By Elizabeth MacDonald
In considering this aging bull market, some sobering facts from John P. Hussman, Ph.D., of the Hussman Funds: “Recall that the 2000-2002 [market] collapse wiped out the entire total return of the S&P 500 in excess of Treasury bill returns, all the way back to May 1996.”
Hussman adds: “The 2007-2009 collapse wiped out the entire total return of the S&P 500 in excess of Treasury bill returns, all the way back to June 1995. If the S&P 500 was to experience nothing but a run-of-the-mill 34% bear market decline over the coming three years, it will have underperformed Treasury bills for what would at that point be an 18-year period since 1999.”
Stock markets correct every three years or so in the double digits. This bull market is in its sixth year. The S&P 500 is up 202%, and the Dow has risen 171% since March 2009; the Federal Reserve’s zero bound rate policies, launched in December 2008, would have entered the first grade by now.
Markets now are no more long term than the Federal Reserve’s policy decisions, the markets have been in a through-the-looking-glass period when Wall Street has been obsessed about central bankers’ forward thinking on rates, and not CEOs’ forward thinking on earnings.
“I still believe that the attempt by central bankers to prevent the private sector from deleveraging via a non-stop parade of asset price bubbles will end in tears,” says Hussman.
