The S&P 500 index climbed to a record high Tuesday, but star mutual fund manager John Hussman
, president of Hussman Investment Trust, isn't impressed.
"Equity valuations — on the most historically reliable measures we identify — are now fully 117 percent above their pre-bubble norms, on average," he writes in a market commentary.
The S&P 500 carried a trailing price-earnings ratio of 20.44 Friday, up from 17.60 a year ago, according to Birinyi Associates.
"As of Friday, our estimate of prospective 10-year S&P 500 annual nominal total returns has declined to just 1.4 percent, suggesting that even the dismal 2 percent yield-to-maturity on 10-year bonds is likely to outperform equities in the decade ahead," Hussman says.
"The upshot is that equities are likely to produce total returns close to zero over the coming decade."
So what does that mean for you and me?
"Suffice it to say that current equity markets are no place for long-term investors, and that even a resumption of risk-seeking investor preferences would demand a considerable safety net," Hussman maintains.
Tom Lee, founder of market research firm Fundstrat, is a good deal more optimistic, at least for the short term. Stocks' ability to climb in the face of hedge fund selling points to their strength, he says.
"We're seeing a movement — a rise in markets while a large contingent is taking themselves out of the market," Lee tells CNBC
"Obviously someone else is coming in. The ones coming in are saying, hey, interest rates are back to normal levels, crude is acting like it's not in a continuous decline. Spectacular rally in high-yield. That's bullish."
The 10-year Treasury yield has soared to 2.14 percent from a 20-month low of 1.65 percent just two weeks ago. And oil prices have jumped 24 percent from 5 ½-year lows over the past three weeks.
"It's bullish in the sense that markets are capable of rising while a very large player in the marketplace is de-risking, and that is going to provide fuel later, as they re-risk and add buying power to the rally," Lee notes.
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