Investing.com – More and more investors and economists are warning against a market rally that they consider excessive, and which could lead to a brutal crashsome evoking the crisis of 2008, or that of the internet bubble of the 2000s, while others go back to 1929 to find parallels.
In an article published Monday, economist John Hussman, known as a “permanent bear,” estimated that a ngrowing shadow of alarms market suggests that the S&P 500 has reached its speculative peak.
He thus confirmed his prediction of a correction of 50 to 70% of the benchmark index during this cycle, highlighting in particular the fact that the “negative leadership” of the market has never been higher in five years, with stocks reaching new lows faster than they cross new ones. new heights.
However, he clarified that this is only one of the warnings that he noted, emphasizing that since Friday, the “alert syndromes” tracked in daily data were catapulted beyond levels seen in 2000, 2007, late 2018 and early 2020, years that were all associated with a crash.
“There is nothing magical about these syndromes, but when dozens of them are triggered at the same timewe pay attention to it,” he wrote.
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Hussman also stressed that the indicator he considers the most reliable, namely the ratio between non-financial market capitalization and gross value added of companies, exceeds even 1929 levelswhen the Dow Jones recorded an 89% fall from peak to trough.
“I don’t think it’s possible to identify market peaks and troughs in real time, but there are unusual moments in history where we see a sudden deluge of conditions that suggest a speculative climax or capitulation of risk aversion,” he said.
Note that given the 17% collapse of Nvidia (NASDAQ:) since its records last week, and knowing that it is largely With Nvidia’s rise supporting the stock bull market since the start of the year, Hussman’s comments don’t seem all that alarmist.
However, many other analysts believe that the AI revolution is a game-changer, and that rather than a crash, we should expect profound changes in the nature of the bull market over the coming months.
In other words, the big winners in the coming months are unlikely to be those from earlier in the year, and investors who want to maximize gains will therefore have to broaden their horizons of investment well beyond technological mega-caps.
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