Air pockets, free falls, and more cowbells

Hussman Funds/John Hussman/July 2023

“There is a particular “setup” that we’ve historically found to be associated with abrupt “air pockets” and ‘free falls’ in the S&P 500. It combines hostile conditions in all three features most central to our investment discipline: rich valuations, unfavorable market internals, and extreme overextension. The last time we observed this combination to a similar degree was in November 2021, shortly before the S&P 500 lost a quarter of its value. The S&P 500 remains lower than it was then. Despite enthusiasm about the market rebound since October, I remain convinced that this initial market loss will prove to be a small opening act in the collapse of the most extreme yield-seeking speculative bubble in U.S. history.”

USAGOLD note: Hussman tells in detail how the stock market is breaking down and why it should be taken seriously.