Hussman: Four Factors Pushing Us Toward a Double-Dip

In his latest weekly market commentary, top fund manager John Hussman says four factors are indicating that the U.S. is on the verge of a double-dip recession.



“In every instance we’ve observed these conditions, the U.S. economy has either already been in a recession, or has been within a few weeks of what turned out in hindsight to be the official beginning of a recession,” Hussman writes. “There have been no false signals.”



The four factors:



1: Widening credit spreads: Hussman says this is already occurring.



2: Moderate or flat yield curve: “Virtually any decline” in the 10-year Treasury yield will make this occur, Hussman says.



3: Falling stock prices: This, of course, has occurred in recent weeks.



4: Moderating ISM and employment growth: The measures Hussman uses for employment growth are moderating; the ISM growth is not.



“For all intents and purposes, unless the credit spreads, the S&P 500 (SPY), or the yield curve reverse, a further decline in the Purchasing Managers Index to 54 or below would be sufficient to confirm a ‘double-dip recession’,” writes Hussman. “Note that by itself, such a level might not be particularly troublesome. But in concert with the other evidence we observe, it would be sufficient to complete the syndrome of risk factors.”