Hussman - Recession Risks are No Longer Dormant

Hussman Funds - Weekly Market Comment: June 26, 2006 - Recession Risks are No Longer Dormant: "In the context of slowing employment growth, a stall in aggregate weekly hours, an emerging widening in credit spreads, and other factors, my impression is that recession risks have increased considerably.
That said, we are still not at the point where I would view a recession as imminent. The main factors that would create that expectation would be a further flattening in employment growth (not necessarily a downturn, just growth in non-farm employment of less 0.5% on a 6-month lookback - which would require employment growth to average about 100,000 jobs per month or less over the next quarter or so), a weakening of the ISM figures toward or below 50 (not all declines below 50 indicate recession, but at present, such a decline would be a strong confirmation of negatives in other indicators already suggesting caution), and a further widening of credit spreads, particularly between 6-month commercial paper and 6-month Treasury bills.
For now, suffice it to say that recession risks are no longer dormant, but aren't yet acute. While we don't yet have enough evidence to anticipate a significant and impending economic downturn, the trends are continually turning in that direction, so it is becoming more a question of 'when' than 'if'."

Hussman Weekly Commentary: Recession Risks are No Longer Dormant

Hussman Funds - Weekly Market Comment: June 26, 2006 - Recession Risks are No Longer Dormant: "In the context of slowing employment growth, a stall in aggregate weekly hours, an emerging widening in credit spreads, and other factors, my impression is that recession risks have increased considerably.
That said, we are still not at the point where I would view a recession as imminent. The main factors that would create that expectation would be a further flattening in employment growth (not necessarily a downturn, just growth in non-farm employment of less 0.5% on a 6-month lookback - which would require employment growth to average about 100,000 jobs per month or less over the next quarter or so), a weakening of the ISM figures toward or below 50 (not all declines below 50 indicate recession, but at present, such a decline would be a strong confirmation of negatives in other indicators already suggesting caution), and a further widening of credit spreads, particularly between 6-month commercial paper and 6-month Treasury bills.
For now, suffice it to say that recession risks are no longer dormant, but aren't yet acute. While we don't yet have enough evidence to anticipate a significant and impending economic downturn, the trends are continually turning in that direction, so it is becoming more a question of "when" than "if".

Hussman's Weekly Market Commentary - S&P 500 Fair Value Below 800?

As I watched a 10% decline in my wealth over the last few weeks, I was reminded that Hussman has been 'spot-on' in his analysis of the market. I'm seriously considering putting some of my Domestic Equity holdings into Hussman's fund.

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Hussman Funds - Weekly Market Comment: June 19, 2006 - S&P 500 Fair Value Below 800?: "Sometimes, there is simply no point to retaining an exposure to market fluctuations at all. When valuations are rich, interest rates are rising, and internal market action displays wide divergences and 'heavy' price/volume action (indicative of waning sponsorship and a deteriorating willingness of investors to accept market risk), there has been no benefit historically in maintaining even a speculative exposure to market risk. During such periods, hedging against the impact of market risk actually reduces volatility while typically increasing long-term returns (though not necessarily short-term returns since one will tend to miss periodic short-term rallies)."

Hussman Weekly Market Commentary: BEAR

Hussman has been spot-on in his analysis of the markets. Today he utters the B word... Bear.

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Hussman Funds - Weekly Market Comment: "As usual, our own investment approach doesn't focus much on identifying bull or bear markets (which can only be identified in hindsight), but instead focuses on prevailing, identifiable conditions of valuation and market action. For what it's worth, unfavorable Market Climates have a clear, but far from perfect overlap with periods that turn out to be "bear markets" in hindsight. Unfavorable Market Climates do tend to cover the worst portions of most bear markets, as well as periods within bull markets that were negated by abrupt weakness, which is important.

Given the present constellation of market and economic conditions, if I was to venture a guess, I'd guess that stocks have entered a bear market here. That opinion doesn't drive our actual investment stance, and we'll accept an exposure to market fluctuations on any significant improvement in valuations or market action, but I certainly would not rule out the potential for substantial further market weakness just because stocks are down a little bit from their highs. Nor, however, should we be surprised by a "fast, furious, prone-to-failure" rally to boost short-term hopes to the contrary. We're fully hedged regardless."