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Market veteran John Hussman has warned that stocks could see disastrous returns over the next 12 years.
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The legendary investor pointed out signs that the stock is significantly overvalued due to investor FOMO.
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In a recent note, he wrote that the market appears to be nearing its peak.
Legendary investor John Hussman says stocks could see a decade or more of disastrous returns, as FOMO seems to be nearing its peak.
President of Hussmann Investment Trust pointed out this. stock monster rally Over the past four months, the S&P 500 has already set new highs one after another heading into 2024. But much of that is due to Wall Street’s “nearly frantic ‘fear of missing out'”, Hussmann said in the paper. Note That matters for the stock price in the long run.
“A number of pressures are driving that anxiety: the recent rally to record highs, enthusiasm for a ‘soft landing’ in the economy, an expected ‘reversal’ towards lower interest rates, and most recently, the prospects for artificial intelligence. I’m excited about it,” Husman said. “Current market valuations suggest that no matter what metric you choose, total returns over 10 to 12 years are likely to be weak or disastrous, or significant full-cycle losses,” he said. I’m confident,” he warned.
One valuation metric is the S&P 500’s ratio to non-financial market capitalization. Company’s gross added value — the stock is Most highly rated since 1929when markets bubbled and crashed before the Great Depression.
Husman said this valuation is most correlated with the S&P 500 index’s total return over the next 10 to 12 years, meaning investors who bet on stocks now could be disappointed in the long term. He said that it shows.
Meanwhile, the estimated 12-year nominal return for a traditional investment portfolio (investing 60% of your cash in the S&P 500) is below 0%. This is the lowest estimated return since the 2020 recession, when the pandemic upended markets.
“We can’t say with any certainty that stock prices are at the peak of the market. We can also say with absolute confidence that current conditions reflect what the peak of the market looks like,” Husman cautioned.
Hussmann, who accurately predicted the market crashes of 2000 and 2008, has been bearish on stocks in recent months. Previously, he warned of a “casualty of disaster” facing the stock market, adding similarly: It wouldn’t be a surprise to him if the stock price fell 65%.However, we are refraining from making official predictions.
Meanwhile, Hussmann said there were still recession risks in the economy and the risk of a future recession was a “legitimate” concern for investors.he predicted Significant interest rate cuts are planned This is similar to the Fed’s deep interest rate cuts during the early 2000s recession and the 2008 global financial crisis.
Those risks could disappear for investors who remain bullish on stocks as the market continues to rally.individual Investors are most bullish on stocks since 2007according to an index maintained by the Yale School of Management.
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