A fresh stock-market crisis will emerge from the ‘breathtaking disconnect between Main Street and Wall Street,’ fund manager warns

Long-suffering stock market bears have to be eating up Thursday’s nasty action, with the Fed’s grim economic outlook and troubling coronavirus headlines sending the Dow down more than 1,800 points on its way to one of its worst showings in a long time.

Leading up to the steep drop, John Hussman of Hussman Investment Trust, who hasn’t shied away from addressing his misfires in recent years, once again offered up his gloomy take on the market’s prospects in his latest note to clients.

“In the face of a breathtaking disconnect between Main Street and Wall Street, largely based on overconfidence in free money, my sense is that there remains a crisis ahead that will emerge ‘gradually, then suddenly,’” he wrote, referring to Ernest Hemingway’s famous quote from “The Sun Also Rises” about going bankrupt, “gradually, then suddenly.”

Hussman singled out six widely held stocks, in particular, he believes are vulnerable when the mood turns to risk-off: Facebook, Apple, Amazon, Netflix, Google and Microsoft.

mw-ii403_mc2006_20200611115302_ns-4210394

Hussman used that chart to show how the two-year revenue growth of some of those massive companies has “slowed remarkably” compared with the “spectacularly high” rates of prior years.

“All of these companies are headed toward growth rates that are likely to converge toward single-digit rates similar to the growth rate of the overall economy,” Hussman predicted. “That’s not how investors are pricing these large-cap glamour stocks.”

This is reminiscent of the “Nifty Fifty” stock boom of the 1970’s and the high-flyers of the tech bubble in 2000, he explained, adding that every indication is that the same process of unwinding is underway today which could have sweeping implications for the health of the market.

“The wide dispersion between richly-valued, mega-cap components of the S&P 500 and the broader market is likely to create an enormous headwind for passive index investors over the coming decade, but will simultaneously create enormous opportunities for investors with the flexibility to pursue broad, value-conscious stock selection,” Hussman said.

In Thursday’s selloff, with the S&P 500 closing off almost 6%, all the “glamour” names were in the red, led by Microsoft’s 5.4% drop. 

June 11, 2020 at 9:22 p.m. ET By Shawn Langlois – MarketWatch

Related Post

EDUCATION BEFORE INVESTING

Learn How A Precious Metals IRA Can Secure Your Retirement

The precious metals market may seem intimidating, but it’s not as it seems. Our team has compiled a summary of our tips and information into a free guide so you can learn how to begin securing your future.

TALK TO AN IRA ACCOUNT MANAGER

We Will Guide You Every Step Of The Way

Schedule a Call
Learn Why Everyone Should Own Real Gold & SilverRequest Your Free Step-By-Step Investment Guide

"*" indicates required fields

Name*
I'm interested in (please select all that apply):
Hidden
This field is for validation purposes and should be left unchanged.

Inside this Free Investment Guide

  • How a Gold IRA Gives You Full Control.
  • How You Can Grow Your Retirement.
  • How to Open a Gold IRA Tax & Penalty Free.

Disclaimer

By clicking the button above, you agree to our Privacy Policy and Terms of Service and authorize Oxford Gold or someone acting on its behalf to contact you by text message, ringless voicemail, or on a recorded line at any telephone or mobile number you provide using automated telephone technology, including auto-dialers, for marketing purposes. No purchase required. Message and data rates may apply. You also agree to receive e-mail marketing from Oxford Gold, our affiliated companies, and third-party advertisers. To opt-out at any time click here or reply STOP to opt-out of text messages.