Extreme Stock Bubble To "End In Tears": Expert

John Hussman, an asset-bubble expert, forecasts the ongoing rally in US stocks will "end in tears," adding the S&P 500 risks a 64% collapse given extreme valuations and "unfavorable market internals," Zahra Tayeb reported for Business Insider.

Photo Insert: Stretched equity valuations and unfavorable "internals" could lead to a steep plunge in stocks necessary to restore market conditions back to normal.

The long-time equity bear who called the 2000 and 20008 crashes recently doubled down on his grim outlook for US stocks, warning of an astonishing 64% plunge in the S&P 500 index that'll burst what he called an "extreme yield-seeking speculative bubble."

The president of Hussman Investment Trust said stretched equity valuations and unfavorable "internals" could lead to a steep plunge in stocks necessary to restore market conditions back to normal.

The S&P 500 has rallied 19% so far this year, taking its gains since the end of 2008 – the year of the global financial crisis – to more than 400%.

The price-earnings ratio of the index, one of the valuation metrics tracked by investors, has climbed to about 26 from last year's lows near 19, according to data from macrotrends.net.

"There is a particular 'setup" that we've historically found to be associated with abrupt 'air pockets' and 'free falls' in the S&P 500. It combines hostile conditions in all three features most central to our investment disciple: rich valuations, unfavorable market internals, and extreme overextension."

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