John Hussman: Тhis is the most overvalued stock market on record

This is the most dangerous and overvalued stock market on record — worse than 2007, worse than 2000, even worse than 1929.

Or so warns Wall Street soothsayer John Hussman in his scariest jeremiad yet.

“Presently, we observe the broadest market valuation extreme in history,” writes the chairman of the cautious Hussman Funds investment group, “with the steepest median valuations on record, and the most reliable capitalization-weighted measures within a few percent of their 2000 peaks.”

On top of such warning signs as “extreme valuations, bullish sentiment, and consumer confidence,” he adds, “market action has deteriorated in interest-sensitive sectors... As of Friday, more than one-third of stocks are already below their 200-day moving averages.”

Don’t be fooled by the booming headline indexes. More NYSE stocks hit new 52-week lows last week than new 52-week highs, he notes.

Market veterans note that even if Wall Street is overvalued, as some of these things suggest, there is nothing to prevent it becoming even more so before any correction. That’s what happened in 1929, 2000 and 2007-2008. But the more valuations get stretched, the more dangerous it becomes.

None of this proves for certain that the current euphoria is misguided. But it is something to bear in mind before we let it go to our heads. Hussman, wisely, recalls the warning of the late, great investor Sir John Templeton, that euphoria is how bull markets die.

MarketWatch

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