A leading hedge fund manager Lukasz Tomicki has warned that the S&P 500 index could crash somewhere between 20% and 30% next. Tomicki expressed concern that inflation in the US is not being taken seriously by lawmakers, which could result in a sharp market correction.
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The S&P 500 index is currently at the level of 5,304 and is up almost 12% this year. This year, inflation peaked at 5,341 and cooled after the CPI data, where inflation stood at 3.2%. However, despite inflation, stocks have soared this year, delivering huge gains for investors.
The hedge fund manager explained that stocks hitting new highs in the second half of 2024 could change course. Institutional fund sell-offs and profit bookings could be high, causing average investors to miss out on a lot of money. That's why the S&P 500 is overbought and a crash is on the horizon, Tomicki predicted.
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The S&P 500 could crash 20% to 30%, hedge fund manager says
Tomicki pointed out that US inflation has not been below 2% for more than three years. Despite several attempts by the Federal Reserve to revive the economy, inflation has not fallen below 2%. “We had a big rally earlier this week on Wednesday based on inflation that, if it was two years ago, I think the market would fall 3%. And now everyone somehow thinks this is a great inflation print.” he said to the Business insider.
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“From now on, the market could easily drop 20-30%,” he warned, saying the S&P 500 will be the first hit. If his prediction is correct, the S&P 500 index could fall between 4,240 and 3,710 prices. That's a steep drop and could unsettle not only the US, but the global stock market as well.