Excerpt from John Hussman's latest weekly essay:
...attention has turned to the prospect that the Fed has finished, or is just about to finish, its tightening cycle. Isn't that alone a great reason for bullishness here?
...If you look at periods where the price/peak earnings multiple was 16 or higher on the S&P 500, the final rate hike of a tightening cycle was actually associated with losses on an annualized total return basis, averaging -7.18% over the following 6 months, -9.94% over the following 12 months, and -5.87% over the following 18 months. Given the current multiple of 19 times peak earnings on the S&P 500, this would be the relevant set of comparisons even if the latest rate hike was the final one (an apparent hope of some analysts, which runs counter to the Fed's language last week, where it noted “The Committee judges that some further measured policy firming is likely to be needed.