In his latest note, John Hussman presents 12 things he believes about the market:
- Investors always underestimate the risk of a major stock market plunge.
- Agreement among “experts” is not your friend.
- Downside risk is elevated when complacency is high.
- The only reason we avoided a second Great Depression was the change in mark-to-market accounting rules — NOT the bailouts.
- The US economy IS recovering, but very vulnerable to even modest shocks.
- The US fiscal position is far worse than the numbers suggest.
- ” A long period of generally rising interest rates will not negate the ability of flexible investment strategies to achieve returns, provided that the increase in rates is not diagonal, and the strategy has the ability to vary its exposure to interest rate risk. “
- Stocks are poor inflation hedge.
- It will be harder to inflate our way out of debt than people realise.
- It will be harder to grow our way out of debt than people realise.
- The S&P is priced to gain 3.6% annually over the next decade.
- “The specific features of a given economic cycle don’t change the mathematics of long-term returns – they simply affect the level of valuation that investors demand or are willing to temporarily tolerate”
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