Paulsen's Perspective
The Teflon Market
The U.S. stock market has already risen higher than most anticipated this year and has done so with remarkably low volatility.
Playing With Fire
Most post-war recoveries have ended only after a period of “overheat.” Not necessarily a raging forest fire like the hyper-inflation of the 1970s, but with at least some indications that demand is finally outpacing supply.
Economic Acceleration After Harvey?
The human suffering created by the wrath of Harvey is heartbreaking.
Labor Market Slack Has Retired
It’s payroll Friday this week and all eyes will again be on the wage number.
And Now A Word From Our Private Sector Policy Official.....
U.S. economic momentum seems to be accelerating again. Recent reports on the job market, retail sales, durable goods orders, small business confidence, ISM manufacturing, and the leading economic indicator index all suggest renewed vigor.
How Long Will Inflation Stay In The SWEET SPOT?
The current economic recovery is likely to end like most of the post-war era – after a period of overheated pressures force both inflation and interest rates higher. Inflation has proved remarkably tame in recent months calming fears of any imminent inflation problem and challenging the aggressiveness of Fed normalization efforts. However, investors should remain vigilant regarding inflation risk.
Phillip Is Not Dead!
Reports of Phillips death are greatly exaggerated. Phillips Curve that is. A string of weaker U.S. inflation in the last few months has all but eliminated overheat fears on Wall Street and created doubt at the Federal Reserve.
Bond Market Perceptions Shape Stock Market Performance?
In the post-war era, perceptions surrounding whether bond yields were too high or too low changed with every generation.
Recalibrating The Stock Market’s Valuation Range?
One of the biggest concerns among stock investors is valuation. Compared to historic norms, most gauges suggest the stock market is richly priced and exhibits considerable downside risk. In other words, the stock market is the same today as it has been for much of the last quarter century, overvalued!
The Trend Is Your Frenemy!
Like surfers, investors like to catch a wave. Find a security with positive momentum and ride it to shore. Indeed, the popular Wall Street refrain “the trend is your friend” has a solid historic record.
Fed Is Tightening, But Will Anyone Notice?
The Federal Reserve has raised the funds rate four times since late-2015 and three times since mid-December 2016. It threatens to increase it yet again this year and also seems poised to soon begin contracting its balance sheet.
U.S. Dollar Fundamentals Less Favorable
Several factors are shaping the character of the financial markets. Changes in economic and earnings momentum, sector rotation, Fed rate hikes, daily political maturations, oil prices, and valuation anxieties are just a few.
Where the Bear Lingers
While the next recession could be caused by a variety of factors, we suspect the recovery will eventually end like most post-war expansions, only after a significant rise in interest rates.
The Consensus Says… But...
Often, widespread accord on an important issue produces a mantra that is rarely challenged. Investors should always be wary of any economic or financial market truism.
Valuation Risk = 3% Inflation
Stock investors are understandably concerned about the valuation of the U.S. stock market. On trailing 12-month earnings per share, before extraordinary items (as published by Bloomberg), the S&P 500 stock price index currently trades at about a 21.5x price-earnings (PE) multiple. Based on monthly observations since 1950, the current PE is about 25% above its average of 16x, and is higher than 88% of the monthly PE multiples since 1950.
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