'I'm nervous' that a market meltdown is unfolding, investor David Tice warns

The stock market may be on the cusp of a major setback, according to David Tice.

Tice, who made a name for himself in running the Prudent Bear Fund before selling it to Federated Investors in 2008, believes the market is dangerous.

"I'm nervous," he said Wednesday on CNBC's "Trading Nation." "We're getting closer to a meltdown scenario."

Tice may be known as a permabear, but last December he predicted a 50 percent chance stocks would stage a 25 percent rally this year. So far in 2018, the S&P 500 and Dow are up 8 and 5 percent, respectively. The Nasdaq has rallied 15 percent.

However, Tice's bullish call came with a caveat: "Longer term, the market is going to suck."

And, that's where the current environment comes into play.

According to Tice, struggling emerging markets could spark a contagion that could hit the U.S. The MSCI Emerging Markets Index has lost more than 13 percent of its value this year as of Wednesday's close.

"You look at emerging markets. There's a lot of trouble in emerging market currencies where we've broken to new lows," Tice noted.

Plus, he's making a contrary call on inflation based on the global picture.

"Frankly, I think there's fear of deflation picking up again," he said. "I think that deflationary trend is likely to continue."

He also pointed to frothy sentiment in the market, which is often perceived as a warning signal to Wall Street.

"Everybody is into this market," he said. "I'm worried about whether the economy could enter a recession faster than a lot of people think."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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