Is the market about to peak? The legendary investo

Legendary investor John Hussman, who twice accurately predicted the U.S. stock market crash, warned that U.S. stocks could end up in the next decade as the stock market rally driven by "fear of missing out" (FOMO) appears to be nearing its peak. Dismal returns.

The president of Hussman Investment Trust pointed out that the stock market has risen sharply in the past four months, and the S&P 500 has set a series of record highs in 2024. But he said in a report on Sunday that this was largely driven by "almost insane" FOMO on Wall Street, which also spelled trouble for stocks in the long run.

"There are many factors contributing to this fear: the recent record highs in nominal value of U.S. stocks, enthusiasm for a 'soft landing' for the economy, expectations of a 'turnaround' in interest rate cuts, and optimism about the prospects for artificial intelligence," Hersman said.

But he warned: “Whatever one chooses to measure, after current market valuations reach such high levels, total returns over the next 10-12 years are likely to be dismal and dismal, with deep losses throughout the cycle. "

The ratio of the market capitalization of non-financial companies in the S&P 500 to total market capitalization growth shows that U.S. stock valuations are at their highest since 1929, when the market bubbled and collapsed before the Great Depression.

Hirschman said this valuation metric is most correlated with the S&P 500's total returns over the next 10 to 12 years, suggesting that investors currently betting on U.S. stocks may be disappointed in the long run.

Meanwhile, the 12-year nominal return forecast for a traditional portfolio (investing 60% of cash in the S&P 500) has fallen below 0%. This is the lowest return estimate since the coronavirus pandemic upended markets in 2020.

"We cannot say with complete certainty that the stock market is at a market peak. But we can say with complete certainty that the current situation reflects what the market peak will look like." Hersman warned.

Hirschman, who correctly predicted the 2000 and 2008 crashes, has been bearish on stocks in recent months. Earlier, he warned that the stock market faced "a series of disasters" and added that he would not be surprised by a 65% drop in stocks, but he did not make an official forecast.

Hirschman said recession risks remain, calling them a "legitimate" concern for investors. He expects the Fed to cut interest rates sharply this year, as it did during the recession of the early 2000s and the 2008 financial crisis.

Investors may ignore these risks and remain bullish on stocks as markets continue to rise. According to an index maintained by the Yale School of Management, individual investors' optimism about U.S. stocks has reached its highest level since 2007. Wall Street investment banks have also raised their year-end target prices for U.S. stocks.

Barclays said on Tuesday that despite higher interest rates, markets will continue to prosper in 2024 thanks to a strong technology sector and a resilient economy. The bank raised its year-end price forecast for the S&P 500 to 5,300 from 4,800, which would represent a 4.5% upside from Monday's close and the second-highest target in a CNBC market strategist survey, behind UBS.

The S&P 500 hit a record high last week and briefly exceeded 5,100 points for the first time in the session. The index is up 6.3% so far this year, with technology stocks posting bigger gains on the encouraging prospect of artificial intelligence boosting corporate profits.

Barclays strategist Venu Krishna noted that the new forecast "reflects our view that inflation will continue to normalize, while the economy remains relatively resilient and Big Tech will maintain its lead."

Barclays expects the S&P 500 technology sector to rise 9.6% in 2024, outperforming the other 10 sectors. As in 2023, the clear winner so far is Nvidia (NVDA). Last week, the chipmaker released another blockbuster quarterly report. Krishna also raised his full-year S&P 500 earnings forecast to $235 per share from $233.

Article forwarded from: Golden Ten Data

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