The S&P 500 index is hovering within 1 percent of its record high, but don't let that fool you, says star mutual fund manager John Hussman, president of Hussman Investment Trust.
"The financial markets are establishing an extreme that we expect investors will remember for the remainder of history, joining other memorable peers that include 1906, 1929, 1937, 1966, 1972, 2000 and 2007,"
he writes in his weekly commentary.
"The failure to recognize this moment as historic is largely because investors have been urged to believe things that aren’t true, have never been true, and can be demonstrated to be untrue across a century of history."
So what are the un-truths? The principal one is that the Federal Reserve is boosting financial asset prices, Hussman says.
"In fact the primary driver of financial markets in recent years has been pure speculative risk-seeking. While risk-seeking is encouraged by monetary easing, it is not a reliable outcome."
The Fed has kept its federal funds rate target at a record low for 6 ½ years, and its balance sheet has ballooned to $4.5 trillion.
The S&P 500 index suffered its last correction of 10 percent or more in 2011. In fact, it plummeted 20 percent in the July-August period that year.
And Simon Maierhofer,
writing on TheStreet.com, finds troubling parallels now in 2015.
- Both years are pre-presidential-election years.
- In the first 5 1/2 months of each year, the S&P 500 index stagnated in a narrow trading range. In both years, the index was little changed on June 12 from the beginning of the year. "What does the S&P have to show for it? A meager 1.71 percent gain," Maierhofer notes.
- When the S&P 500 reached a record high in late April, the percentage of S&P 500 stocks trading above their 50-day simple moving average fell short of its February peak.
To be sure, "although summer might turn into a tough spot for stocks, the damage is likely to be limited and temporary," Maierhofer maintains.