These two concluding paragraphs from the latest market comment of John Hussman are worth paying attention to:
That doesn’t mean that stocks can’t advance further, and it’s impossible to rule out potential enthusiasm that the Treasury “public-private partnership” idea might engender. But the relentless failure to properly respond to this crisis has increased the probable duration of the economic downturn, deepened the likely extent of job losses and deleveraging, and has lowered the expected level of future profit margins, all which erode the fundamental value of U.S. companies. Meanwhile, with the market no longer deeply compressed, there is less pressure for a rebound on the basis of easing risk aversion.
In all, I view the general market’s condition somewhat less favorably than when we first observed these levels last year. Too much has gone wrong in factors that will have persistent effects, and having consolidated the losses, prices are not nearly as compressed as they were then. It is very true that the market tends to bottom when the economic news is still poor, but the economic difficulties here are well outside the norm, and we should at least allow for valuation extremes that are similarly outside of the norm. [More here]