Asset-bubble expert John Hussman has once again sounded the alarm, issuing a dire warning that the S&P 500 could experience a staggering 64% crash from its current levels. In his latest assessment, he highlights the extreme "tail" risk ahead, which may be disorienting for investors. According to Hussman, a massive recession is not necessary for stocks to suffer a larger sell-off.
Hussman, the founder of the Hussman Investment Trust, believes that the unwinding of the Federal Reserve's intervention in the financial market and banking conditions is a significant factor contributing to the potential crash. He simplifies the current state of affairs by stating that the Fed-induced unwinding is the root cause of the problem.
Expressing his concern, Hussman warns that the equity market is likely to face profound losses over the completion of the full market cycle. This pessimistic outlook aligns with the fact that both the S&P 500 and Nasdaq Composite have already fallen into a bear market, with each index experiencing a decline of at least 20%.
Investors are currently grappling with uncertainty following a recent mixed batch of data. Softer-than-expected inflation coupled with stronger-than-anticipated figures contribute to the prevailing ambiguity in the market. This uncertainty further fuels concerns about a potential crash.
Hussman argues against exaggerating the correlation between monetary policy and the fed funds rate. He suggests that describing even a small change in the rate as a grave policy error greatly overestimates its actual impact. Instead, he emphasizes the broader financial market and banking conditions as the primary driving forces behind the potential crash.
Despite the alarming warnings, Hussman maintains his conviction that the S&P 500 could indeed experience a 64% crash. He leans towards expecting this outcome, firmly believing that it is not only possible but likely to occur.
In conclusion, John Hussman's latest warning of a potential 64% crash in the S&P 500 emphasizes the extreme "tail" risk ahead. His analysis draws attention to the unwinding of the Fed-induced conditions and the broader financial market and banking conditions as the key factors contributing to the potential crash. As the market experiences uncertainty and grapples with mixed data, investors are urged to be cautious and consider the possibility of substantial equity market losses.
