The latest reported job data, although less bad than expected, only convinced John Hussman that the employment picture in the past three months has been the worst job creation shortfalls on record:
But the gloom job picture is not what worry Hussman the most. He is more concerned with the cheering of the data on wall street:
Hussman is very conservative with regard to the short term perspective of the stock market, and he has fully hedged Both the Strategic Growth Fund and the Strategic International Equity Fund:
Read the complete Hussman Market Comment for this week.
Based on typical impulse response, very robust job growth would normally have been expected following the massive job losses of 2008 and 2009. From this perspective, the past three employment reports have not simply been bad - they have been among the worst job creation shortfalls on record. While not every shortfall results in a fresh wave of propagating job losses, we are observing this shortfall in the context of leading economic indicators that have already turned down clearly.
But the gloom job picture is not what worry Hussman the most. He is more concerned with the cheering of the data on wall street:
Yet even the near-term risks to employment and the economy are not the greatest risks that investors face. Rather, the most serious risk for investors here is the persistent and misguided eagerness of Wall Street to value long-term assets based on short-term earnings results. Investors have priced the S&P 500 in a manner that is far too dependent on the achievement and maintenance of profit margins about 50% above historical norms. This is a mistake. Profit margins normalize over time, and on the basis of normalized earnings, the S&P 500 is about 40% above robust historical valuation norms (and even further above valuation levels that have represented "generational" buying opportunities such as 1974 and 1982, when well-covered corporate dividend yields averaged about 6.7%, versus the current 2%).
Hussman is very conservative with regard to the short term perspective of the stock market, and he has fully hedged Both the Strategic Growth Fund and the Strategic International Equity Fund:
As of last week, the Market Climate for stocks remained characterized by unfavorable valuations, mixed market action, and unfavorable economic pressures. The stock market is clearly overbought on a short-term basis.
Read the complete Hussman Market Comment for this week.
