Prevent marketplace collisions: Experts warn of 50-70% problem for S&P 500

Others take an additional pessimistic view. Trust John Hussman, president of Hussman Funding, who made his name between the stock-market crashes of 2000 and 2008.

In a June 23 note, Hassman shared some charts showing how today’s market — at least by these measures — rivals one of the last bubbles in history.

Primary Presentations Hussman’s most popular valuation measure: the ratio of total market cap of non-financial stocks to the gross value of non-financial stocks. The ratio is rising close to its two best peaks in 2021 and 1929 and is even higher than the 2000 and 2008 ranges.

Hussman likes this measure as a result of his talent for anticipating long-term market returns. The Stream Range recommends disastrous annualized absolute returns over the coming 12 years for the S&P 500 and a -9.8% annualized return relative to the risk-free 10-year Treasury in that month.

The second chart shows only four cases since 1990 when the S&P 500 has dropped from five-year highs, both when the percentage of stocks listed on the New York Stock Exchange is less than 50% at one-year highs and during recessions. The percentage of investors is less than 30%, according to Investor Wisdom data.

Along with the present, this mixture has most often occurred in 2000, 2019 and 2022.

And third, Huseman shared a chart that depicts the high risk level for the S&P 500 when evaluating and what he calls “market insiders” – recognizing the level of market breadth and gaining insight into investors’ urges. A study of individual stock performance for. Food for risk taking.

Currently, the danger threshold is as high as it was in 2018 and 2000.

Huseman said all this makes for a grim outlook for stocks, especially over the long term. However, he also warned of possible changes in the market in the near future.

“Barring a wholesale change in the intrinsic quality of the market, which is rapidly going the wrong way, any further highs from these levels are likely to be minimal,” Hussman noted. “In contrast, current valuation extremes indicate potential downside risk for the S&P 500 on the order of 50-70% at the completion of this cycle.”

Hussmann’s observational reports – and his views in context

After all, these viewpoints are clearly outside the market consensus. Chief strategists at major Wall Boulevard banks have repeatedly raised their S&P 500 price targets this year as the market continues to reach unprecedented highs. The maximum expectation is that the index will remain above 5,000 by the end of 2024.

AI developments, a strong equity market and declining inflation have made it harder to bet on the market and have changed the minds of many one-time bears like Morgan Stanley’s Mike Wilson and Piper Sandler’s Michael Kantrowitz.

However some deniers still exist. JPMorgan’s Marko Kolanovic expects the S&P 500 to fall to 4,200, with the final forecast coming the next day with Jeremy Grantham’s estimate of a low of 3,000.

For those unaware, Hassman has made headlines several times by predicting stock market stopped More than 60% and full decade forecast destructive fairness returns, And since the stock exchange market was generally high, he continued his cataclysmic screams.

However, before you write off Hussman as a bizarre super-bear, once again believe his observation reports. Here are listed the arguments he made:

• He predicted in March 2000 that tech stocks would fall 83%, after noting that the tech-heavy Nasdaq 100 index fell 83% over the period 2000 to 2002, “impossibly accurate.”
• He predicted in 2000 that the S&P 500 would see disastrous normal returns over the decade in question, which is what happened.
• He predicted in April 2007 that the S&P 500 would decline by 40%, followed by a 55% decline in the next decline from 2007 to 2009.

Alternatively, Hussman’s contemporary returns were less than stellar. Their Strategic Expansion treasury is down about 53% since December 2010, and is down 11% in the last three hundred and sixty-five days. By comparison, the S&P 500 is up about 26% over the past year.

The amount of bearish evidence Hussman is finding continues to grow, and his cries for a significant selloff over the past few years appear to hold true in 2022. Of course, there are still returns to be learned on this untouched bull. Markets However, at what level does the increasing risk of a major crash become too unbearable?

That’s a question buyers must resolve for themselves – and one Hussmann would reserve to explore for now.