Original title: "crash warning"! Legendary investors who successfully predicted the collapse of US stocks twice: us stocks are afraid to fall by 70%
Source: FX168
Despite recent record highs in the US stock market, John Hussman, a legendary investor who has successfully predicted a US stock crash twice, recently warned that investors had ignored that US stocks were already overvalued and that he thought US stocks would plunge 65 to 70 per cent and that investors were at risk of big losses.
(screenshot source: Business Insider)
Hussman, now president of Hersman Investment Trust (Hussman Investment Trust), predicted bubbles in the U.S. stock market in 2000 and 2008.
U. S. stocks closed higher on Monday, as the three major stock indexes continued to set new intraday and closing highs. The Dow closed up 82.76 points, or 0.24%, at 35144.31; the Nasdaq was up 3.72 points, or 0.03%, at 14840.71; and the S & P 500 was up 10.51, or 0.24%, at 4422.30.
On Monday, the Dow rose as high as 35150.37, the Nasdaq rose as high as 14863.65, and the S & P rose as high as 4422.73, both hitting new intraday highs.
According to Business Insider, a well-known financial website, Hussman wrote in a commentary on July 14: "my idea is that after years of Fed-induced yield speculation, investors have once again concluded-at the worst possible time-that valuations don't matter at all. I expect them to suffer not only huge losses at the end of the market cycle, but also a long, interesting, missing journey of nearly 20 years. "
At different points in the past year, Hussman has repeatedly said he expects US stocks to plunge 65 per cent and 70 per cent.
But he seems more worried about the long-term return prospects for investors. Given current valuations, he firmly believes that the S & P 500 will face negative returns over the next decade.
The chart below is the main valuation indicator of Hussman-the ratio of total market capitalization to total added value or total profit-"this indicator is still more relevant to actual subsequent market returns than any other indicator we test or introduce," he said. The current level is higher than it was during the bubbles of 2000 and 2008.
(screenshot source: Hussman Investment Trust)
Hussman puts so much emphasis on valuations because of their predictive ability. The chart below shows the returns of the S & P 500 at different points in time. The index was 3.49 on July 12, meaning the index's return over the next 12 years should be around-6%.
(screenshot source: Hussman Investment Trust)
But what could trigger a recession when the economy finally returns to work? One possibility, says Hussman, is that economic data are mediocre. This is because huge federal spending will slow, while consumer spending has not increased, he said.
"my feeling is that investors may also underestimate the risk of major economic frictions and deficits in the coming quarters," Hussman wrote. Over the past year, the federal deficit has reached 19% of GDP. "
In March 2000, Hussman predicted that US technology stocks as a whole would plummet 83%. As a result, between 2000 and 2002,NASDAQThe 100 index fell by exactly 83%.
In April 2007, Hussman predicted that the S & P 500 would fall 40 per cent, down 55 per cent during the 2007-2009 crash.