The stock market is looking shaky in 2022. Inflation at a 40-year high, and rising interest rates have sent the market swinging, leaving investors jittery.
Making sense of this volatile stock market can be difficult, but a famous investor has one word to sum it up: Koyaanisqatsi.
In his latest letter to investors, prolific hedge fund manager Dan Loeb compared the current state of the stock market to the atmosphere of an experimental art film from 1982. Koyaanisqatsi relies on images and sounds rather than dialogue and contrasts images of idyllic natural landscapes with footage of cities, specifically the impact of modern technology on human life. As Loeb notes in his letter, “koyaanisqatsi” is a word from the Native American Hopi language that translates to “life out of balance.”
The stock market is falling because investors are pricing in life out of balance, Loeb says.
“Forty years later, this film and soundtrack make an apt backdrop for today’s investment environment. ‘Koyaanisqatsi’ neatly captures current market conditions which are, in many ways, a reaction to imbalances,” Loeb wrote.
Loeb, whose hedge fund Third Point managed around $18 billion last year, wrote that the stock market’s current state of volatility is itself a response to subtle but significant changes happening in the economy. He suggests that the “shift” occurring in the market is not being met with an adequate response from investors to adjust their practices.
“I have seen many investors (including myself) stumble after years of success because they did not adapt their models and frameworks quickly enough as conditions shifted,” Loeb wrote.
Loeb did not elaborate on what specific imbalances he was witnessing in the market, but in another, less esoteric part of the letter, he touched on some big events Third Point is observing, including the rapid tech stock selloff of the past month.
Technology stocks have been in a nosedive for weeks, with the tech-heavy Nasdaq index hitting its lowest point since June 2020 last week. Third Point says it has sidestepped the carnage by focusing its assets on more cyclical stocks, according to the letter, but not all fund managers were as lucky. Tech-focused fund Tiger Global, which currently manages around $80 billion, reportedly lost $17 billion this year after the selloff.
The tech stock volatility means that companies have had to start tightening their belts, slowing down hiring processes, and even laying off staff.
Loeb said that it is difficult to predict what direction the tech sector will head in now, but he suggested that the industry’s reliance on stock performance to determine company valuations and internal compensations could lead to a “spiral” and further imbalances in the market.
And Loeb writes that the tech stock selloff is a sign that big changes are in store for the wider market.
“I have said before that they don’t ring a bell when the rules of the game are changing, but if you listen closely, you can hear a dog whistle. This seems to be such a time to listen for that high-pitched sound,” he wrote.
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.