Stock Market Conditions Among 'Worst...In History,' Says Veteran Investor Who Predicted The 2008 Crash: 'Cluster Of Woe'

The stock market is currently facing conditions that rank among the worst in history, veteran investor John Hussman said in a note this month. Investors are at risk of experiencing steep declines, similar to previous extreme sell-offs.

What Happened: Hussman, the president of the Hussman Investment Trust, has a history of predicting market downturns, including those in 2000 and 2008. He recently warned investors of another potential market fallout due to the current “Cluster of Woe,” reported Business Insider.

Market conditions are currently at their worst, with the most overvalued stocks since 2021 and the five weeks around the new year in 1929, according to Hussman’s firm’s “most reliable valuation measures.” Any further increase in equities could lead to unfavorable internal market fundamentals, similar to those preceding the most extreme losses since 2007.

Hussman stated, “We estimate that current market conditions now ‘cluster’ among the worst 0.1% instances in history — more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods.”

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He also pointed out that other “similarly extreme instances,” such as the 2000 dot-com bubble, were followed by an “abrupt” stock market drop, ranging between 10%-30% over six to 10 weeks. Given the current market condition, Hussman warned that losses could be even steeper this time.

Why It Matters: The warnings from Hussman come amid a series of cautionary signals from market experts. Earlier in January, Jon Wolfenbarger, a top strategist, warned of a potential stock market crash and year-long recession. Wolfenbarger, with over three decades of investing experience, relied on a variety of economic indicators that suggested an impending downturn.

Similarly, renowned investor Robert Prechter, who predicted the 1987 stock market crash, cautioned that the current market situation is reminiscent of the years leading up to the 1929 crash. He highlighted the extreme bullishness among investors and the various warning signs in the market.

However, Federal Reserve Chair Jerome Powell on Monday downplayed the possibility of an impending recession. In a recent interview with CBS 60 Minutes, Powell attributed the current economic conditions to distortions caused by the pandemic.

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