In a recent note to clients, McDonald - who profited off of the pandemic crash in March with bullish wagers on stock-market volatility - laid out three reasons why the market is especially vulnerable to such a swift downturn right now.The perceived future harm of the new COVID-19 strain in the UK will introduce additional risk to markets, according to McDonald.
"The idea that tech stocks should keep rising in the face of the Covid-induced headwinds was an idea rooted in historic optimism. As we see now, eventually reality strikes and changes things overnight," he added.
The investment chief said that markets have always crashed in the weeks and months following 52-week highs, and it will only take a change in sentiment to trigger a large sell-off. Both the Dow and S&P 500 closed at record highs last week, but have pared back gains since then.