“At present, our measures of valuations are breathtakingly extreme, and our measures of market internals are negative and divergent. Yet despite these market extremes, we always have to allow for the possibility that investors will take the speculative bit back in their teeth. An improvement in the uniformity market internals wouldn’t avoid the negative total returns that we project for the S&P 500 over the coming 10-12 years, nor would it reduce the 50-65% downside risk that I continue to view as likely over the completion of this market cycle, but it would defer our immediate near-term downside expectations for the market.
Here and now, we observe a combination of market conditions that has historically been permissive of “trap door” market losses. I use the word “permissive” because market losses are not a certainty. Rather, when we examine points of extreme market risk across history, they share many of the features we observe today.”
John Hussman, 11/2019