Fra Hussmans ugentlige nyhedsbrev:
It’s certainly possible that credit spreads will narrow and market internals will improve. In that case, it won’t make the market any cheaper, but my impression is that it wouldmitigate the immediacy of our concerns. Longer-term, we would still anticipate dismal returns on a 7-10 year horizon, but an improvement in credit spreads and market internals would essentially be a signal that investors had shifted back to a more risk-seeking psychology at least for a bit.
In short, our views will shift as the evidence shifts, but here and now, the market has re-established overvalued, overbought, overbullish conditions that mirror some of the most precarious points in the historical record such as 1929, 1937, 1974, 1987, 2000 and 2007. That syndrome is now coupled with continued evidence of a subtle shift toward more risk-averse investor psychology, primarily reflected by internal dispersion and widening credit spreads. I’ve often emphasized that the worst market outcomes have historically been associated with compressed risk premiums coupled with a shift toward risk aversion among investors. In those environments, risk premiums typically don’t normalize gradually – they do so in abrupt spikes. We’ll continue to respond as the evidence changes, but under current conditions, we view the investment environment for stocks as being among a handful of the most hostile points in history
