What Triggered the Crash? - Hussman Funds

When the time comes to ask the question – “What triggered the crash?” – remember that this is the least important question. A market crash requires nothing more than a shift in investor psychology from careless speculation to even modest risk-aversion.  

With valuations at the most extreme level in history, the one thing that the market simply cannot tolerate is the eager attempt of a substantial number of investors to exit. 

When the walls come down, investors will scavenge the news for “catalysts.” Don’t fall into this trap. Undoubtedly, some “catalyst” will be found, but the mistake will be in believing that the collapse is caused by that piece of “bad” news. 

The important question to ask is “What drove the bubble?” That’s where the lessons are. 

The root causes of a crash are always the factors that nurtured and encouraged the “happy” period of carefree and irresponsible speculation that led to the bubble extreme.

John P. Hussman, Ph.D. President, Hussman Investment Trust

July 2021

https://www.hussmanfunds.com/comment/mc210715/

Hussman’s claim to fame includes forecasting the market collapses of 2000 and 2007-2008. 

Long-suffering market bears, like John Hussman

https://englundmacro.blogspot.com/2019/05/long-suffering-market-bears-like-john.html