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The stock market appears poised to fall from its extreme highs, said legendary investor John Hussman.
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Hussman said the stock market reflects the extremes that preceded the 1929 crash.
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A stock market crash as sharp as 65% wouldn’t surprise him, he has said previously.
The stock market’s extreme bull run is about to end as overly optimistic investors have pushed stocks to the most extreme valuations in nearly a century, according to legendary investor John Hussman.
The chairman of the Hussman Investment Trust issued another bearish warning on stocks this week, pushing back strength in stocks so far into 2024. The S&P 500 has broke a series of records this yearand has regained strength in recent days after a sluggish month of April.
But the rally has largely been driven by “some impatience and fear of missing out” among investors – and market internals appear “unfavorable,” Hussman said in a statement. note.
His company’s most reliable stock valuation measure, the ratio of non-financial market capitalization to gross corporate value added, shows the S&P 500 having the highest price. extreme levels since 1929just before the market collapsed 89% from peak to trough.
Hussman’s firm expects the S&P 500 to underperform Treasury bonds by 9.3% annually over the next 12 years, based on its firm’s internal metrics. This is the worst 12-year performance ever predicted – even worse than in 1929, when market insiders suggested that the S&P 500 would underperform Treasury bonds by 6% per year over the next 12 years.
“Statistically, current market conditions resemble a major bull market peak more than any other time in the last century, with the possible exception of the 1929 peak,” Hussman said. “This does not guarantee that the market will plunge, nor that it cannot rise further. However, given the combination of extreme valuations, adverse market internals and dozens of other factors that are among the most important ‘ top-like’ of history, we are very good with a risk aversion, even bearish outlook.
Hussman, who was among the investors who called the stock market crashes of 2000 and 2008, refrained from making an official forecast on stocks. However, he struck an extremely bearish tone on the stock’s future prospects.
Previously, he said stocks appeared to be in the “most extreme speculative bubble in US financial history“, adding that a crash as steep as 65% it wouldn’t surprise him.
Individual investors are also starting to sour on stocks as they weigh in on higher-than-expected inflation and lower their expectations for The Fed cuts rates this year. Only 39% of investors say they are optimistic about stocks over the next 6 months, according to the latest AAII report. Investor Sentiment Survey.
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