“Fund manager John Hussman of the Hussman Funds sounds the alarm again in his most recent weekly note.
Specifically, he suggests that the economy is much weaker than most people realize and may, in fact, be in a recession.
And then he observes that corporate earnings, which have driven the stock market to a record high (without adjusting for inflation) are based on record-high profit margins that will almost certainly drop.
First, here’s Hussman on the economy:
While there is no shortage of smug observers who believe that recession risk does not exist and never did, the fact is that the strongest leading indicators, as well as the most timely coincident data, have deteriorated and danced along the border between economic expansion and economic recession for more than two years. Meanwhile, repeated rounds of QE have produced little but short-lived bounces to defer a recession that historically would have followed such deterioration more quickly. The chart below offers a good picture of this process.
Notice the successively lower levels, as each round of quantitative easing has smaller and smaller effects on real economic activity (speculative activity in the financial markets aside)…..”
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