Prominent market expert, John Hussman, renowned for his accurate predictions of previous market crashes, is warning of an impending bear market. Having successfully called out the dot-com crash and the Global Financial Crisis, Hussman believes that current conditions are aligning for another significant market downturn.
Valuations & Investor Sentiment Raise Concerns
Hussman relies on two critical indicators to gauge stock market direction: valuations and investor sentiment and both factors are currently alarming, according to his analysis. Using his preferred valuation measure, which compares the market cap of nonfinancial stocks to gross value added, Hussman asserts that the market is even more overvalued than during the dot-com bubble and the 2008 financial crisis.
Investor sentiment also worries the 60-year-old economist, as he points to the poor market breadth and a cautious approach adopted by traders due to prevailing uncertainties. Unresolved debt-ceiling negotiations and the Federal Reserve’s uncertain rate policy contribute to the cautious sentiment. With ongoing “no deal” negotiations and the potential for the United States to default, market participants are exercising caution and waiting for further clarity before making significant moves.
Similar Implications For The Crypto Market?
Hussman’s bearish outlook for the stock market might extend to the broader crypto market as well. As reported earlier on CoinGape, this sentiment aligns with JPMorgan Global Head of Equity Macro Research, Dubravko Lakos-Bujas, who shares a similar perspective. A significant collapse in the US stock market could have a ripple effect on cryptocurrencies, potentially causing Bitcoin to break its support level of $25,000 and experience a new monthly low. Some experts have even gone forward with the prediction of Bitcoin plummeting to $20,000 or lower.
Further adding to the concern, Bloomberg’s macro strategist, Mike McGlone, also anticipates a Bitcoin crash coinciding with a stock market downturn. He foresees a severe correction in most altcoins, with Bitcoin’s price potentially reaching a new bear market bottom. While speaking about the possible price dump on a crypto podcast, McGlone was quoted as saying:
My base case [for the S&P 500 index] is going to 3,000, Bitcoin’s going to go down, I don’t know how far. It might make a new low. Cryptos will go down really hard.
Even Elon Musk, a well-known advocate for cryptocurrencies and Dogecoin, recently issued a stark warning, advising against buying crypto in the current uncertain climate. Additionally, prominent crypto analyst, Michael van de Poppe, highlights the excessively bearish sentiment among retail investors towards Bitcoin and altcoins, which he deems “insane.” He suggests that many investors remain stuck in the mindset of 2022, which witnessed one of crypto’s biggest upsets, the fall of the FTX empire.
People are stuck in the 2022 mindset.
— Michaël van de Poppe (@CryptoMichNL) May 27, 2023
Market expert John Hussman’s predictions and the echoed concerns from other influential figures indeed paint a gloomy picture for both the US equities and the crypto market. If true, the potential bear market rally, along with prevailing uncertainties and cautious sentiment, could heighten the risk of a significant market downturn, affecting various financial instruments, including the mighty Bitcoin.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.