Taleb is a consultant for Universa.
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