Money and Finance
- Hussman Weekly Market Comment: Hovering With An Anvil
In July 2011, just before the market lost nearly 20% (but also the last time it corrected materially), I observed “Like Wile E. Coyote holding an anvil just past the edge of a cliff, here we are, looking down below as if there is much question about...
- Hussman Weekly Market Comment: Roach Motel Monetary Policy
Strong leading indicators such as the CFNAI and the Philly Fed Index have been weak for many months, and the deterioration in new orders has moved from a slowing of growth to outright contraction in recent months. In the order of events, a slowing in...
- Hussman Weekly Market Comment: Distinction Without A Difference
The difficulty today is not only that valuations are rich, but that on our metrics, present market conditions cluster among those that have produced strikingly negative market outcomes on a blended horizon from 2-weeks to 18-months. Wall Street’s beloved...
- Hussman Weekly Market Comment: Run Of The Mill
My Views in a Nutshell: We remain strongly defensive here, which will ideally be resolved by a sharp improvement in valuations followed by early improvement in market action, but we'll respond to shifts in the evidence however conditions change. I...
- Hussman Weekly Market Comment: Unusual Drawdown Risk
Of course, our present concerns are based on a smaller and more negative subset of conditions that we've seen even less frequently - presently featuring not just "overvalued" and "overbought" conditions, but adding overbullish sentiment, modest but...
Money and Finance
Hussman Weekly Market Comment: Dancing at the Edge of a Cliff
Present market risks involve a confluence of factors. First, valuations remain unusually rich. Though prospective returns are better than at the 2000 and 2007 peaks, valuations remain more elevated than at any point prior to the late-1990's bubble, save for the period before the 1929 plunge. Notably, valuations only seem "reasonable" on the basis of "forward operating earnings" if one ignores the fact that profit margins are 50-70% above historical norms, and are dependent on unsustainably large fiscal deficits and depressed household saving in order for that to continue (see Too Little to Lock In).
Second, market internals have deteriorated, with an uncomfortably familiar "two-tier" profile developing between a handful of speculative momentum stocks and the broader market. Coupled with an active new issues calendar, near-panic levels of selling by corporate insiders, heavy beta exposure among mutual funds and institutional managers, record-low mutual fund cash levels, and advisory bearishness at just 20.5% (a level last seen before the steep 2011 decline), there appears to be a lopsided exposure to risk among speculators, and a divestment among issuers.
Third, as I've frequently noted, the best way to extract meaningful signals and reduce noise in volatile data is to draw those signals from the jointbehavior of several indicators. While these methods range from the simple to the complex, we've frequently presented variously defined sets of indicators (see An Angry Army of Aunt Minnies) that capture some particular investment environment (such as an overvalued, overbought, overbullish market where favorable drivers have begun to drop away). In recent weeks, we've seen several of these hostile syndromes emerge, as I've detailed in prior weekly comments.
Finally, though our overall assessment of market return/risk prospects is largely independent of our macroeconomic concerns, the joint deterioration in the growth of real personal income, real personal consumption, real final sales, and employment, coupled with our inference of leading economic pressures from "unobserved components" methods, creates not only the concern but the expectation that the U.S. economy is entering a recession - not a quarter or two from today, but most likely at present. Indeed, Europe already appears to be in a broadening recession, which the U.K. has now joined, and the confluence of economic weakness and already strained government debt conditions in Europe is likely to produce disruptive outcomes in the coming quarters.
- Hussman Weekly Market Comment: Hovering With An Anvil
In July 2011, just before the market lost nearly 20% (but also the last time it corrected materially), I observed “Like Wile E. Coyote holding an anvil just past the edge of a cliff, here we are, looking down below as if there is much question about...
- Hussman Weekly Market Comment: Roach Motel Monetary Policy
Strong leading indicators such as the CFNAI and the Philly Fed Index have been weak for many months, and the deterioration in new orders has moved from a slowing of growth to outright contraction in recent months. In the order of events, a slowing in...
- Hussman Weekly Market Comment: Distinction Without A Difference
The difficulty today is not only that valuations are rich, but that on our metrics, present market conditions cluster among those that have produced strikingly negative market outcomes on a blended horizon from 2-weeks to 18-months. Wall Street’s beloved...
- Hussman Weekly Market Comment: Run Of The Mill
My Views in a Nutshell: We remain strongly defensive here, which will ideally be resolved by a sharp improvement in valuations followed by early improvement in market action, but we'll respond to shifts in the evidence however conditions change. I...
- Hussman Weekly Market Comment: Unusual Drawdown Risk
Of course, our present concerns are based on a smaller and more negative subset of conditions that we've seen even less frequently - presently featuring not just "overvalued" and "overbought" conditions, but adding overbullish sentiment, modest but...