'Castles built on sand': Famed economist David Rosenberg says investors are being too reckless as stocks rally — and warns that a vicious long-term bear market is far from over
"Investors should be careful to avoid the misconception that easy money always supports the market," said Hussman. "Despite the fact that the Fed eased the whole way down during the 2000-2002 and 2007-2009 collapses, investors have come to believe that Fed easing always supports stock prices.
-induced drawdown. To him, the prices being paid aren't reflective of fundamentals — they're being perpetuated by momentum and "excessive" sentiment. And that's permeating through to valuations. Despite a 40-plus percent rally since the nadir reached on March 23, Rosenberg thinks the market isn't out of the woods yet.
In addition to lofty valuations, overwhelmingly positive sentiment, and a perceived Fed backstop, Rosenberg is quick to touch upon a historical precedent that normally coincides with bull markets: a low measure of the VIX. The commonly referenced benchmark gauge of market volatility is now relatively elevated.
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