It may be small comfort, but you’re not the only one! Phrases now used to describe the somewhat surreal and inexhaustible energy of the current bull market are ‘zombie market’ and ‘bizarro market’. The U.S. market has been on an upward climb since 2009 largely due to the historically unique phenomena of Quantitative Easing by the Federal Reserve.
John Hussman posted an article of October 24 titled, ‘The Illusion That ‘Old Measures No Longer Apply’ at Seeking Alpha. He provides an excellent overview that shouldn’t be summarized so please follow the title link for the complete article.
But for those with a busy schedule, here’s a summary. Hussman outlines how the repeated injections of a sea of capital by the Fed has created historic distortions in the current market. The current confusion experienced by investors and traders is similar to the pre-crash periods at the top of the markets in 1929, 1969, 2000, and 2008.
Investors currently face the most hostile set of market conditions we identify across history: extended overvalued, overbought, over bullish extremes that are then joined by early deterioration in market action. These conditions are diametrically opposed to those that we associate with the most favorable market return/risk profiles.
The current bubble may not be over as the global financial market has its own list of pending crises that can effect the U.S. market. In any case the savvy investor should now be in a protective mode by balancing their portfolios, lowering their exposure to the market, or hedging their portfolio positions. You’re invited to download my free e-book that outlines a method I use as ‘portfolio insurance’ to protect against exposure to a market crash.