Tags: Hussman | Market | Losses

Hussman: Major Market Losses Coming

Tuesday, 17 April 2012 07:49 AM

Economist and fund manager John Hussman says his estimate of potential market losses over a six-month window is now in the worst 0.5 percent of historical observations.

In February, Hussman estimated potential market losses over an 18-month window in the worst 1.5 percent of historical observations.

"More recently, we've observed a marked deterioration in our measures of market internals," Hussman writes in a note to investors. "We're seeing a very broad-based downward shift in market action across nearly every industry group."

Editor's Note: Obama’s Economic ‘Fix’ is In . . .

"While the depth of the breakdown is still fairly shallow, the uniformity of the signal suggests significant information content."

This isn't an appeal for investors to sell, or even reduce their investment exposure, says Hussman, but irather an appeal for investors to carefully examine their exposure to market risk, and to consider their willingness to adhere to their existing investment discipline through a steep and potentially extended market decline.

“I have no desire to persuade investors to abandon their discipline or make major changes to their portfolio allocations if they have considered the potential risks carefully,” Hussman says. “That consideration should include a careful examination of the declines that stocks have experienced on several occasions since 2000.”

Other experts are also warning about economic trouble on the horizon.

Investor A. Gary Shilling said the disappointing March jobs report is just the beginning of a decline in U.S. consumer spending that will tip the country back into recession, clobbering stocks and reviving the bond market.

He sees not a short-term correction but a huge 43 percent decline for the S&P 500, and he predicts that 30-year bond yields will fall to 2.5 percent, while the 10-year Treasury could hit 1.5 percent.

“You’ve got the foreign earnings that don't look good because of recession unfolding in Europe, a stronger dollar, so they are translation losses. A hard landing in China. In the U.S., we could see a moderate recession led by consumer retrenchment,” Shilling told Bloomberg Television in an interview.

Editor's Note: Obama’s Economic ‘Fix’ is In . . .

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Tuesday, 17 April 2012 07:49 AM
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