In this week’s market commentary, Investment Guru Hussman presented two lessons from the lost decade of the last ten years.
Modeling with multiple methods, Hussman predicts some not so exciting expected returns in the next 10 year:
Hussman has made his two equity funds “well-hedge”.
Read the full text of this week’s Hussman Market Commentary.
Check out what kind long position John Hussman maintains despite his bearish view by clicking on his name.
Also check out:
The first is that valuations matter. Though valuations often have little impact on short-term returns over periods of less than a few years, they are undoubtedly the single best predictor of long-term market returns. Moreover, high valuations are ultimately followed by far deeper periodic losses than emerge from low valuations. Put simply, greater risk does not imply greater reward if the risks that investors take are overvalued and inefficient ones.
The second lesson is that the effects of wasteful misallocation of capital cannot be fixed by policies that encourage the wasteful misallocation of capital. Fortunately or unfortunately, policies can often help to prop up unsustainable patterns of activity in order to "kick the can down the road." This can postpone major economic adjustments, but often makes the ultimate adjustment even worse.
Modeling with multiple methods, Hussman predicts some not so exciting expected returns in the next 10 year:
Based on our standard methodology (see The Likely Range of Market Returns in the Coming Decade for the basic approach) we estimate that the S&P 500 is priced to achieve a 10-year total return of just 5.05% annually. Using our forward operating earnings methodology (see Valuing the S&P 500 Using Forward Operating Earnings), the projected 10-year total return is just 4.69% annually. With the S&P 500 dividend yield at 1.96%, the 10-year projection from dividend-based models is even lower, at about 2.30% annually (though prospects are good that faster growth of index-level dividends will bring that estimate closer to earnings-based projections, see No Margin of Safety, No Room for Error).
Hussman has made his two equity funds “well-hedge”.
Read the full text of this week’s Hussman Market Commentary.
Check out what kind long position John Hussman maintains despite his bearish view by clicking on his name.
Also check out:
