But that doesn’t mean they’re ready to act on that information.
For evidence of that, consider that the 9-1/2-year bull market is now the longest on record— a milestone that’s come amid a string of new record highs for stocks. In many cases, investors have been willing to ignore the flashing warning signs in favor of continued strong returns.
And as that’s happened, valuation metrics have climbed into even more rarefied air, endlessly frustrating market traditionalists who see a disaster brewing.
John Hussman— a former economics professor who’s now the president of the Hussman Investment Trust — falls firmly into that camp.
He’s stood by and watched as a seemingly endless supply of buying power has pushed valuations to eye-popping levels that exceed the fervor seen around the 2000 dotcom peak, as well as the Great Recession of 1929.
The chart below shows five valuation metrics monitored by Hussman that bear this out. In his mind, these measures — which are listed in the chart’s legend — have been highly correlated with future S&P 500 returns throughout history.
“Last week, the stock market recorded the most offensive valuation extreme in history,” Hussman wrote in a blog post from September 4. “I am aware of no plausible conditions under which current extremes are likely to work out well for investors.”
A recent shift that’s changed the game
If you’ve followed Hussman’s work at all in recent months, you likely know he’s been making such bearish proclamations for quite some time.
It’s been a trying time for him as he waits for the market reckoning he’s predicted to occur. Over that period, Hussman’s become quite self-aware, referring