'Prepare for the worst': Hedge fund veteran thinks the market is broken

DBi’s Andrew Beer is concerned that key financial market indicators could be broken.

Traditionally, financial markets are seen as a giant prediction machine. CNBC called it a "crystal ball." When investors think the future looks good, prices usually rise; when they expect trouble, prices fall or shift. Changes in stocks, bonds, currencies and oil often give early clues about coming growth, inflation, or crises.

That's not happening right now, however, and Beer is worried it is because the crystal ball is broken.

“It’s not normal for big markets to move as much as they are right now,” said Beer, the firm’s managing member, in an interview with CNBC’s “ETF Edge."

“Something is deeply wrong in the market’s ability to forecast the state of the world... The only thing we can all do as investors is: This is the moment to plan and to prepare for the worst. You hope for the best," he added.

“You just — you have more geopolitical risks stacked on top of each other today [and] more economic risk factors than I remember at any time in my career,” he said after more than three decades in the hedge fund industry.

There have been a number of stresses on the economy over the past 12 to 18 months, but it hasn't caused a crisis, and that isn't normal.

“These financial assets are — they’re an investment, but they’re also what you need to survive, to live on, to retire, and so it’s the very real human side of it that I hope people will focus on,” he added.

“The best thing to do in 2025 was just turn off your computer beginning of the year and come back at the end of the year, and you’ve made money, your stocks and your bonds and everything else,” he said. “It won’t continue like that. We will go through a more difficult period.”

He noted that there are so many investments in portfolios that make it difficult to calibrate, like crypto, gold and silver not to mention crude oil.

“No one has a playbook for that,” said Beer.

He's keeping an eye on private credit, which even Sen. Elizabeth Warren (D-Mass.) is concerned President Donald Trump might open up for 401(k) investments. There are other concerns about insurance portfolios and other small areas of "the market where unusual stress could begin to spread," CNBC said.

Research director at XTB, Kathleen Brooks, penned a column Friday in which she predicts that the markets may just be immune to things Trump says after so many wild swings over the past months.

"After falling to as low as $96 per barrel earlier this week on comments from President Trump that the war could soon be over, oil traders are now discounting the daily torrent of posts and incoherent press conferences from the White House, as the war rages on. On Friday, investors are facing the facts: the Strait of Hormuz is effectively closed and it does not appear that there is a real end in sight to the war," she said.

It appears they're going to operate as if they have no faith in Trump, she suggested. Markets aren't even reacting to positive news, like Trump's announcement that he won't bomb Iran's power infrastructure this week or next week.

"Effectively, this is just another 10 days where nothing will be achieved and 20 percent of the world’s oil supply will remain constrained. This is why traders have failed to react to this ‘positive news’ and instead the sell-off continues," said Brooks.

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