When markets start falling and powerful investors insist everything is fine, that’s exactly when people should start paying attention, according to investor Ross Gerber.
Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, delivered a warning during a recent appearance on the Meet Kevin show while discussing market volatility, geopolitical risk, and growing cracks in parts of the financial system.
Market Optimism Can Be Misleading
Gerber spoke about the disconnect he sees between public messaging and what’s actually happening behind the scenes in markets.
“When billionaire guys in suits see their stocks going down a lot and telling you everything’s okay, you should be worried,” Gerber said.
His comment came as markets face several overlapping risks, including geopolitical tensions in the Middle East, concerns around private credit and questions about how long the current bull market can continue.
Gerber believes many investors are underestimating the potential for a meaningful pullback. In his view, the market has barely reacted so far.
“1.5% decline is not a dip,” he said. “That’s like a rounding error.”
He said a normal correction could easily push markets down 10% to 12%, particularly given the current uncertainty surrounding global conflicts and interest rates.
“With the markets elevated a good 10 to 12% above what I would consider cheap, a correction is due if you’re looking for an excuse for one,” Gerber said.
For now, he is playing defense.
“It’s risk off,” he said. “You got to be more conservative.”
That means trimming weaker positions, reducing speculation and building cash reserves so investors can buy when opportunities appear.
Private Credit Raises Red Flags
One of Gerber’s biggest concerns is the rapid growth of private credit markets.
He said many investment firms have been aggressively pitching private credit products in recent years, often with high fees and limited transparency.
“They’re very hard to analyze because you just don’t know what’s in them,” Gerber said.
Unlike public companies, private funds face far fewer disclosure requirements, which makes it harder for investors to fully understand the risks.
Gerber said he has avoided these products for years.
“They charge too high a fee,” he said. “My theory is they shouldn’t be making more money than we are on our clients.”
He also believes the industry tends to overextend during hot investment cycles.
“Every cycle the private guys load up on whatever’s hot and they’ll pay whatever to get in these deals just so they have product,” he said.
Still, Gerber does not believe problems in private credit will necessarily trigger a systemic financial crisis similar to 2008.
“The good news about it is everybody who’s losing are really wealthy people that can afford to lose their money,” he said.
Major banks are far better capitalized today, he added, largely due to reforms that followed the financial crisis.
War Adds Uncertainty To Markets
Gerber also spent significant time discussing the geopolitical risks surrounding the escalating conflict with Iran.
While he believes the U.S. military is highly capable, he warned that wars rarely unfold as simply as political leaders expect.
“You cannot take over a country by bombing people,” he said.
Even if military objectives are achieved, the larger challenge comes afterward.
“Running Iran post whatever this is is going to be a much greater problem than beating the Iranian military,” Gerber said.
He pointed to past conflicts like Iraq and Afghanistan as examples where military success did not translate into long-term stability.
At the same time, Gerber believes removing the current regime could eventually result in economic opportunity.
“If Iran’s a free country again, it will be one of the wealthiest nations in the world,” he said.
Still, he cautioned that the process could take years and markets may not have the patience for that timeline.
The Economy Still Looks Strong
Despite his caution on markets, Gerber said consumer spending and economic activity remain strong.
“A recession involves people spending less money and that is not what I’m seeing,” he said.
He pointed to strong demand for travel, entertainment and tourism as signs that the economy continues to hold up.
“I cannot tell you how much people are spending on concert tickets, on sports events, tickets, on hotels and travel,” Gerber said.
At the same time, he believes inflation pressures remain significant, which could prevent the Federal Reserve from cutting interest rates soon.
“Do not expect rate cuts,” he said. “I think that’s foolish.”
AI Is Reshaping The Workforce
Gerber is highly optimistic about artificial intelligence and believes it will dramatically increase productivity across many industries.
He described a future where professionals combine experience with AI tools to become far more effective.
“If you add AI to you, what you do, you become a superhuman,” Gerber said.
However, he warned that this shift may disrupt traditional career paths, especially for recent college graduates.
“The value of a college degree has dropped,” he said.
Meanwhile, demand for skilled labor continues to rise.
“The demand for skilled labor is off the charts,” Gerber said.
Preparing For The Next Opportunity
Ultimately, Gerber’s message to investors is not panic, but preparation.
Markets move in cycles, and downturns often create the best opportunities for long-term investors.
“The worst position is when you don’t have the ability to buy, and then the correction comes,” he said.
Instead, he encourages investors to position themselves so they can take advantage of volatility.
“You’ve got to be able to buy low,” Gerber said.
And for Gerber, that starts with recognizing when market optimism may be masking bigger risks.
“When billionaire guys in suits see their stocks going down a lot and telling you everything’s okay,” he said, “you should be worried.”