John Hussman explains the math behind his call for almost nonexistent stock returns over the next 20 years.
"At extreme valuations, it's important to remember that the completion of a hypervalued market cycle can wipe out every bit of the stock market's total return over-and-above T-bills, going back not just a few years, but for over a decade," he said in a recentHe continued:"Within the 80-year period from 1929 to 2009, the S&P 500 took three long, interesting trips to nowhere, accounting for 53 of those years , underperforming risk-free Treasury bills after all was said...
If those years sound familiar, that's because the former coincided with the worst economic event the US has ever experienced, where the market plummeted 86%. The latter is congruent with the bursting tech bubble, an event that lopped 50% off of the S&P 500. The following chart depicts his proprietary S&P 500 return when market returns are across-the-board favorable against the benchmark's actual total return.A market that goes nowhere
Structurally, Hussman has US economic growth pegged at just 1.4%. This metric reflects demographic labor force growth and trend productivity growth, barring forces of cyclical changes in unemployment.
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