Tags: Hussman | stock | market | overvalued

Hussman: Stock Market Historically 'Overvalued, Overbought, Overbullish'

By    |   Wednesday, 11 March 2015 06:40 AM

Please don't accuse star mutual fund manager John Hussman, president of Hussman Investment Trust, of being a stock market bull.

"We continue to observe one of the most overvalued, overbought, overbullish syndromes in the historical record, combined — and this feature is central — with deterioration in market internals suggestive of a shift toward risk-averse preferences among investors," he writes in his weekly market commentary.

"The resulting combination places current conditions among instances that we identify as a 'Who's Who of Awful times to Invest.' . . . We continue to view the stock market as vulnerable to significant downside risk both in the near-term and over the completion of the present market cycle."

Stocks have soared over the past six years, with the S&P 500 index tripling since 2009.

However, "We cannot rule out the possibility of market advances counter to the hostile market return/risk profile we presently identify, as even the most hostile profile we identify has included instances of advancing prices," Hussman noted.

"Stock prices today (six years after 2009) have advanced well beyond normal valuations, all the way to steep overvaluation."

Stock guru Jeremy Siegel, professor of finance at the University of Pennsylvania, doesn't share Hussman's bearishness, but he is wary of a correction. That's what could be in store if the Federal Reserve raises interest rates in June, as many experts expect, he told CNBC.

"It's the first time I've been cautious in a while."

To be sure, Siegel doesn't think the Fed should move in June, given "poor" economic growth and miniscule inflation.

Fourth-quarter GDP growth was revised down to 2.2 percent last month from 2.6 percent previously. The economy expanded 5 percent in the third quarter. Consumer prices slipped 0.1 percent in the 12 months through January, the first 12-month decline since October 2009.

"If we're going to get a June rise, there are going to be some ripples in the stock market before this is over," he said. "I certainly would not be surprised to see a correction in the next three months that brings the market, down maybe 5 percent to 10 percent."

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Please don't accuse star mutual fund manager John Hussman, president of Hussman Investment Trust, of being a stock market bull.
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Wednesday, 11 March 2015 06:40 AM
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