‘I expect an 80% crash’: Hedge fund legend says U.S. stocks could rally before falling hard — and how investors can prepare ahead

In an interview with Reuters (1), Spitznagel said he expects “an 80% crash” in U.S. equities but believes it would be preceded by a “massive, euphoric, historic blow-off rally” — a pattern where stocks could climb sharply before they tumble.

“I would argue we’re in the middle of that rally right now, not at the end of it,” he told the news outlet.

He also argued that ultra-loose monetary policy has delayed the full economic fallout from the pandemic, saying, “We’re going to see the consequences of that… it takes time.”

Spitznagel isn’t a casual market commentator. Universa specializes in “tail-risk” hedging — strategies designed to pay off during rare, high-impact market dislocations, often called “black swan” events. Since 2007, the firm has reported average annual returns on capital exceeding 100%. During the early pandemic period, Universa posted a staggering 4,144% return as markets shook (2).

Do others see the same risk?

Spitznagel isn’t alone in his warning.

A recent Goldman Sachs survey of U.S. insurance professionals found:

• 52% cited inflation is creating major financial risk
• 48% saw a slowdown or recession as a distinct possibility (3)

Meanwhile, wealth manager Josh Brown recently told Scott Galloway’s The Prof G Pod that a pullback driven by artificial intelligence (AI) enthusiasm is plausible — although the question is when (4).

“You could just have a bear market follow this — and what if it starts three years from now? Think of all the money that you are missing out on,” Brown said.

For Canadian investors, the exact timing of a U.S. market downturn matters less than how closely your money is tied to U.S. stocks. Many Canadians hold equity in U.S. companies through their Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs) and regular investment accounts, often through index funds, exchange-traded funds (ETFs) or tech stocks. Even Canada’s largest pension plan had about 50% of its portfolio in U.S. assets as of 2025, signifying the reliance on foreign stocks for diversification (5).

The Canadian stock market also experiences strong influence from what happens globally, since it’s heavily made up of financials (~30%), energy (~18%), mining (~13%) and real estate companies (~2%) (6). When investors get nervous, those sectors can take a hit.

In other words: a U.S. crash would not stay centralized, it would send shockwaves globally.

Protecting your money with alternative assets

If Spitznagel is right — even remotely — the answer isn’t to panic or sell everything. Instead, it’s to make your investments stronger so they can handle different kinds of markets.

Wealthy investors don’t try to guess the exact day a crash will happen. They spread their money out across different assets so they aren’t relying on a single market or one type of investment.

That’s where alternative assets come into play.

What are alternative assets?

Alternative assets — or “alternatives” — are investments outside of regular stocks and bonds. Examples include:

• Real estate: houses, apartments, land
• Infrastructure: roads, utilities, energy projects
• Commodities: oil, copper, agriculture
• Precious metals: gold, silver
• Private markets: private credit, private equity, venture capital

Investors use alternatives to help:

• Reduce portfolio fluctuation
• Protect against inflation
• Earn income from different sources
• Spread their risk
• Keep their buying power over time

Wealthy investors and institutions have long used alternatives, especially during market uncertainty. According to a 2024 UBS Global Family Office Report, 33% of high-net-worth families use hedge funds as diversification (7), a sign that these portfolios are structured to handle big market swings in a way most everyday portfolios aren’t.

In contrast, many everyday Canadian investors see alternatives as risky or complex. This means they have more limited exposure compared to wealthy investors — around 2% or less as of 2025 (8), with broader liquid alternative allocations noted in the 5% to 10% range (9).

The difference matters because portfolios with little exposure to alternatives rely more heavily on stock and bond markets for returns — making them more vulnerable when those markets struggle.

Why alternatives help during market downturns

Different types of investments don’t always move in the same direction at the same time — which is why alternatives matter. For example:

• Gold often goes up when people are nervous about the economy
• Real estate and infrastructure can earn steady income that rises with inflation
• Private credit can benefit from higher interest rates
• Commodities can spike when supply is tight or demand is high

There’s no perfect shield against market downturns, but spreading money across different assets can soften the blow — for example, if U.S. stocks are priced for perfection, one bad shock could send markets lower.

Gold as protection during a crash

Gold has long been regarded as a “safe haven” investment during recent market fluctuations. From 2023 to 2024, gold prices hit new record highs (10). Numerous reasons accounted for this: