Exclusive | Hedge Fund Elliott Warns of FOGO: Fear of Getting Obliterated in the Market

“Paul Singer’s Elliott Investment Management compared the current state of the markets, laden with debt-fueled risk-taking and bubbling with hype over new technologies, to the Roaring ‘20s that preceded the Great Depression. “At present, virtually every alarm bell warning of a substantial bear market ahead is ringing,” the $80 billion hedge-fund firm wrote in an October investor letter reviewed by The Wall Street Journal. While Elliott is prepping for potentially historic upheaval, its performance is lagging behind the broader hedge-fund industry. Elliott’s returns were flat in the three months ending Sept. 30, leaving its gains the first nine months of 2026 at a little under 2%, according to the letter. That trails a composite hedge-fund index compiled by research firm PivotalPath, as well as the nearly 13% total return of the S&P 500 and the nearly 3% gains in an index of short-term Treasury bills over the same period. Elliott’s quarterly letters are known for their doom-and-gloom commentary on the dominant themes of the day.” … “In the third quarter, Elliott’s unprofitable sectors included distressed debt and portfolio hedges related to gold, currencies, stocks and interest rates. Its profitable sectors included commodities, arbitrage and portfolio hedges related to credit. The firm sees opportunities in activist investing in healthcare companies, producing energy properties and, eventually, buying from forced sellers in dislocated credit markets. Its recent activist positions include stakes in PepsiCo and Synopsys, a chip-design software maker. Jesse Cohn, one of Elliott’s managing partners, took to X last month to lament the effect that retail, high-frequency and other traders are having on short-term price discovery. “The stock market feels different right now because it is different. Winners keep winning, losers get pounded, earnings reactions are increasingly unpredictable and larger,” Cohn said in a post on X. Regarding AI, Elliott warned about circular investments between AI model companies and makers of AI infrastructure, debt-financed capital spending and a burgeoning anti-AI movement. Elliott wrote that the market impact from any challenges to the pricing of AI products or diminished expectations about the AI build-out “could be historic, or at least as severe as any bear market in the last few decades.” ““So many factors have lined up to cause this great boom that it might take disruption in only one or two of them to shift this momentum into reverse, leading to a cascading, self-reinforcing unwind of this bull market and an abrupt change from FOMO to FOGO (fear of getting obliterated),” the letter said. ”