Mark Spitznagel, founder and chief investment officer of Universa Investments, said stocks appear to be in a "Goldilocks zone" as they hit record highs and traders become increasingly confident about a soft landing for the economy.

But he said in an interview Thursday that investors should be wary of "second-order effects," such as an economic slowdown that could cause markets to suddenly plunge even if the Fed cuts rates. Spitznagel expects a "meltdown" in global markets before the end of the year, likely driven by an economic slowdown.

“When the yield curve inverts and then reverses, you’re in black swan territory,” said Spitznagel, whose firm is advised by Nassim Nicholas Taleb, author of “The Black Swan.” “Black swans are always lurking, but now we’re in their territory.”

The S&P 500 hit 42 all-time highs in 2024, helped by strong corporate earnings, a Federal Reserve rate-cutting cycle and expectations that the U.S. economy would avoid a recession. But Spitznagel believes the Fed's lower borrowing costs should make investors concerned and think more about where stock prices will be next year.

“Gold will fall, cryptocurrencies will fall along with risk assets,” he said, adding that bonds could be the safe haven. He also expects volatility to rise in the coming months.

However, Spitznagel's views are still in the minority on Wall Street, and most major banks still expect U.S. stocks to continue to set new highs and even rise to 6,000 points.

Goldman Sachs Group Inc.'s chief U.S. equity strategist said in an interview on Tuesday that he expects the S&P 500 to be trading around 6,000 in a year. The forecast would mean a gain of about 5% from Monday's record close of 5,719 for the index, which has risen about 20% so far this year. But first, he noted that investors may have to ride out some market turbulence in the coming weeks as the election between Vice President Harris and former President Trump enters its final stretch. Historically, that's been a period of rising volatility and falling stock prices, he said.

Article forwarded from: Jinshi Data