There is not a single instance in historical data since 1871 when the S&P 500 traded above 18 times record earnings and there was not a low a year or more later that erased every bit of advantage over Treasury bills. Not one.”
It’s All Fun and Games Until Someone Gets Hurt – February 5, 2007 Weekly Market Comment
Note – the same observation holds for each point that the Shiller P/E (the ratio of the S&P 500 to the 10-year average of inflation-adjusted earnings) was at or above its present level (22.6). Every prior instance in every prior market cycle was followed by a point – at least a year later – where the entire advantage of the S&P 500 over Treasury bills in the interim period was entirely erased. Please understand that that “erased” does not simply mean erased by a margin of 5% or 10%. Rather, the typical resolution put the S&P 500 down 30-60% relative to Treasury bills from the point of overvaluation to the eventual low.
Read the whole article (opens in a new tab so you may easily comment here): Hussman Funds - Weekly Market Comment: Shall We Dance? - February 11, 2013.
So, if expansion promotes equities often at the expense of mortgage-backed bonds (paraphrased from Dan Green) and John P. Hussman is correct (and we have no reason to doubt him), then equities will tumble and bonds will do better, which will help mortgage rates, which will aid housing investors and personal-home purchasers, which is still good for the overall economy but more than a bit a delaying detour.