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Paulsen's Perspective

Oct 17 2018

A Positive Sign For Emerging Market Stocks?

  • Oct 17, 2018

A central quandary for equity investors is whether Emerging Markets (EM) represent an opportunity or a risk? Current relative valuations highlight the opportunity. The relative forward P/E multiple (versus the S&P 500) is as low today as it was at the start of this bull market in early 2009, and relative price-to-sales and price-to-book ratios have not been this attractive since the early 2000s!

Oct 15 2018

The ‘REAL’ Killer!

  • Oct 15, 2018

Bond yields have taken center stage in the financial markets. Overheat anxieties have awakened, the Federal Reserve is poised for its fourth Fed funds hike of the year in December, and the 10-year bond yield has risen by about 40 basis points in a little over a month!

Oct 08 2018

Another Overheat Round?

  • Oct 8, 2018

Inflation has remained low throughout this recovery causing many investors to conclude it is not much of a problem even if it rises a bit further. However, inflation has been trending higher for much of the last four years and has already significantly impacted the stock market. Moreover, because both wage and price inflation recently reached new recovery highs, overheat pressure seems poised to become even more pronounced. 

Oct 01 2018

It’s Too Calm & Boring!

  • Oct 1, 2018

Even though the calendar has turned to fall, it sure seems like the Dog Days of Summer have persisted. Volatility across the Financial Markets has been remarkably modest in the last year. It’s not just a low VIX volatility reading in the stock market, but rather, weekly volatility in the stock,

Sep 24 2018

Defensive Stocks… The Canary In The Coalmine?

  • Sep 24, 2018

Despite a very strong economy, defensive stocks have been matching the performance of the overall stock market since early this year. Indeed, in the last three months, while the S&P 500 has returned to a new record high, the top four leading S&P 500 sectors have been those normally considered defensive (i.e., Health Care, Telecom, Utilities, and Consumer Staples), and the five sectors which have trailed the S&P 500 are much more cyclical (Consumer Discretionary, Technology, Financials, Materials, and Energy). 

Sep 17 2018

A Valuation Pictorial

  • Sep 17, 2018

Everyone has a favorite stock market valuation tool. For some, it’s the celebrated Shiller CAPE P/E (price/earnings) ratio. Many prefer to value stocks based on expected future earnings or the forward P/E multiple. Others are more comforted by a “show-me-the-money” approach basing the P/E multiple on (actual) trailing earnings.

Sep 10 2018

This Could Yield Some Gas?

  • Sep 10, 2018

Confidence has arguably played an outsized role in the contemporary bull market. It was born amidst widespread fears of the “second coming of the Great Depression,” and until recently, had persevered despite lingering crisis fears and confidence measures which remained below post-war norms. 

Sep 04 2018

A ‘Fantastic Fundamentals’ Fade?

  • Sep 4, 2018

Fantastic Fundamentals have pacified the White House, the Federal Reserve, and investors during the last couple years. Is this about the end? 

Aug 27 2018

Stock Market Nears FULL Capacity!

  • Aug 27, 2018

The potential for the stock market to rise depends on how much capacity there is for improvement. Can its valuation rise? Could investor confidence improve? Do corporate profits still have room to run? Will stocks become more competitive relative to alternative investments? How spent is the economic recovery?

Aug 20 2018

This And That…

  • Aug 20, 2018

Potpourri week! No common thread, just a bunch of unrelated thoughts. None are earth shattering, but hopefully each may prove marginally intriguing? So, sit back, grab a refreshing adult beverage, and let your mind wander about a bit…

Aug 13 2018

A BAD Tech Trend!

  • Aug 13, 2018

Technology stocks have outpaced the overall market during the last five years, and by an accelerating margin since the end of 2016. Naturally, they have become market darlings, replete with stories about remarkably innovative products with phenomenal growth potential.

Aug 06 2018

Correlation-Adjusted Valuation

  • Aug 6, 2018

The S&P 500 trailing Price-Earnings (P/E) multiple is currently higher than 84% of the time since 1950. Appropriately, high valuations have become a concern for many investors. Although the market’s high P/E profile has reduced future return potential, at least historically, it does not necessarily suggest significant downside risk.

Jul 31 2018

A Wage Whoosh!

  • Jul 31, 2018

As it often does, Friday’s jobs report will likely set the tone for the financial markets during the next few weeks. Since the January report, the employment numbers have been reassuring. A rise in the labor force has allowed solid job gains to coincide with a flattening in the unemployment rate near 4%, leaving an impression the labor market still has significant slack. 

Jul 30 2018

Dollar DRIVES The Day?

  • Jul 30, 2018

In the last few years, movements in the U.S. dollar have played a huge role in shaping the character of the recovery and the behavior of the financial markets. During the first half of this recovery, the trade-weighted U.S. dollar index (DXY) remained in a narrow range, but since 2014, its volatility has substantially increased.

Jul 26 2018

Popular/Panned (PP) Ratio - An Update

  • Jul 26, 2018

We first published the accompanying chart in March of this year. The PP ratio had just spiked sharply upward in the previous three months, as it did near the end of the dot-com era in 2000. Since, as shown, the PP ratio has been largely marking time during the last four months even though technology certainly has not lost its popularity.

Jul 23 2018

Let’s Get Real!

  • Jul 23, 2018

On a trailing earnings basis, the S&P 500 has been highly-priced above a 20x PE multiple (or below a 5% earnings yield) for most of the last two years. What does this suggest about future return potential, and perhaps more importantly, about the potential for negative returns? Although the absolute valuation of the stock market does impact future return potential, it has not been particularly useful in assessing the chance of losing money in the stock market. 

Jul 16 2018

Don’t FADE Inflation Risk!

  • Jul 16, 2018

Inflation/overheat worries have eased recently. The advance in the 10-year bond yield has stalled just below 3%, the upward trend in commodity prices paused once the U.S. dollar began rising in April, and wage inflation has failed to break above 3%. Indeed, the latest employment report left a goldilocks impression with a solid jobs gain, a rise in the labor force participation rate, and only a modest increase in wages. 

Jul 09 2018

The 2% Credit Spread Recession-Risk Toggle?

  • Jul 9, 2018

Most traditional recession indicators remain uneventful. The recovery is old by calendar standards, the unemployment rate is low, and the Federal Reserve has begun to tighten monetary policy. 

Jul 02 2018

Main Street Speaks To Future Returns

  • Jul 2, 2018

The contemporary character of the Main Street economy has often been a harbinger of future investment returns. Specifically, the mindset of private economic players (i.e., are they confident enough to engage in aggressive behavior or are worries dominating economic decisions) and the degree of resource slack (the unemployment rate) have often provided a good indication of how the financial markets may perform during the next five years! 

Jun 27 2018

Too Quiet... Too Long???

  • Jun 27, 2018

Considering how this bull market began, while it may not be widely recognized, it has simply been too quiet now for too long. The accompanying chart illustrates that the last eight years have been among the four calmest and quietest of all stock markets during the post-war era!

Jun 25 2018

Momentum Is Synonymous With Technology!

  • Jun 25, 2018

Another interesting echo, today, of the 1990s’ dot-com era, is how much the S&P 500 Technology sector has come to dominate price momentum (MOM) within the stock market. Like the late 1990s, stock market winners have become synonymous with technology. 

Jun 18 2018

Defensiveness Has Left The Building!

  • Jun 18, 2018

Perhaps the stock market is taking its cue from the NBA back-to-back champion, Golden State Warriors (and winners of three of the last four titles). They employ an aggressive and entertaining “Offense-First” style of play driven by multiple all-stars firing “threes” with rapid abandonment from distances normally reserved for long touchdown passes!

Jun 08 2018

Dot-Com Déjà Vu?

  • Jun 8, 2018

Haven’t we seen this movie before? Technology takes over the stock market late in a recovery cycle, seemingly making the bull ageless, pushing portfolios toward a more concentrated new-era exposure, stimulating investor greed bolstered daily by watching a chosen few (FANGs) rise to new heights, and convincing many that tech is really a defensive investment against late-cycle pressures which trouble other investments. 

Jun 08 2018

A Growth Alert?

  • Jun 8, 2018

This year started with strong expectations for economic growth. A substantial tax cut and evidence the global recovery had finally synchronized significantly raised expectations for both the pace of economic growth and corporate earnings results.. 

Jun 04 2018

Is Gold About To Glitter?

  • Jun 4, 2018

Since its early-2011 peak, gold has been a disappointing investment. Despite significant bouts of international turmoil and periodic renewed-crisis fears, the salve often provided by the shiny metal has eluded investors.

Jun 01 2018

So Good On Main Street...But...

  • Jun 1, 2018

The jobs report this morning was spectacular! A 223K gain in payroll employment, a 15K upward revision to past months’ numbers, a drop in the underemployment rate to 7.6%, a decline in the unemployment rate to 3.8%, and a respectable monthly rise in wages of 0.3%! 

May 29 2018

Cyclicals Or Defensives?

  • May 29, 2018

Equity investors face a dilemma. Since the economy and profitability are doing well, should cyclical stocks be emphasized, or with the recovery getting old and because valuations are high, should defensive stocks be favored?..

May 21 2018


  • May 21, 2018

Here are a few unrelated concepts to chew on this week. No major overriding theme. Just a bunch of interesting “one-offs!”

May 14 2018

When Bulls And Bears Agree…

  • May 14, 2018

Fundamentally, the economic recovery has never been this good. U.S. real GDP growth is forecasted to rise by almost 4% in the current quarter, there is regular healthy job creation, the unemployment rate has fallen below 4%, household income gains are solid, profits are spectacular, confidence measures among both businesses and consumers are near historic highs, and for the first-time, economies about the globe are in a synchronized recovery!

May 07 2018

Yield Is A State Of Mind

  • May 7, 2018

As the Federal Reserve keeps raising interest rates and the 10-year U.S. Treasury yield nears a seven-year high, investors wonder what yield level will bite the stock market? This may be the wrong question...

Apr 30 2018

Mo Don’t Like SLOW?

  • Apr 30, 2018

Momentum investing is an investment strategy focused on profiting from a continuation of existing trends in the stock market. Stock prices which rise are more likely to keep rising. Buying stocks with strong positive price momentum (Mo) has long been a popular strategy. 

Apr 23 2018

A Whiff Of Stagflation?

  • Apr 23, 2018

Two indicators based on recent movements in the 10-year U.S. Treasury yield and the U.S. Dollar Index suggest economic momentum is likely to slow in the next several months while inflation continues to rise. That is, these indicators suggest the potential for a whiff of stagflation yet this year...

Apr 16 2018

Betting On An Earnings Beta?

  • Apr 16, 2018

Many investors are betting robust earnings this year will allow the stock market to regain its mojo. Earnings results should be spectacular, boosted by both a synchronized global recovery and by a sizable tax cut. However, the question for stocks is not whether companies will deliver, but rather, whether the stock market will respond? 

Apr 09 2018


  • Apr 9, 2018

Investors often face quandaries. Always present is whether the markets will rise or fall? Currently, a few perplexing issues are interesting and deserve some pondering. Is new leadership evolving in the stock market? Should you buy regulated or nonregulated FANGs? Why are energy stocks doing so well in Emerging Markets and so poorly in Developed Markets? 

Apr 05 2018

Payroll Friday PAY?

  • Apr 5, 2018

It’s not a question of IF, but rather WHEN. The U.S. output gap finally closed late last year, the unemployment rate is on the cusp of breaching 4%, and the pace of economic growth both here and abroad remains healthy. Wage inflation is going to rise above three percent soon! Maybe tomorrow, maybe later?

Apr 02 2018

Markets’ Whispers

  • Apr 2, 2018

Although struggles within the stock market are capturing most of the attention, stress signals are being whispered across the financial markets.

Mar 26 2018

Yield Curve Watching?

  • Mar 26, 2018

The biggest risk facing investors today is the start of the next recession. In a few months, this recovery will enter its 10th year and challenge the longest ever in U.S. history. Just prior to the next recession, the stock market will likely enter a bear market while credit quality deteriorates significantly. Although volatility and corrections are always present in the financial markets, recession is what is feared most.

Mar 26 2018

No Panic?

  • Mar 26, 2018

Throughout most of this bull market, there has been too much panic. In the minds of investors, a return to the 2008 crisis or the second coming of the Great Depression was always just around the corner. In the last couple years, however, the U.S. economy has returned to full employment, the output gap has closed, real GDP growth has moved away from being stuck at slightly above 2% to perhaps trending closer to 3%, and the global economic recovery has synchronized in a positive way.

Mar 19 2018

The Popular/Panned (PP) Ratio

  • Mar 19, 2018

Bull markets do not age by the clock but rather by their character and often end with investor aggressiveness and the comfort of popularity. In the latter stages of a bull market, confident investors usually prefer hares (i.e., aggressive, fast moving, high beta investments that have been highly successful and are therefore wildly popular), while tortoises (i.e., conservative, high quality, defensive stocks that only widows, orphans, and worrywarts would own) become universally panned!

Mar 12 2018

Research Residuals

  • Mar 12, 2018

Just as a well-diversified portfolio is comprised by a variety of assets with uncorrelated returns, investment strategies often evolve from seemingly unrelated thoughts or perceptions. Individually interesting but essentially unrelated concepts sometimes expose a picture not otherwise considered...