Hussman: This time is different

The global bull market in stocks continued last week. From Bloomberg:

The MSCI All-Country World Index jumped 1 percent for the five days, reaching a record close on June 19. The Standard & Poor’s 500 Index increased 1.4 percent to 1,962.87 and the Dow Jones Industrial Average gained 171.34 points, or 1 percent, to 16,947.08...

The Stoxx Europe 600 Index advanced 0.3 percent for the week, trading near the highest level since 2008...

The MSCI Asia Pacific Index advanced 0.4 percent for a sixth week of gains, the longest stretch of increases since August. The measure reached its highest level since June 2008 during the week.

John Hussman says in his latest article that despite overvalued, overbought, overbullish conditions, the stock market has continued to advance, unlike at the 1929, 1972, 1987, 2000 and 2007 peaks, when such conditions were followed by steep losses in short order.

So yes, this time is different. It is different because the Federal Reserve’s zero-interest rate policy has starved investors of all sources of safe return, forcing them to accept risk at increasingly higher prices and progressively dismal long-term prospective returns. More importantly, this time is different because warning signs that appeared at every major pre-crash market peak have persisted and escalated, without resolution, far longer than they have done so historically...

Unfortunately, what is not different is that rich valuations are predictably followed by dismal long-term returns, even if short-term consequences are held in suspended animation for a period of time. What is not different is that compressed risk-premiums have a tendency to surge abruptly on events that are either entirely unexpected or, more often, that stem from recognized sources of risk that produce outcomes decidedly more negative than investors had assumed. What is not different is the habit at market extremes for investors to assign elevated price/earnings multiples to earnings that are themselves elevated and unrepresentative of the long-term stream of cash flows their investments will deliver...

According to Bloomberg, the S&P 500 is trading at 16.6 times estimated earnings. The STOXX Europe 600 is trading at 15.6 times while the MSCI Asia Pacific is trading at 13.4 times.