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From July 2007; Market Recovery or Not

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December 25, 2013 – Comments (0)

My question to any who might read this and have insight is this:

What (specific) effect the Fed? 

Here is the scenario

In July of 2007 I printed out a report from John Hussman (Weekly Market Comment). The title is "A Who's Who of Awful Times to Invest."  I feel I learn most of my best lessons from looking at old reports and testing their veracity over time.  Dr. Hussman predicted 10 year returns in the low single digits based on the following defining characteristics:

1) price/peak-earnings multiple above 18 (currently 19.5)

2) 4-year high in S&P index (check)

3) S&P 500 8% or more above its 52-week moving average (yup)

4) rising Treasury and corporate bond yields (meh)

So it's number 4.  Extraordinary Fed action is distorting #4.  For the purposes of this exercise, that may be irrelevant.  Or not.  Do/don't fight the Fed now?

Incidentally, since the report came out, the S&P has returned 2.6% annualized...and we are in year 6 (or seven, depending on how you count).  You can probably find the report on-line. As important and fresh a read today as it was then.  Now, is it another 10 years of low single digit returns?

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