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John Hussman, an asset-bubble expert, forecasts the ongoing rally in US stocks will “end in tears.”
The S&P 500 risks a 64% collapse given extreme valuations and “unfavourable market internals,” he said.
Here are the long-time market bear’s six most striking quotes from a recent note.
The US stocks have enjoyed an impressive rally in 2023, thanks to a combination of cooling inflation, fading recession fears and hype over artificial intelligence.
But don’t bet on the cheer lasting long, according to John Hussman.
The long-time equity bear who called the 2000 and 20008 crashes recently doubled down on his grim outlook for US stocks, warning of an astonishing 64% plunge in the S&P 500 index that’ll burst what he called an “extreme yield-seeking speculative bubble”
The president of Hussman Investment Trust has based his views on stretched equity valuations and unfavourable “internals” – deeming a steep plunge in stocks necessary to restore market conditions back to normal.
The S&P 500 has rallied 19% so far this year, taking its gains since the end of 2008 – the year of the global financial crisis – to more than 400%. The price-earnings ratio of the index, one of the valuation metrics tracked by investors, has climbed to about 26 from last year’s lows near 19, according to data from macrotrends.net.
Here are Hussman’s six most striking quotes from a recent note.
1. “There is a particular ‘setup” that we’ve historically found to be associated with abrupt ‘air pockets’ and ‘free falls’ in the S&P 500. It combines hostile conditions in all three features most central to our investment disciple: rich valuations, unfavourable market internals, and extreme overextension.”
2. “The present combination of historically rich valuations, unfavorable internals, and extreme overextension places our market return/risk estimates – near term, intermediate, full-cycle, and even 10-12 year, at the most negative extremes we define.”
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3. The potential for a near-term ‘air pocket’ or ‘free fall’ isn’t a forecast so much as a…
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