Hussman Funds Weekly Market Comment
Credit Risk Spreading Beyond Financials
Read full commentary at the Hussman site
Hussman believes markets are trading under assumption that US has dodged a recession. He thinks this assumption is based on lagging indicators which do not provide a current picture. He remains concerned by market participants complacency as shown by the low volatility in the options market.
“I’ll emphasize again that at the point we do observe sufficient evidence for investors to concede recession, the potential downside could be abrupt, leaving little opportunity to make defensive changes after the fact. As I’ve often said, the best time to panic is before everybody else does.”
Hussman remains concerned about the widening of credit spreads, believing this indicates default risk is spreading in to the wider economy.
What to watch for.
“Typically, low volatilities are observed prior to poor market performance, with the worst performance often following a low VIX that breaks out moderately to the upside. For that reason, fluctuations in the VIX, particularly any move beyond 25-27, are worth watching here.”
Related posts:
Leave your response!