Legendary investor John Hussman is sounding the alarm on the stock market, warning that stocks are in the most extreme bubble in history. According to Hussman, stock valuations are as overvalued as they were in 1929 and in 2021, signaling a potential steep correction on the horizon.
Hussman, who accurately predicted the market crashes of 2000 and 2008, is raising concerns about the current market environment. He points to various valuation measures, including the ratio of nonfinancial market capitalization to gross value-added, which is at its highest level since the 1929 stock-market peak.
In a recent note, Hussman expressed his belief that investors are experiencing the “double-top of the most extreme speculative bubble in US financial history.” He cautioned that over-speculative market bubbles have historically ended poorly for traders, with stocks hitting a “limit” to speculation before facing a sharp decline.
Despite the stock market’s months-long rally and bullish sentiment among investors, Hussman remains bearish on the outlook. He has refrained from making an official forecast but has warned that a potential crash could send the S&P 500 plunging 63%, reaching its lowest level since 2013.
As investors continue to push the market to all-time highs, Hussman’s warnings serve as a reminder of the risks associated with overvalued stocks. With market internals signaling a potential correction, Hussman advises taking a defensive stance to protect against a possible crash.
As the market remains at risk for a steep correction, investors would be wise to heed Hussman’s cautionary words and consider their investment strategies in light of the current market environment.
