Stocks are primed to tumble into a bear market as bullish investors have driven equities to 1929 extremes, famed fund manager says

A trader works on the floor at the New York Stock Exchange in New York City, US, March 5, 2020.Andrew Kelly – Reuters

  • The stock market looks poised to fall from its highs, said legendary investor John Housman.

  • The stock market reflects the volatility that preceded the 1929 crash, Housman said.

  • He previously said that a 65% market crash wouldn't surprise him.

The stock market's extreme bull run is about to end, as overly optimistic investors have pushed stocks to their most extreme valuations in nearly a century, according to legendary investor John Huseman.

The president of Hussman Investment Trust issued another bearish warning on stocks this week, taking a backseat to the strength of stocks so far in 2024. The S&P 500 hit Breaking a series of record highs this yearIt has regained momentum in recent days after a lackluster month in April.

The rally was largely driven by “impatience and fear of missing out” among investors – and the internal market appears to be “unfavorable,” Hausmann said in a report. NB.

His company's most trusted valuation measure for stocks, the ratio of non-financial market capitalization to corporate GVA, shows the S&P 500 index being priced at record highs. Maximum levels since 1929right before the market crashed 89% from peak to trough.

Housman expects the S&P 500 to underperform Treasuries by 9.3% annually over the next 12 years, based on his company's internal metrics. This is the worst 12-year performance the measure has ever forecast — even worse than in 1929 when market insiders suggested the S&P 500 would underperform Treasuries by 6% per year over the next 12 years. .

“Statistically speaking, the current set of market conditions looks more like the peak of a major bull market than any other point in the past century, with the possible exception of the 1929 peak,” Hausmann said. “This is not a guarantee that the market will go down, nor that it will not be able to advance further. However, given the combination of extreme valuations, unfavorable market internal factors, and dozens of other factors that combine to be the most 'bull-like' factors in history, we are… Fine with risk aversion, even bearish expectations.”

Hausmann, who was among the investors who The market crashes of 2000 and 2008 are calledIt declined to provide official stock forecasts. However, he cast a very bearish tone on the future outlook for the stock.

Previously, he said stocks looked as if they were in “The most extreme speculative bubble in US financial history“, adding that A Crash as severe as 65% It wouldn't surprise him.

Individual investors are also starting to get nervous about stocks, weighing hotter-than-expected inflation and lowering their inflation expectations. Interest rate cuts by the Federal Reserve this year. Only 39% of investors said they were optimistic about stocks over the next six months, according to the latest AAII data. Investor sentiment survey.

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