Top fund manager John Hussman remains quite bearish on the broader market, saying that investors who try to ride the market’s recent momentum are getting close to “ensur[ing] themselves maximum damage”.

“We’ve certainly made our own adaptations to improve our ability to ‘go with the flow’ with a greater frequency, even in markets that appear objectively overvalued from a long-term perspective,” Hussman, who has a strong long-term track record but has missed out on much of the current rally, writes in his latest market commentary. “Still, whatever constructive opportunities there might have been in 2009 and early 2010 are now well behind us. We are close to the point where investors can ensure themselves maximum damage by shifting away from a defensive stance and buying the market, in hopes of reaching for return in an already richly valued and overextended advance.”

Hussman says he’s expecting the broader market to return 3.5% to 4% per year in the coming decade, but adds that those average returns could be the result of big short-term swings, “so a poor long-term expectation doesn’t rule out the likelihood of significant investment opportunities in the interim. The real difficulty at present is that at already elevated valuations, it’s less likely that those opportunities will be front-loaded.”

Hussman says it’s critical for investors to base their value judgments on “historically reliable methods”, which he says many investors fail to do. He says his projections are based on based on reliable methodologies that look at “earnings, forward earnings, dividends and other fundamentals, all which have a fairly tight relationship with subsequent 7-10 year total returns”.

The rebound off the March 2009 low, Hussman adds, was not the start of a secular bull market. “There’s no chance that the 2009 low was the beginning of a secular bull, both because valuations weren’t nearly low enough (prospective 10-year returns briefly exceeded 10% annually, but were nowhere close to those accompanying the beginning of previous secular bulls), and also because at present, valuations are already about the point where one would look for a secular bear to start,” he says. He provides data showing that the average cyclical bull market within a secular bear market has lasted 26 months over the past 100 or so years — right where the current bull is right now.