Stocks are about to enter a bear market as bullish investors have pushed stocks to their 1929 limits, says famed fund manager

• The stock market appears to be about to fall from its extreme heights, said legendary investor John Hussman.

• Hussman said the stock market reflects the extremes that preceded the 1929 crash.

• A market crash of as much as 65% would not surprise him, he said earlier.

The stock market’s extreme bull run is about to end, according to legendary investor John Hussman, as overly optimistic investors have driven stocks to the most extreme valuations in nearly a century.

The president of the Hussman Investment Trust sounded another bearish warning on stocks this week, undermining the stocks’ strength so far in 2024. The S&P 500 has broken a series of record highs this yearand has regained momentum in recent days after a lackluster April.

But the rally is largely due to a “certain impatience and fear of missing out” among investors — and internal market conditions look “unfavorable,” Hussman said in a report. remark.

His most trusted stock valuation metric, the ratio of non-financial market capitalization to corporate gross value added, shows the S&P 500 priced at its highest. extreme levels since 1929right before the market crashed at 89% peak-to-trough.

Hussman’s company expects the S&P 500 to underperform Treasuries by 9.3% per year over the next 12 years, based on his company’s internal figures. That’s the worst 12-year performance the measure has ever predicted—even worse than in 1929, when internal market data suggested the S&P 500 would underperform Treasuries by 6% annually over the next 12 years.

“Statistically, current market conditions resemble a major bull market peak more than any other point in the past century, with the possible exception of the 1929 peak,” Hussman said. “That is no guarantee that the market will plummet, nor that it cannot rise further. Still, given the combination of extreme valuations, unfavorable internal market conditions and dozens of other factors that are among the most ‘top-like’ in history, we are fine with being risk averse and even bearish.”

Hussman, who was among the investors so-called market crashes of 2000 and 2008, has refrained from making an official prediction about the stock. Still, he has set an extremely bearish tone on the prospects for stocks going forward.

He previously said the shares looked like they were in the “most extreme speculative bubble in American financial history”, adding that A crash as steep as 65% wouldn’t surprise him.

The story continues

Individual investors are also turning sour on stocks as they bring higher-than-expected inflation and are scaling back their expectations for the future. Fed rate cuts this year. According to the AAII’s latest report, only 39% of investors said they were optimistic about stocks over the next six months. Investor sentiment research.

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