Fund manager John Hussman says he sees “extreme strains” ahead that many investors are underestimating.

In an excerpt from his most recent market commentary posted on Seeking Alpha, Hussman talks about how he missed some 2009 and 2010 upside “as we worked to make our approach robust to Depression-era outcomes”. Hussman says he thinks that will prove to be a good thing in the long run. “From a fiduciary perspective, I continue to believe that ensuring the ability to withstand extreme strains was necessary,” he says. “From a practical perspective, I continue to believe that the ability to withstand extreme strains will be more relevant in the coming years than investors would presently like to believe.”

Hussman also talks about why he doesn’t lift his hedges when the market surpasses a certain moving average and reinstate them when the market crosses below the average. He says that while the approach would seem to make sense on the surface, “if you actually take that strategy to historical data, the results typically aren’t nearly as compelling. Moreover, once any amount of slippage or transaction costs are taken into account, the most widely-followed strategies generally underperform a passive buy-and-hold strategy over time, and often don’t even manage downside risk particularly well.”

Hussman does talk about what types of trend-following strategies are useful. The key, he says, is using a strategy that employs a variety of factors. “Generally speaking, single indicators provide weak information because the true signal (whether about market conditions or economic prospects) is invariably confounded by random noise,” he writes. “The ability to infer signals from noisy observable data is typically enhanced by using a variety of indicators.” He says “market action should always be analyzed in the context of multiple indicators that capture a broad range of sectors, security types, yield-spreads, leadership, and so on. The information isn’t just in the obvious trends, it is also in the less obvious divergences.”