It takes more than headline economic news to convince John Hussman that US economy is on the mending and there is no risk of double dip. The economics professor turned mutual fund manager looks several layers beneath the surface of any reported seemingly benign data and finds things unobvious to the media. This is what he did to the Philadelphia Fed Survey result that was released last week, as he said in his Weekly Market Comment for this week:
Recently, the stock market has rallied on the latest rounds of economic data released that seem to show that recovery is taking hold, but John Hussman considers the time we are in is just calmness before the storm:
In the Weekly Market Comment, among several other important subjects such as housing, Hussman elaborated his position on the inflation/deflation debate:
Hussman “updated” his reading on the market valuation and internals, which continues to call "tightly hedged" positions:
Although he still sounds very conservative, I read a glimpse of hope that he might be ready to loose up:
Read the complete Hussman Market Comment.
You can check out Hussman’s complete stock holdings and investment activities here: http://www.gurufocus.com/holdings.php?GuruName=John+Hussman
Last week, we got a fresh set of economic indications from the Philadelphia Fed Survey. While the market evidently took relief from the modest uptick in the composite index to -0.7, a quick look at the component indices suggests a worsening of economic conditions in the latest report. Specifically, the Philly Fed new orders component fell to -8.1 from -7.1, which is the third month in negative territory. While there was a slight uptick in the index for number of employees (to 1.8 from -2.7), the better leading measure is the average employee workweek, where the index weakened to -21.6 from -17.1.
Recently, the stock market has rallied on the latest rounds of economic data released that seem to show that recovery is taking hold, but John Hussman considers the time we are in is just calmness before the storm:
As I've emphasized in recent weeks, the U.S. economy is still in a normal "lag window" between deterioration in leading measures of economic activity and (probable) deterioration in coincident measures. Though the lags are sometimes variable, as we saw in 1974 and 2008, normal lags would suggest an abrupt softening in the September ISM report (due in the beginning of October), with new claims for unemployment softening beginning somewhere around mid-October. It's possible that the historically tight relationships that we've reviewed iin recent weeks will not hold in this particular instance, but we have no reasonable basis to expect that. Indeed, if we look at the drivers of economic growth outside of the now fading impact of government stimulus spending, we continue to observe little intrinsic activity.
In the Weekly Market Comment, among several other important subjects such as housing, Hussman elaborated his position on the inflation/deflation debate:
On the subject of inflation, I should emphasize that while I expect inflation pressures to be contained for several years, …
Hyperinflation is a much different story, and as I've said before, I am not in that camp. This doesn't exclude the possibility that enough policy mistakes will change that, but for now, my inflation outlook is flat for several years and then accelerating in the second half of this decade.
Hussman “updated” his reading on the market valuation and internals, which continues to call "tightly hedged" positions:
As of last week, the Market Climate for stocks remained characterized by unfavorable valuations, mixed market action, increasing bullish sentiment (approaching levels of overbullishness), and clear overbought conditions… Both the Strategic Growth Fund and the Strategic International Equity Fund are tightly hedged.
Although he still sounds very conservative, I read a glimpse of hope that he might be ready to loose up:
The next several weeks will be important. As noted above, however, if leading measures of economic activity improve and internals improve, we'll be willing to accept a moderately more constructive position, but even here, our latitude to do so is somewhat restricted by valuations that are historically rich.
Read the complete Hussman Market Comment.
You can check out Hussman’s complete stock holdings and investment activities here: http://www.gurufocus.com/holdings.php?GuruName=John+Hussman
