While the footing has been a bit less steady for stocks lately, March is still set to deliver solid gains for most of Wall Street, with the Dow Jones Industrial Average DJIA,
The big bull calls for this market remain scarce though, and that may be down to some disbelief, said Jim Paulsen, chief investment strategist at money management and research firm The Leuthold Group.
“ “I just can’t imagine that at that point, when, in some sense in this country, when we declare victory over COVID that we’re not going to feel a whole lot more giddy than we do right now sitting in my basement.” ”
“There’s a lot of thought that people are too giddy, there’s too much optimism, sentiment is too strong, but I just can’t help but feel it’s going to be a lot stronger,” said Paulsen, in an interview on Monday with MarketWatch.
In our call of the day, he brushes away the naysayers, and looks ahead to the coming autumn, when almost everyone in the U.S. who wants a COVID-19 vaccine will get one, and we’ve got reopenings, re-employment and people “flush with stimulus” cash.
“I just can’t imagine that at that point, when, in some sense in this country, when we declare victory over COVID that we’re not going to feel a whole lot more giddy than we do right now sitting in my basement,” including growth better than 8% this year, Paulsen said. “So I think that sentiment is going to run through Main Street and Wall Street.”
Fundamentals go along with that, as he expects U.S. growth of better than 8% this year, among the strongest of the postwar era. Earnings are also expected to surge, with Wall Street forecasting a rebound for S&P 500 earnings to $175 this year — Paulsen sees $200 as possible.
“And if it does, that means we’re selling on less than 20 times earnings right now on the S&P 500, and probably broader markets are even better valuation,” he said. What he thinks is happening is that sentiment just can’t keep up with the better-and-better scenario unfolding.
“There’s not another period I can think of in postwar history where we effectively took the world economy to a Depression-era bust, and then within about a year…a postwar boom,” he said. And while rising bond yields — something to watch for Tuesday — hover over investors, Paulsen sees a “stepwise” move up to 2%.
For investors, he suggests continuing to steer toward economically sensitive areas, via cyclical, small cap and international stocks. He owns technology, but is underweight as sees some underperformance ahead. “But I don’t think it’s going to crater. I think it’s going to participate in this bull.”
Investors shouldn’t abandon the sector, because it has been such a domineering force throughout the globe. And down the road, he said tech companies, because they permeate so many sectors, may start to be categorized differently.
What to avoid? Paulsen said he would be wary of healthcare, utilities, real-estate investment trusts, cash, bonds, gold. And yes he does see a correction likely, a big risk for this year.
“I think it might come later this year but I wouldn’t be shocked, starting right now,” he said. “And that’s the biggest risk this year and I don’t think that’s a cycle ender, it certainly is painful. And I think we’re going to get one of those.”
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The COVID-19 vaccines from drug company Pfizer PFE,
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