![]() ![]() He predicted in March 2000 that tech stocks would plunge 83%, then the tech-heavy Nasdaq 100 index lost an "improbably precise" 83% during a period from 2000 to 2002.And as the stock market had continued to grind mostly higher, he persisted with his doomsday calls.īut before you dismiss Hussman as a wonky perma-bear, consider again his track record. BUBBLE LETTER CHAIN REAL FULLJob openings also remain relatively elevated, rising again in August after falling in the second quarter.įor the uninitiated, Hussman has repeatedly made headlines by predicting a stock-market decline exceeding 60% and forecasting a full decade of negative equity returns. The labor market remains strong with unemployment at a historically low 3.7%. The Fed has said their goal is to bring it back to 2%. The Consumer Price Index, a main measure of inflation, hit 8.3% in August, down from 8.5% in July and 9.1% in June. Such a move is dependent on how quickly inflation falls and how well the the job market holds up in the months ahead. Whether or not the Fed pivots to dovish policy this winter is one of the biggest questions in markets right now. "It should be increasingly probable that the next months could see some dovish tilt by the Fed," Kolanovic said in a note this week. ![]() They include Stifel's Barry Bannister, JPMorgan's Marko Kolanovic, and Fundstrat's Tom Lee.Īll of them see inflation coming down, and the Federal Reserve pivoting back to more dovish policy - or at least putting a pause on their hawkish policies. Some strategists, however, think a near-term bottom is in. Since September 8, stocks are down around 9%.Ī number of Wall Street strategists - like Bank of America's Savita Subramanian, Morgan Stanley's Mike Wilson and Goldman Sachs' David Kostin - have also said they anticipate the S&P 500 to fall to a range around 3,000-3,600 (depending on how hard the economy is hit by monetary tightening) in the months ahead before rebounding. Scott Minerd, the CIO at Guggenheim Investments, also said valuations are too high given where inflation is, and that the market should fall another 20% from September 8 until mid-October. Grantham told Reuters he expects stocks to end the bear market down at least 37%. In each of the last three "superbubble" instances of the last century, stocks fell at least 50%. Jeremy Grantham, the founder of GMO, said valuations are still too high, and reached "superbubble" status late last year, rising 2.5 standard deviations from historical norms. ![]() Some of the biggest names on Wall Street said in September that the market still has substantial downside ahead.īridgewater Associates Founder Ray Dalio said he higher risk-free yields in the Treasury market and and damage to corporate earnings - both thanks to Fed tightening - would drag down stocks another 20%. Hussman has plenty of company in his call for stocks to go lower. He continued: "By the time investors experience the second or third free-fall – and we've hardly experienced the first one yet – the psychology of investors is not 'this is the bottom' – but rather, 'there is no bottom.'" Hussman's track record - and his views in context "The way that bubbles unfold into preposterous losses – 89%, 82%, 50%, 55%, and I expect this time between 50-70% – is through multiple periods of decline and even free-fall, punctuated by fast, furious 'clearing rallies' that offer hope all the way down," Hussman said. Hussman said the market's rally between mid-June and mid-August was one what he thinks will be multiple bear market rallies on the way down to the bottom. ![]() "Put simply, investors are clearly becoming uncomfortable, but in practice, they continue to defend the hill of extreme valuations, in the apparent belief that whatever risk remains must be short-term in nature," he said. Hussman said this is above average, and pointed out that at the market bottoms in 1990, 2002, and 2009, that level was 40%. According to recent American Association of Individual Investors surveys, investors still have a 64.5% allocation to equities in their portfolios despite high valuations and rising yields. In other words, investors are spooked and less willing to take risks at the moment.īut according to Hussman, this risk-aversion has yet to show up in investor positioning. Second, Hussman says his proprietary gauge on "market internals" is currently unfavorable. Now that yields are becoming more attractive, that willingness to accept higher valuations is waning. Generally falling bond yields since the Great Financial Crisis have meant a greater willingness among investors to accept higher valuations in stocks. Yields on 10-year Treasury notes are approaching 4% for the first time since 2010. ![]()
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