Tags: Hussman | Stock | Rally | last

John Hussman: Stock Rally Isn't Real, Won't Last

Monday, 17 Oct 2011 08:28 AM

Economist and fund manager John Hussman says the recent market rally won't last.

"From my perspective, Wall Street's 'relief' about the economy, and its willingness to set aside recession concerns, is a mistake born of confusion between leading indicators and lagging ones," Hussman writes in a note to investors.

"Leading evidence is not only clear, but on a statistical basis is essentially certain that the U.S. economy, and indeed, the global economy, faces an oncoming recession."
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Likewise, says Hussman, lagging evidence is largely clear that the economy was not yet in a recession as of, say, August or September, leading investors is to treat lagging indicators as if they are leading ones.

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(Getty Images photo)
"The simple fact is that the measures that we use to identify recession risk tend to operate with a lead of a few months," Hussman says.

"Those few months are often critical, in the sense that the markets can often suffer deep and abrupt losses before coincident and lagging evidence demonstrates actual economic weakness."

As a result, Hussman notes, there is sometimes a “denial” phase between the point where the leading evidence locks onto a recession track, and the point where the coincident evidence confirms it.

“We saw exactly that sort of pattern prior to the last recession. While the recession evidence was in by November 2007,” he says.

Bloomberg reports that the index of U.S. leading economic indicators increased more than forecast in August, easing concern the economy is headed for recession.



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Economist and fund manager John Hussman says the recent market rally won't last. From my perspective, Wall Street's 'relief' about the economy, and its willingness to set aside recession concerns, is a mistake born of confusion between leading indicators and lagging ones,...
Hussman,Stock,Rally,last
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2011-28-17
Monday, 17 Oct 2011 08:28 AM
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