Wall Street Legend Predicts Dismal 12-Year Stock Returns, Warns FOMO-Fueled Rally Nearing Peak

The stock market might be in for a prolonged period of low returns, according to a prominent Wall Street figure.

What Happened: John Hussman, the president of the Hussman Investment Trust, has cautioned that the current stock market rally, driven by a “fear of missing out” (FOMO), could lead to disappointing long-term results. This could mean a decade or more of poor returns, reported Business Insider.

Hussman highlighted several factors fueling the FOMO rally, including record highs, optimism about a “soft landing” for the economy, anticipated interest rate cuts, and excitement about artificial intelligence. “I do believe that current market valuations, whatever metric one chooses, are likely to be followed by weak-to-dismal 10-12 year total returns and deep full cycle losses,” he said.

One valuation measure, the S&P 500’s ratio of nonfinancial market capitalization to corporate gross value-added, suggests that the market is the most overvalued since 1929. This could indicate disappointing returns for investors in the long run.

“We can’t say with any certainty at all that stocks are at a market peak. We can also say with complete certainty that present conditions mirror what a market peak looks like,” Hussman warned.

Despite the ongoing rally, Hussman who correctly predicted the 2000 and 2008 market crashes warns that recession risks still loom over the economy. He predicts substantial rate cuts similar to those made by the Fed during the early 2000s and the 2008 Great Financial Crisis.

See Also: Donald Trump’s Mar-a-Lago Co-Defendant Carlos De Oliveira Requests Dismissal Of Charges In Classified Document Case: Report

Why It Matters: This warning from Hussman comes amid a series of cautionary signals from market experts. Hussman previously warned of a “cluster of woe” facing the stock market and suggested that a 65% drop in stocks wouldn’t be surprising. This was in early February when he also noted that market conditions were at their worst, with the most overvalued stocks since 2021 and the five weeks around the new year in 1929.

Another prominent Wall Street strategist, Tom Lee, also warned of an imminent stock market correction. Lee, the equity strategist at Fundstrat, predicted a drawdown following the S&P 500’s surge to around 5,000.

Meanwhile, the soaring stock price of Nvidia has sparked widespread FOMO in the market, according to Evercore ISI’s Julian Emanuel. This has raised concerns about a potential market correction.

Another notable figure, David Einhorn, the founder of Greenlight Capital, has expressed concerns about the increasing dominance of passive and algorithmic trading. He believes that this has made value investing more challenging and views the market as fundamentally broken.

Read Next: Max Keiser Says Buying Bitcoin Now Is Like Getting Berkshire Hathaway Shares At $1500 — Here’s What It Means For Apex Crypto

Image Via Shutterstock