So far this summer, selling in May and going away hasn’t been a prudent move. Since May 1, the SPDR S&P 500 ETF Trust (NYSE:SPY) is up 5.8% and is consistently making new all-time highs.
Despite the summer surge, there is a growing number of major fund managers that believe the S&P 500 Index is on the brink of a huge collapse.
These experts aren’t crackpot doomsayers, either. They’ve earned billions of dollars and respectable reputations recognizing market moves over the years. Here’s what they have to say about the state of the market:
Carl Icahn Sees “Day of Reckoning” for SPY
As of the most recent filings of Icahn Enterprises LP (NASDAQ:IEP), Icahn is maintaining a 149% net short position in the stock market. Why? He explained his theory in a lengthy recent interview.
“I have hedges on, I’m more hedged than I ever was … [The market] is way overvalued at 20 times the S&P and I’ll tell you why: a lot of it is a result of zero interest rates.”
Icahn added that a “day of reckoning” is coming for stocks. He’s seen the pattern many times in his lifetime. Icahn wasn’t definitive about when the crash is going to happen, but said it might not come until 2017. He also gave no indication of how far the SPY might fall.
George Soros Enters SPY Short as Britain Exits Europe
George Soros believes investors are not appreciating the long-term global economic impact of the Brexit. After a brief two-day selloff following the surprise vote, the S&P 500 bounced back stronger than ever.
On June 30, Soros said that the Brexit has “unleashed a crisis in the financial markets comparable in severity only to that of 2007/8.”
Soros’ fourth-quarter filings showed sizable short positions in both the SPY and the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ). His latest filings show he has doubled down on his short SPY position. Soros now holds puts representing over 4 million shares of the SPY.
Paul Tudor Jones Joins the SPY Short Party
It’s one thing for a market “permabear” to go on CNBC and predict a market crash. It’s completely different when someone put billions of dollars on the line.
Tudor Investment Corp hedge fund manager Paul Tudor Jones also doubled down on his short position in the SPY in Q2. As of the end of Q1, Jones held put options on more than 2.39 million shares of the SPY. In the firm’s most recent filing, that number had jumped to 8.34 million shares.
Jones famously profited an estimated $100 million during the 500-point collapse of the Dow Jones Industrial Average known as “Black Monday” on Oct. 19, 1987.
Jeffrey Gundlach Selling “Everything,” Including SPY
Jeffrey Gundlach, who manages $100 billion at DoubleLine Capital, recently urged investors to dump everything they own.
“The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong,” Gundlach said in a July interview.
In addition to his bearish stance on the S&P 500, Gundlach is also “maximum negative” on Treasuries. DoubleLine continues to hold sizable long positions in gold and gold miner stocks. Gundlach sees gold as one of the only true safe-haven options for investors. He predicts that the precious metal will soon hit $1,400 an ounce.
Paul Singer Sees “Breakdown” Ahead for SPY
Paul Singer is yet another market expert betting on a stock market collapse. Singer manages the $38 billion Elliott Management Corporation. In his most recent letter to investors, Singer pulled no punches when explaining what he sees ahead for markets.
“The ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large,” Singer wrote.
Singer’s fund has actually outperformed the SPY year-to-date thanks to big bets on energy and gold. And when five men responsible for billions of dollars put their own money where their mouths are, then your ears should at least perk up.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.