A market forecaster has been buzzing about a generational buying opportunity in stocks. One long-time market bear disagrees.

• Wall Street veteran Richard Bernstein sees a generational buying opportunity in US stocks.
• Longtime strategist John Hussman dismissed the idea, pointing to historical S&P 500 returns.
• Hussman has previously warned the benchmark index could plunge by 60% to about 1,600 points.

A Wall Street veteran recently hailed a generational buying opportunity for US stock investors – but John Hussman, a longtime strategist and financial historian known for his pessimistic predictions, disagrees.

Richard Bernstein, the CEO and chief investor of Richard Bernstein Advisors, suggested in a note last week that there's a "once-in-a-generation investment opportunity in virtually anything other than those 7 stocks." He was referring to the "Magnificent Seven" – Amazon, Alphabet, Apple, Microsoft, Tesla, Meta, and Nvidia.

The former chief investment strategist at Merrill Lynch pointed to the US economy's resilient growth despite the pressures of inflation and higher interest rates, and said he doesn't expect a downturn or recession.

While a handful of mega-cap technology stocks such as Tesla and Nvidia are trading at heady levels in his view, Bernstein expects the wider stock market to climb as valuations are fairer, there's an economic tailwind, and he believes corporate profits are accelerating and will surge next year.

Hussman, the head of Hussman Investment Trust, disagreed firmly when an X user asked for his reaction to Bernstein's call.

"Here's a century of data that might help to identify a generational opportunity," he posted on X Sunday. "It's not on the buy side."

"'Show your work' doesn't just apply to math tests," he added.

Hussman attached a chart comparing estimated and actual 12-year total returns from the S&P 500 in excess of Treasury bonds between 1928 and 2023. He singled out the latest datapoint, November 3, and his estimate that the index will underperform Treasuries by 7.4% over the next 12 years.

Hussman offered more context for his grim forecast in his latest research note. He included a chart showing his preferred valuation metric, the ratio of the market capitalization of all non-financial stocks and the gross value added from those stocks. The measure of stock-market value to productivity has a strong negative correlation with S&P 500 returns over time, and it's currently so high that it suggests the index will underperform in the years ahead.

"Current market valuations, even after the retreat since the beginning of 2022, rival the 1929 and 2000 bubble peaks," he wrote, adding that they "stand at one of the three great bubble extremes in US history."

"The problem is that the expansion in multiples was so extreme in the advancing phase of this bubble that likely 10-12 year S&P 500 total returns, by our estimates, are now negative," he added.

Hussman also flagged "poor market internals" in his latest research note, his firm's proprietary measure of investor sentiment that's historically correlated to abrupt sell-offs.

While Bernstein expects a strong economy to boost stocks, Hussman noted that underlying GDP growth, which takes into account growth in the labor force and productivity, has slowed from over 4% a year to below 2% today.

The pair seem to disagree on the outlook for equities over the next 12 years at least, given Bernstein sees a generational buying opportunity, whereas Hussman views stocks as extremely overvalued and anticipates a decade of stock-market underperformance.

However, they're far more aligned on the overvaluation of Big Tech stocks today. Hussman pointed out in recent note that the profit margins of the largest US stocks are no higher relative to the median stock than they've been in the past, and biggest mega-cap companies are growing more slowly as they've become more dominant. Similarly, Bernstein underscored in his recent note that his bullish market outlook excluded the Magnificent Seven.

Hussman didn't immediately respond to a request for comment from Insider.

For the uninitiated, Hussman has repeatedly made headlines by predicting a stock-market decline exceeding 60% and forecasting a full decade of negative equity returns. And as the stock market continued to grind mostly higher, he has persisted with his doomsday calls.

However, it's worth noting that he correctly predicted the tech-heavy Nasdaq 100 would plummet by over 80% once the dot-com bubble burst in the early 2000s, and accurately forecasted that the S&P 500 would see negative total returns over the next decade. Moreover, he warned in April 2007 that the S&P 500 could tank by 40%, and the benchmark stock index fell as much as 55% between 2007 and 2009.