From my perspective, we are again at the point where we should be alert for tanks. We already know that stocks are priced to deliver a 10-year total return in the area of 6.1% annually - among the lowest levels observed in history except for the period since the late-1990's (which despite periodic advances has ultimately not worked out well for investors). We are already observing evidence of weak sponsorship from a volume perspective and growing non-confirmations of recent highs from the standpoint of market internals. The cumulative tally of surprises in economic reports (a metric we credit to Bridgewater, which Bill Hester adapted here), has also turned down decidedly. Though the historical correlation is not always as strong as it has been during the recent downturn, shifts in economic surprises have tended to lead market turns in recent years.
Still, with market internals mixed but not clearly collapsing, prices strenuously overbought but still achieving marginal new highs, and valuations unfavorable but not as extreme as they were in 2000 or 2007, investors may be convinced that there is still a little bit of punch in the bowl. We can't argue with that too strongly, and have been trading in (on market weakness) and out (on market strength) of a modest positive market exposure in recent weeks (to diversify our position and allow for two very different potential states of the world). We're just keeping our risk very close to the vest.
In short, we have to allow for the potential for further speculation, and we can't ignore the day-to-day charts showing several market indices near 52-week highs. But we are also at the point where we can look right over the top of the monitor, and see the tanks a-coming.
Click here to read the complete Hussman Weekly Market Commentary.
Still, with market internals mixed but not clearly collapsing, prices strenuously overbought but still achieving marginal new highs, and valuations unfavorable but not as extreme as they were in 2000 or 2007, investors may be convinced that there is still a little bit of punch in the bowl. We can't argue with that too strongly, and have been trading in (on market weakness) and out (on market strength) of a modest positive market exposure in recent weeks (to diversify our position and allow for two very different potential states of the world). We're just keeping our risk very close to the vest.
In short, we have to allow for the potential for further speculation, and we can't ignore the day-to-day charts showing several market indices near 52-week highs. But we are also at the point where we can look right over the top of the monitor, and see the tanks a-coming.
Click here to read the complete Hussman Weekly Market Commentary.
