Episode summary
Larry McDonald: S&P 500 Could Crash 30% Over the Next Year
Wealthion
· · 48 min · Hosts: Maggie Lake · Guests: Larry McDonald
Summary
Larry McDonald argues that the S&P 500 is dangerously concentrated, especially in AI-linked megacaps, and says passive investing has pushed retail investors into valuations that no longer reflect underlying business risk. He warns that the index could fall 30% over the next year and then go flat for years, while many individual stocks are already in deep drawdowns that create selective opportunities.
His preferred setup is to own beaten-down equities and assets that benefit if rates fall or inflation stays sticky. He highlights long-duration bonds, including an Apple bond trading at 47 cents on the dollar, and says names like Nike may be washed out enough to rebound. He also argues that energy, materials and industrials should gain share over the next five years as hard assets regain favor.
McDonald sees AI as inflationary in the near term because of data-center buildouts, copper demand and power-grid investment, but he thinks the bigger risk is a capex slowdown that would hit the Magnificent Seven. He also says stablecoins could pull trillions into T-bills, support Treasury demand and become part of a broader policy response that could include yield-curve control or even gold revaluation.
Key takeaways
- McDonald says the S&P 500 could drop 30% over the next year and then remain flat for years, echoing the post-2000 pattern.
- He thinks passive investing and AI concentration have turned retail investors into exit liquidity for private-market billionaires.
- McDonald favors long-duration bonds, including Apple debt at 47 cents on the dollar, if Treasury yields start falling.
- He expects energy, materials and industrials to gain share over the next five years as markets rotate toward hard assets.
- He sees stablecoins as a potential policy tool that could drive more demand for T-bills and help finance U.S. debt.
Notable quotes
“The S&P is going to drop 30%. Nvidia is going to get cut in half the next like two, three years”
“This is the greatest cash out from billionaires in Silicon Valley we've ever seen. Run. Don't walk the other way”
“there's 43 trillion Maggie in the NASDAQ 100”
“I think stable coins probably go in the next five years to a trillion trillion and a half”
How the episode opens
The S&P is going to drop 30%. Nvidia is going to get cut in half the next like two, three years. This is the greatest cash out from billionaires in Silicon Valley we've ever seen. Run. Don't walk the other way.
Joining us today, Larry McDonald, founder of Bear Traps Report. Hi, Larry. Great to — Thanks for having me. What a what a pleasure. — Yeah, same here. So, uh it's going to be a great combo. The work you do is all about avoiding draw downs and it feels like we really need to be thinking about that right now. Where are the greatest risks investors need to be positioned for right now? What's top of your radar?
Well, you know, the year-end setup is fascinating because the relationship between the index, so the S&P and what I call the dark side of passive investing,
It's getting pretty crazy. probably 60 Hall of Fame brands that are down 35 to 80% and the index is at all-time highs. So the setup is during tax loss season in years where the S&P is up 10, 15, 20%.
And great brands are down, you want to get long, the wonderful brands and maybe think of it even shorting the index or buying puts on the index. But that's what we're seeing the most sophisticated institutional investors behind me in our Bloomberg chat. That's that's that's a trade that I'm seeing people put on.
We ask the experts closest to the real economy to make sense of it. The people who build, mine, and power real assets and put their own capital behind them. Then we connect the dots and tell you what it means for your money. Wealthy. It's interesting. It sounds like rotation within uh within equities.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- s&p 500 crash risk
- passive investing and concentration
- ai spending and valuation
- hard assets rotation
- stablecoins and treasuries
Companies and tickers mentioned
- NKE
- AAPL
- META
- NVDA
- SLB
- ISRG
- BAX
- Nike
- Apple
- Meta
- Nvidia
- Schlumberger
- Intuitive Surgical
- Baxter
- Tether
Watch the episode
Watch “Larry McDonald: S&P 500 Could Crash 30% Over the Next Year” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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