Tags: Hussman | Market | Recovery | Years

Hussman: Market Recovery Will Take 8 Years After Next Tumble

Friday, 30 Apr 2010 08:45 AM

Investors should prepare for the market rally to end, says John Hussman of Hussman Funds.

Hussman even says the end of the rally should have been predicted.

A correction is looming in the near term because investors have only gained 2.4 percent from the S&P from the two large periods of extreme loss during the past 12 years, he said.

“Investors now rely on a sustained economic recovery and the absence of any additional credit strains — and even then would be likely to achieve only tepid long-term returns from these levels,” Hussman said,
according to the Business Insider.

During the next few years, returns will be low. Investors should expect another six to eight years before the market recovers, he said.

Fundamentals are causing the low return of the S&P, Hussman said.

“This outcome is not dependent on whether or not we observe a second set of credit strains, but is instead baked into the cake as a predictable result of prevailing valuations," he says.

"The risk of further credit strains simply adds an additional layer of concern here. Investors have chased risky securities over the past year to the point where the risk premium for default risk has eroded to the levels we saw at the peak of the credit bubble in 2007. My sense is that this is a mistake that will be painfully corrected,” he said.

Other experts said recent economic reports demonstrate that consumer confidence is rebounding, Bloomberg reported.

“Consumers are gradually finding their way back to the stores. The talk about the ‘new consumer’ turns out to be a lot of rubbish. We’re seeing vestiges of the ‘old consumer,’” said Ken Mayland, president of ClearView Economics LLC, who forecast a 1.5 percent rise in sales.

Consumers are showing a willingness to spend again, the New York Times reports.

Consumer spending is “growing more than we originally anticipated. This is a fact that cannot be ignored,” Dan Greenhaus, chief economic strategist for Miller Tabak, an investment firm, wrote in a research note.

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Investors should prepare for the market rally to end, says John Hussman of Hussman Funds. Hussman even says the end of the rally should have been predicted. A correction is looming in the near term because investors have only gained 2.4 percent from the S P from the two...
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