Its Over

...Hussman is Ringing the Bell !

https://x.com/hussmanjp/status/1805234071708004408

You Can Ring My Bell

John P. Hussman, Ph.D.
President, Hussman Investment Trust
June 2024

Based on the present combination of extreme valuations, unfavorable and deteriorating market internals, and a rare preponderance of warning syndromes in weekly and now daily data, my impression is that the speculative market advance since 2009 ended last week. Barring a wholesale shift in the quality of market internals, which are quickly going the wrong way, any further highs from these levels are likely to be minimal. In contrast, current valuation extremes imply potential downside risk for the S&P 500 on the order of 50-70% over the completion of this cycle.

Emphatically, nothing in our investment discipline relies on a market peak, and every element of our discipline remains open to a change in market conditions that would encourage a more constructive outlook. We just don’t see those conditions at present.

As our long-term readers know, I try to avoid statements that sound like forecasts. Our investment discipline is not to forecast, but to identify – to align our outlook with prevailing, observable, measurable conditions. Given that the S&P 500 just set a record intra-day high of 5505.53 on Thursday of last week, suggesting that the bubble has peaked is extreme, even for me. Still, as I observed at the 2000 and 2007 peaks, we don’t know any other way to approach the market than to ask “What are the conditions now?” and “How have those conditions historically been resolved?” Then, as now, we had only one answer.

Taken as a whole – extreme valuations, divergent market internals, overextended market action, euphoric sentiment, tepid participation, deteriorating leadership, and other warning signs – the current set of market conditions provides no historical examples when stocks have followed with decent returns. Instead, the “nearest neighbors” are either major market peaks or extremes that preceded steep corrections.

The reason my language is so pointed is that, as Jeremy Grantham observed on the approach to the January 2022 peak, “Seriousness is flagged by the language that you use. I’ve always tried to make a big difference, but the difference is often wasted because people don’t remember what you sounded like when you were serious. The difference I’m trying to make is just the routine ‘the market is expensive,’ and the significant. The significant is three bubbles. This is serious.