It’s been just revealed the fact that the billionaire venture capitalist Chamath Palihapitiya is issuing a warning to investors that the markets are facing heightened tail risks. Check out the latest reports about this below.
New alert is issued to investors
In a recent interview, Palihapitiya, who called the impending crypto market crash in late 2021, says that investors currently face two headwinds.
The first one involves the possibility of lower-than-expected earnings for the S&P 500.
“We’re dealing with two things. One is just that if you really think about it if I had said 13 months ago that we would be sitting here today and the Fed would have hiked 500 basis points in nine months plus or minus, you would have thought it was crazy. So we’re sort of coming into this phase of sobriety, trying to figure out how do we all do our jobs differently and what does it mean for the investments that we’ve already put in the ground.”
He continued and said the following:
“For me personally, I think the setup is that it amplifies tail risk. So right now, I’m sort of quite cautious because I think there’s a left tail risk… The risk is that the S&P[ 500] earnings are sort of in the one handle 180, 185 and all of a sudden the S&P [500] is 3,200, 3,300 [points.].”
He also addressed the second risk which is the likelihood that the Fed would keep interest rates high.
“But then there’s this high tail risk, which is that the Fed becomes dovish, everybody capitulates because it looks like things are slowing down and now all of sudden though, you will have to deal with terminal rates that are going to be 4% to 5% on a more consistent basis because if [Fed Chair Powell] lets off the gas now, then inflation kind of sticks around.”
