Market analyst John Hussman, who is a market bear, has claimed that the stock market will lose about $20 trillion in the next crash. That is equal to 60% of the market value.
Hussman has been warning that stock valuations have been extreme for years, and is long overdue for a return to historical norms, according to Investopedia. “The only time we’ve ever seen a confluence of risk factors anywhere close to those of today was the week of March 24, 2000, which marked the peak of the technology bubble,” he wrote in a recent blog post quoted by Business Insider.
While Hussman’s prediction is certainly severe, a drop of that magnitude is far from unprecedented. In fact, it is not much worse than the last bear market that ran from 2007 to 2009, also known as the Great Recession. Additionally, some other market indices fared even worse than the S&P 500 in these episodes. Most notably, the tech-heavy Nasdaq Composite Index (IXIC) lost a whopping 78% of its value during the notorious “dotcom crash.”
The market value of all publicly traded U.S. stocks reached $30 trillion in January, per Barron‘s. Since then, the Russell 3000 has fallen by 1.5%, suggesting that its market value is just slightly lower today. As a result, the $20 trillion plunge predicted by Hussman would represent roughly a 66% decline. Other prominent investors and market watchers have issued bearish forecasts in 2018. –Investopedia
Hussman is blaming the Federal Reserve’s quantitative easing program for this major problem. “The current back-slapping about the success of extraordinary monetary policy is a lot like declaring victory in a football game at halftime, just before a flock of fire-breathing dragons swoops onto the field and eats the leading team.
…click on the above link to read the rest of the article…