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Excerpt from the Hussman Funds' Weekly Market Comment (2/2/09):

Keep in mind that nominal GDP growth is (to a close approximation) the sum of real GDP growth and the change in the GDP deflator. The overall contraction in nominal GDP last quarter was actually the most severe since 1958, but to the extent that the deflator took the hit, real GDP was less affected. In other words, part of the reason that GDP evidently held up better than expected in the fourth quarter was that businesses attempted to preserve sales by offering price concessions. That practice was clearly evident in the retail sector, but was also at work in the broad economy, and was one of the main reasons for the fierce contraction in profit margins we've seen recently.

This Friday features the January employment report, which is likely to be very poor judging from the weekly jobless claims figures (and continuing claims data). I have no particular view on whether it will be better or worse than expectations, but at present, we continue to grade the quality of market action as unfavorable, which generally prepares us for negative surprises. With the market essentially waiting on additional data here, we'll respond to changes in valuations and market action as they emerge.

Source: John Hussman: Prepare for Negative Surprises