'This market will fail': A portfolio manager and investor-behavior expert at a $2.2 billion firm unloads on speculation in stocks and cryptocurrencies – and warns that it's 'highly probable' the…


Traders work on the floor of the New York Stock Exchange Monday, Dec. 8, 2008.

Stocks continue to inch upwards as an economic reopening looms. But with valuations extended, Phil Toews warns a meaningful sell-off is likely due. He said a 30% drop or more in the S&P 500 is “highly probable” in the “not too distant future.” See more stories on Insider’s business page.

We’re living through a fascinating moment in financial history, according to Phil Toews.

Speculation is running rampant in multiple parts of the market – stocks, cryptocurrencies, NFTs – pushing prices to strange heights.

Toews, who is the CEO and a portfolio manager at Toews Asset Management, which manages $2.2 billion in assets, told Insider on Thursday that investors have become blind to the insanity of some asset valuations, which resemble those of tulipmania in the Netherlands in the 1600s, when tulip bulbs sold for what would today be hundreds of thousands of dollars.

“When you look back at Holland, you’re like, ‘That was so crazy, how could they pay that much for a tulip bulb. But when it’s happening in real time, it’s hard to recognize,” said Toews, who is also and the founder of the Behavioral Investing Institute. “So people think, ‘Well that’s perfectly rational to pay $600,000 for a pop-tart meme.'”

“We’re living in history through something that’s as bizarre as tulip mania. And everybody’s just like, ‘It’s fine,'” he added.

In stocks, Toews is looking at SPACs, meme stocks, and innovation-themed firms and exchange-traded funds. Earnings are either non-existent or are valued far too highly.

More broadly, indicators like total market capitalization-to-GDP (also known as the Warren Buffett indicator) and price-to-sales ratios are at historically astronomical heights.

But the upward trend can’t go on forever, and a “significant downturn” in stocks – which he defined as a pullback of 30% or more – is “highly probable” in the “not too distant future.”