Famed fund manager predicts S&P 500 could drop 70% as markets reach extreme FOMO levels

Legendary investor John Hussman warns of a potential stock market crash, citing extreme fear of missing out (FOMO) as the driving force behind the current rally. Despite record highs in the stock market, Hussman predicts a potential 50%-70% drop in stock prices this cycle.

Hussman, known for accurately predicting the 2000 and 2008 crashes, believes that the current market rally is unsustainable and fueled by investor impatience and FOMO. He points to overextended valuations, divergence among individual stock sectors, and lopsided sentiment as red flags signaling a potential correction.

In a recent note, Hussman stated, “There are certain features of valuation, investor psychology, and price behavior that tend to emerge when the fear of missing out becomes particularly extreme and the focus of speculation becomes particularly narrow.” He also highlighted that his firm’s most reliable indicator now exceeds 1929 extremes, indicating a potential market downturn.

While most Wall Street strategists remain optimistic about the stock market’s performance, Hussman’s bearish forecast serves as a stark warning for investors. Despite the market’s continued upward trajectory, he maintains his view that stocks could experience a significant decline in the near future.

As investors navigate the uncertainty in the market, Hussman’s cautionary outlook serves as a reminder to remain vigilant and consider the potential risks associated with the current market environment.