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Paulsen's Perspective

Sep 22 2021

Surface Turbulence… But The Undertow Is Strengthening?!?

  • Sep 22, 2021

Under the surface of today's stock-market turbulence is an increasingly solid undertow of stock market support. Maybe it won’t be enough to ward off the pressures, but a foundation does seem to be forming in favor of another leg up for this bull market.
 

Sep 20 2021

COVID Still Controls The Financial Markets

  • Sep 20, 2021

Fear has gripped the stock market. Some popular, technical indicators are flashing a warning, including a worrisome drop in the cumulative Advance/Decline Line and last Friday’s S&P 500 tumble to its 50-day moving average.

Sep 16 2021

Messages From The Business Battlefield

  • Sep 16, 2021

Companies are always in the trenches. Sometimes winning, sometimes losing, and often simply striving to survive. So let’s listen in on some messages emanating from “Businesses on the Battlefield.”

Sep 13 2021

Fear The Taper?

  • Sep 13, 2021

Everyone fears the Taper. Fed members constantly remind us that it’s coming soon, the financial media frequently preview the taper’s potential ugly market fallout, and a parade of Wall Street firms are warning that stocks will almost assuredly suffer at least some sort of taper tantrum.

Sep 07 2021

Let’s Talk DEFENSE!

  • Sep 7, 2021

When the stock market finally succumbs to a long-overdue correction, conventional defensive plays may prove more inadequate in preserving capital than they have in the past. 
 

Sep 02 2021

When Will Transitory Inflation End?

  • Sep 2, 2021

It’s the question on everyone’s mind: When will we know if transitory is “no longer” transitory? Although no one can say for sure, perhaps monitoring the accompanying chart will provide some insight.

Aug 31 2021

Careful What You Wish For?

  • Aug 31, 2021

Since the pandemic, economic policy has become an obsession for most investors. The thickness of former Federal Reserve Chairman Alan Greenspan’s briefcase seems pedestrian today. When fiscal and monetary authorities began adopting highly unconventional methodologies after the 2008 financial crisis (e.g., Tarp, Cash for Clunkers, and QE), the mantra on Wall Street became WWPOD (What Will Policy Officials Do?).
 

Aug 26 2021

Think Small... Again?

  • Aug 26, 2021

Small-cap stocks had a ferocious leadership run beginning last October when vaccinations were at hand—and hope surged that the COVID pandemic was finally ending. As economic activities restarted, the Russell 2000 outpaced the S&P 500 by nearly 33% between September and mid-March.

Aug 24 2021

Time For An Economic “Hat Trick?”

  • Aug 24, 2021

In recent weeks, the news surrounding the stock market has turned much more challenging. Most economic reports have come in below expectations, taper-talk swirls about the Federal Reserve, and company earnings reports—while mostly still robust—no longer seem to boost stock prices. In addition, the U.S. exit from Afghanistan has been disturbing, supply shortages and inflation evidence are rampant, and, most importantly, the escalating spread of the Delta variant is dampening economic activities.

Aug 18 2021

Tapering May End Before It Officially Begins

  • Aug 18, 2021

This year, investors, policy officials, and the financial media have been obsessed with when the Federal Reserve will finally start tapering its quantitative easing (QE) program. And perhaps more importantly, is it possible to curtail QE without triggering a temper tantrum in the stock and bond markets?

Aug 16 2021

When Consumer Sentiment Collapses… BUY Stocks!

  • Aug 16, 2021

Last Friday, the University of Michigan reported its Consumer Sentiment Index suffered a shocking collapse. It fell by 11 points, which is the sixth-largest monthly decline since its inception in January 1998. Amazingly, as shown in Chart 1, it deteriorated to a weaker level than April 2020—right after the U.S.-onset of the COVID crisis that essentially shut down the entire economy. Moreover, the Sentiment Index now resides at one of its most pessimistic levels of the last 23 years. Only during the Great Financial Crisis was consumer sentiment shaken noticeably more than today.

Aug 13 2021

Economic Transformations?

  • Aug 13, 2021

Here are a few U.S. economic transformations that could have important investment implications—and a couple of economic conditions that remain status quo.

Aug 09 2021

Has The Fed Made VOLATILITY “Valuable?”

  • Aug 9, 2021

Normally, volatility is feared. It’s a lesson learned early by investors. Experiences like the 1987 crash, the 2008-09 financial crisis, and the 2020 pandemic serve to educate investors. Strive for more return but only while being ever vigilant about risks (volatility). Move that risk/return profile as far as you can to the northwest investment quadrant!   

Aug 05 2021

$300 S&P 500 EPS?

  • Aug 5, 2021

The economic recovery is one year old and is not likely to end anytime soon. The unemployment rate is still high, the labor-force participation rate is very low, and inventories are woefully inadequate—and need to catch up with demand. Additionally, the fed funds rate is still zero, bond yields are minimal and declining, and neither monetary nor fiscal authorities have yet begun to lean against this expansion. As a result, the recovery seems poised to last several more years.

Aug 03 2021

INVENTORY Insights

  • Aug 3, 2021

In the second quarter, the U.S. economy suffered another significant inventory liquidation: As a percent of real GDP, inventory reductions subtracted 1.1% from overall real growth. As shown in Chart 1, as a percent of real GDP (red dotted line), last quarter’s inventory draw-down was the second-largest since 2020 and the fifth-largest back to 1950. On a trailing four-quarter basis (blue line), the paring down of inventories in relation to real GDP in the contemporary period is also the fifth-largest since 1950!

Jul 30 2021

What Is The S&P 500’s “NORMAL” P/E Multiple? …20.2x Trailing EPS!

  • Jul 30, 2021

Since 1871, the U.S. stock market’s average, or normal P/E (price/earnings) valuation is 14.6x its trailing 12-month earnings per share (EPS). With the S&P 500 P/E currently above 28x, the stock market appears frighteningly overvalued relative to its 150-year history—this may eventually prove to be an accurate warning of a pending, catastrophic stock market event. Nobody knows for sure. However, using this long-term historical valuation as the “average” or “normal” benchmark for U.S. stocks should be weighed with some skepticism for two primary reasons.

Jul 27 2021

A Growth Gain?

  • Jul 27, 2021

Worries about an impending economic slowdown have recently increased.

First, COVID-related economic shutdowns have again been implemented in some countries, several U.S. jurisdictions reinstated mask mandates, there is growing concern from health authorities about breakout cases, renewed hospitalization-capacity pressure, and anxieties about unvaccinated children going back to school. This has all raised the possibility of another COVID economic shutdown.

Jul 23 2021

Some “Shorts”…

  • Jul 23, 2021

A few unrelated charts with some “short” comments.

Jul 19 2021

Tech Stocks? A “Thrust” You Can’t Trust!

  • Jul 19, 2021

The S&P 500 Technology sector has had an amazing run. Not quite a replay of the 1990s’ dot-com era, but close. In the last five years, S&P Tech has outperformed the overall S&P 500 Index by more than +72% (total return) or +11.5% per annum! Not only is Tech performance remarkable during this period, but the sector very infrequently trailed the S&P 500 (and by just modest amounts).

Jul 15 2021

Could Inflation Fears Again Shift Leadership?

  • Jul 15, 2021

It’s been a lousy week for inflation! Early Tuesday morning, the NFIB Small-Business Price Survey for June reportedly rose to its highest level since 1981. That was shortly followed by the release of the Consumer Price Index, showing Core CPI inflation surged by 0.9% in June, more than double the 0.4% consensus expectation. As the day progressed, both the CRB Raw Industrial Commodity Price Index and the price of crude oil reached new recovery highs. Then, on Wednesday, it was reported that the Core Producer Price Index jumped by 1% compared to an expectation of only 0.5%. So, in surreal fashion, the last twelve months’ consumer- and producer-inflation rates are now suddenly 5.4% and 7.3%, respectively.

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