Carson Block says artificial intelligence has completely changed how he views markets over the past several weeks, according to Bloomberg.
In a conversation with Barry Ritholtz at the Future Proof Wealth Management conference in Miami Beach, the founder and chief investment officer of Muddy Waters Capital said his outlook has flipped.
“Up until one month ago, I was completely sanguine on the S&P 500 and markets in general and the economy,” Block said. “And my view has 180-ed.”
Known for his short-selling campaigns, Block had been relatively constructive on equities as recently as late November, saying he preferred being long rather than short the U.S. market and even revealing several uncommon long positions. Since then, however, the S&P 500 has lost momentum after a stretch of successive record highs.
Block now believes AI could meaningfully reshape both the economy and the stock market. Investor anxiety has been building over whether the hundreds of billions being spent on AI infrastructure will generate sufficient returns — or instead disrupt large parts of the corporate landscape and eliminate many white-collar jobs.
At the center of his concern is how job losses could ripple through the labor market and eventually affect financial markets.
“I think it’s not unrealistic to say 15% of knowledge worker jobs in the US in three years are gone,” Block said.
If new roles don’t emerge quickly enough, higher unemployment could reduce flows into retirement accounts such as 401(k) plans, which have long supported equity markets. If displaced workers then begin withdrawing savings because they cannot find new jobs, it could add further pressure.
Bloomberg writes that once that process begins, “there’s nobody there to catch the falling knife,” he said.
Block expects the disruption to appear first in fields such as law, accounting, tax advisory and finance support functions, particularly among junior staff and administrative roles. In hedge funds, he said many operational and back-office functions, including IT work, could be replaced by automated systems that are cheaper and more efficient. Large, profitable firms may continue hiring junior analysts out of tradition, but businesses operating with thinner margins will likely automate quickly.
Even with those concerns, Block sees opportunities in parts of the market. His firm has positioned trades that effectively bet against extremely tight credit spreads and seek to exploit liquidity mismatches in certain exchange-traded funds.
“I do think credit spreads are stupidly tight right now and credit volatility is stupidly low,” he said. “To me, you want convexity, and there are lots of ways to play it where you’re capping your potential loss.”
He also argued that years of easy money and ultra-low interest rates have made investors more tolerant of risk and enabled questionable corporate behavior. While outright fraud remains relatively rare, he believes a broad “gray zone” of aggressive accounting and misleading narratives has become common.
“My business has gotten harder because unless it’s something really, really egregious, people don’t care,” he said.