Mark Spitznagel (Mark Spitznagel), chief information officer and founder of the $16 billion hedge fund Universa, called hopes based on interest rate cuts “a situation requiring caution” in an interview with foreign media. The fund focuses on risk mitigation in the face of a “black swan” incident.

Nassim Nicholas Taleb (Nassim Nicholas Taleb), who wrote “The Black Swan” before the 2008 financial crisis and was an advisor to the Universa Fund, described the black swan incident as “very rare, and even the possibility of it happening is unknown,” and “once it happens, it will have a disastrous impact”, and “it seems that it can actually be predicted when explained later.”

Spitznagel's concerns stem in part from how the US economy has developed over the years, that is, borrowing heavily during a period of low interest rates has benefited the economy. He believes, “This economy is based on low interest rates, and when interest rates are reset, there will be a lag effect.”

Although the SPDR S&P 500 ETF Trust Fund (SPY.US) has risen sharply by 27% since its low in October 2023, and investors holding risky assets have also benefited a lot from it, Mark Spitznagel warned that this situation may quickly reverse. He said, “To some extent, this is the fastest and worst austerity in history, and entering the biggest credit bubble in human history is inevitable.” “When things get really bad, it's (probably) too late to get out.”

Spitznagel isn't the only one worried that the market is ahead. According to Business Insider, Stifel Investment Bank's market strategist predicts that “the stock market will experience a 10% retracement in the middle of the quarter” as the Federal Reserve delays interest rate cuts while inflation continues to be higher than expected.

Even if$Berkshire Hathaway-A (BRK.A.US)$Warren Buffett (Warren Buffett) also recently sold due to rising stocks. At Berkshire's recent shareholders' meeting, he predicted that the company's cash position “could reach about $200 billion by the end of this quarter” because “only 'swing' on our favorite 'stadium'”.

However, the founder of the Black Swan Fund sounded the alarm didn't necessarily mean he wanted to sell everything. Instead, he warned to be careful about buying portfolio “insurance,” such as that offered by his fund. Spitznagel assured, “I'm not a long-term bearish person. I've been positive about this market for the past year and a half.”

Spitznagel once said that his tail risk hedging strategy was misunderstood. “The whole point is that (customers) can go long on stock positions” to benefit from potential price increases while being protected from extreme declines.