Every week John Hussman speculates on why the market shouldn’t but does keep rising.
(It shouldn’t because the price-to-normalization ratio is at extremes not seen since 2007 and 1929. It does because investors are stupid.)
He says this is the kind of market that investors who take valuations seriously find excruciating:
As of last week, the Market Climate in stocks remained characterised by an overvalued, overbought, overbullish, rising-yields syndrome that has historically produced periods of marginal new highs, slight declines, and yet further marginal highs, followed somewhat unpredictably by nearly vertical drops. I’ve often accompanied the description of this syndrome with the word “excruciating,” because the apparent resiliency of the market and the celebration of each fresh high, can make it difficult to maintain a defensive stance. Interestingly, the analysts at Nautilus Capital recently noted that the most closely correlated periods in market history to this one were the advances of 1929 and 2007. While exact replication of those advances would allow for a couple more weeks of further strength, we’ve generally found it dangerous to expect history to do more than rhyme. These hostile syndromes have a tendency to erase weeks of upside progress in a few days.
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