(More) Roses Amid Garbage and Trap Doors

Hussman Market Comment – Hussman Funds

We know that conditions that join extreme valuations with unfavorable internals – particularly with lopsided bullish sentiment – have generally been followed by very poor market returns, on average. I’ve often referred to these as ‘trap door’ conditions. But looking at our 2024 hedging implementation, I asked – what if we extend that implementation a bit further to see if we can cultivate roses even there? Not only opportunities to vary the intensity of our downside hedges, but opportunities to adopt a constructive stance, albeit with a safety net, even in conditions that we’ve labeled as bearish ‘garbage.’