Superstition Ain't the Way 
John P. Hussman, Ph.D.

We currently estimate a negative prospective return of the S&P 500 for all horizons of less than 7 years, with prospective nominal total returns most probably within the range of 0-3% over the coming decade. Notably, these estimates draw from the same valuation methods that – in real time – correctly warned of negative 10-year returns in 2000, helped us avoid the devastating market losses of the 2007-2009 collapse, and estimated positive 10-year prospective returns in the 10-14% range in early 2009 (our stress-testing response at the time was emphatically not driven by valuation concerns). At an index level, the S&P 500 is richer than it was in 1937, 1972 and 1987. Valuations are similar to those at the 2007 peak and all but the final weeks of the 1929 peak. Index valuations are clearly less extreme than in 2000, but even so, the present valuation of the median stock has never been higher.

DYI Comments: NONE