Market plunge of 40-55% over the completion of the current cycle, negative 10-12 year real returns, they are all actually run-of-the-mill expectations from current extremes. John P. Hussman

On the Completion of the Current Market Cycle and Beyond

John P. Hussman, Ph.D.

The summary of this outlook is straightforward. I view the equity market as being in the late-stage top formation of the third financial bubble in 15 years.

Based on a century of evidence relating the most historically reliable valuation measures to actual subsequent market returns, neither a market plunge of 40-55% over the completion of the current cycle, nor the expectation of zero 10-12 year S&P 500 nominal total returns, nor the likelihood of substantially negative 10-12 year real returns should be viewed as worst-case scenarios - they are all actually run-of-the-mill expectations from current extremes.

Based on the joint behavior of the most reliable leading economic measures (particularly new orders plus order backlogs, minus inventories), widening credit spreads, and clearly deteriorating market internals, our economic outlook has also moved to a guarded expectation of a U.S. recession.

DYI Comments: As editor(chief cook and bottle washer) I feel as if I'm the boy who cried wolf as the past two years the market has been horribly overvalued and yet nothing has happened. Mr. Market in the end WILL have his way as these sky high valuation descend back to earth(regress to the mean).  The Great Wait Continues......

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  12/1/15

Active Allocation Bands (excluding cash) 0% to 60%

78% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

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DYI