Market Direction and Stock Trends

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~~~ Being Wrong in an Interesting Way ~~~
By John P. Hussman, Ph.D. | May 22, 2017

The lesson to be learned was not that QE or zero interest rates are omnipotent in supporting stock prices. The lesson was not that valuations are irrelevant, or that “this time is different” in ways that investors cannot comprehend. The lesson was not that low interest rates make stocks “cheap” at any price. Rather, the lesson was that in the presence of zero interest rates, yield-seeking speculation can persist even in the face of obscene valuations and recklessly overextended conditions. So while one can become neutral, one has to defer a hard-negative market outlook until the uniformity of market internals explicitly deteriorates (signaling a shift toward increasing risk-aversion among investors). . .

https://hussmanfunds.com/wmc/wmc170522.htm

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