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When the euphoria is a queen, the end result is always some sort of crash
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Loading...John Hussman, the president of the Hussman Investment Trust and a former economics professor, sounding the alarm on what he forecasts will be a catastrophic equity selloff for months now, and his warnings are only getting more forceful.
Investor and former professor John Hussman doesn't think this is a sustainable situation, and forecasts that stocks will lose two-thirds of their value from current levels.
Hussman is an outspoken market pessimist who's sounded the alarm on equity valuations repeatedly in recent months. He argues that while psychological factors can keep valuations high in the near-term, the long-term forecast for the market will involve an unavoidable major selloff.
This time around, Hussman is calling for the benchmark S&P 500 to lose 67% of its current value. That would bring the index from roughly 2,862 down to 950, a truly eye-popping level considering the index's seemingly unstoppable streak of gains.
The market bloodbath that Hussman is forecasting will be so bad, in fact, that one of investors' favorite tactics — buying the dip — will be numb to its power.
"My impression is that the first leg down will be extremely steep, and that a subsequent bounce will encourage investors to believe the worst is over," he said. "Study market history. The trouble rarely ends until valuations have approached or breached their long-term norms."
Still, Hussman's forecasts must be absorbed with the ultimate caveat in mind — his doomsaying predictions have yet to come true, even though he's been making them for months.
His explanation for this is straightforward: he's referring to a longer-term cycle, and while the market has remained resilient in the short-term, it must eventually buckle.
Hussman argues that when sentiment and psychology — rather than fundamentals — are driving the market higher, prices can increase for some time, but the end result is always some sort of crash.
Source: BI
Trader-G.Bozhidarov
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