Permabear who called dot-com crash says he’s watching these market signals

John Hussman isn’t budging.

The famed permabear, who’s best known for calling the dot-com blowup, remains unmoved from his prediction of a major stock crash looming. He says there are a handful of warnings that suggest markets have reached a “speculative extreme” possibly even surpassing the years leading up to 1929 and 2000.

All in all, the signs point to an S&P 500 decline of as much as 75% in the coming years, Hussman wrote in a client note this week, a slightly more catastrophic view than his prior prediction that stocks could suffer a 70% drop.

It’s possible the benchmark index could weather a shallower 55% loss, assuming the profit margins large companies have earned over the past decade are permanent, he said.

“The current level of stock market valuations remains — easily — the most speculative extreme in U.S. financial history,” Hussman wrote.

Hussman is known for regularly speculating about apocalyptic drops in markets, enduring in his call even as stocks have posted double-digit annual gains in recent years. He pointed to a handful of signals that justifiy his downside risk estimate:

1. “Extreme” valuations

Stocks look extremely expensive from a historical standpoint. The ratio of nonfinancial market capitalization to gross value-added, which Hussman called his “most reliable gauge” of market valuation, is now at the highest level ever, surpassing its peak in the years leading up to the 1929 crash, he said.

“In prior market cycles, the gap between prevailing valuations and historical norms has generally been closed, which is part of the reason why our baseline risk estimate for the S&P 500 is a loss of about 75%,” he said, adding that the same indicator was what led him to project an 83% loss prior to the burst of the internet bubble.

When adjusting for average nonfinancial profit margins, the average 12-year annual nominal total return of the S&P 500 when valuations were at this level hovers around 0%, per Hussman’s analysis.

2. Corporate profits look fueled by deficits

Corporate earnings have been strong, but there are signs that profits are being fueled by large deficits in the government and US households.

Corporate free cash flow, one reflection of how profitable companies are, looks like a “mirror image” of the combined deficit between the US government, households, and foreign trading partners, he said, citing his firm’s analysis of data from the Bureau of Economic Analysis.

“When we consider the fact that nearly 90% of corporate equities are owned by the wealthiest 10% of households, and that the other 90% finance their shortfalls by issuing liabilities like consumer debt that’s accumulated directly or indirectly by the top 10%, we see very clearly that the wealth enjoyed by one group is the mirror image of the income shortfalls of others,” he said.

3. Margin debt is at extremes

More investors are borrowing money to invest, another sign of “speculative exuberance” in the market, Hussman said.

The ratio of margin debt to GDP is moving toward 4.5%, the highest level ever recorded.

Historically, sharp peaks in the ratio have been followed by sharp pullbacks in the market, as was the case leading up to the dot-com crash, the Great Financial Crisis, and the bear market in 2022, Hussman noted.

4. IPO frenzy

The hype for companies set to go public soon is another red flag, Hussman said. At currently estimated valuations, companies that are expected to IPO this year are worth around 12% of the US’s total GDP, he said.

Proceeds from IPOs already hit a record high in 2026, with newly public companies raising a combined $142.4 billion. That’s up 792% from levels last year, according to data from Renaissance Capital.

“History has always brought today’s sort of speculative exuberance to much more distressing conclusions,” Hussman said of the fate of the stock bubble.