Speaking at Miami Hedge Fund Week, Nassim Taleb told Bloomberg that investors should prepare for potential drawdowns “two or three times larger” than Monday’s selloff, which he views as “completely in line with expectations” given the market’s structure.
Black Swan author Nassim Taleb warns that this may just be the beginning, with a much larger correction potentially on the horizon and points to the fragility of the market, where gains have been heavily concentrated in a handful of stocks. In fact, Nvidia, Apple, Amazon, Alphabet, and Broadcom accounted for nearly half of the S&P 500’s returns in 2024. This was also one of the concerns that Coach Hazelle from The Joyful Investors, cited in her recent YouTube video on “How to manage risks and uncertainty to build a thriving portfolio” which we thought could be one of the key themes for 2025.
Taleb also highlighted the inherent volatility of tech stocks, calling them “gray swans.” As he put it, “People are beginning to realize it’s not flawless. There’s a small crack in the glass. Now they’re thinking—maybe it’s not infallible.”
Taleb cited Sir Clive Sinclair, who pioneered the laptop computer but went bankrupt, and AltaVista, which quickly vanished from the search engine space after Alphabet Inc.’s Google took over the market. He also warned that the electric vehicle sector could face a similar fate, writing, “Next: electric cars.” His cautionary note is backed by historical examples, such as General Motors’ early push into EVs with the EV1—only to later file for bankruptcy in 2009. Perhaps the same could be said for Nvidia.