Carl Icahn warns that the market rally might finish in a painful correction and hedges accordingly
Billionaire Carl Icahn warned of the possibility of a significant decline in stocks, telling CNBC’s Scott Wapner that “wild rallies” in the market always come to a dramatic end.
Wapner reported on Icahn’s warning about the “mid-term report” on a turbulent day for the stock exchange.
“In my day I’ve seen a lot of wild rallies with lots of mispriced stocks, but they all have one thing in common. Eventually they hit a wall and go into painful correction. Nobody can predict when this will happen, but when that happens, look below, “said Icahn. “Another thing they have in common is that they always say this time is different. But it never turns out to be the truth.”
The investor declined to go into the details of his positions, but told Wapner that he was well hedged.
Icahn’s cautionary statement came as the US stock market fell sharply on the first day of trading in the new year. The three major indices were all down more than 3% by midday, with the Dow falling as much as 700 points.
The tough start to 2021 follows a banner year for markets, with the S&P 500 gaining 16% and certain technology stocks making dramatic jumps despite the Covid-19 pandemic reviving the global economy.
The rapid rise and soaring valuations of stocks have made some Wall Street strategists shy away from the market’s path for a short time. Morgan Stanley strategist Mike Wilson said in a statement to clients on Monday that the market was “ripe for a drawdown”.
Icahn has made a name for himself as an activist investor. On Monday morning, Herbalife announced it was buying back $ 600 million of Icahn’s stock and that the activist’s representatives would be stepping down from the board. Icahn said in a statement that the days of activism at Herbalife, which he invested in more than eight years ago, were over, but he planned to remain a shareholder on a smaller scale.