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Just a few unrelated thoughts to ponder this afternoon…

Not surprisingly, confidence among the highest earners is generally more positive than that of low earners. However, the extent of this “confidence-differential” will vary over an economic cycle. The confidence-differential compares the results of the highest 33% of earners to that of the lowest 33% of earners, based on the University of Michigan’s Consumer Sentiment Index.

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The seventh-longest persistent period of leadership by a single U.S. stock-market sector since 1928 came to an end in March. What does this imply, if anything, about the future of the contemporary bull market?

The U.S. dollar declined last year, but, so far, in 2021, the dollar has been rising. U.S. bond yields have surged far more than foreign yields lately, making dollar investments more attractive. However, U.S. inflation is definitely accelerating, which is never good for the U.S. currency.

Because of extraordinarily accommodative monetary and fiscal policies, a complete synchronization of the global-economic expansion, unprecedented savings, substantial pent-up demand, a post-pandemic reopening, and a record-low inventory/GDP ratio, the U.S. economy is poised to run HOT!

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The stock market and bond market usually get along, but sometimes they simply see things differently. Although disagreements can be difficult, their currently divergent views may prove profitable for equity investors.

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Investors lose a lot of sleep worrying about the Federal Reserve. Should they?

“Fed Legends” are plentiful and as heeded as ever. Several popular adages highlighting their importance have survived the test of time, including: “Don’t fight the Fed,” “Three steps and stumble,” and “The stock market is just one big sugar high.”

Top decile valuations are often the result of unduly positive investor sentiment that leads to inflated multiples. Bullishness comes in varying strengths: optimism, enthusiasm, exuberance, and, at the extreme, the mania of crowds. 

Yields are climbing, and who knows how high they will go? Will Inflation eventually get out of control? The Federal Reserve says they won’t tighten for a long time, but is that believable? Are Tech stocks headed for a bigger correction? As always, there is so much that’s “unknowable?”

After prolonged and noteworthy outperformance, Technology stocks lagged the market last summer and have again underperformed over the past month. Because this sector comprises the largest share of market capitalization, portfolio managers are forced to decide “What to do with Tech?”

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It might seem like a silly question. After all, recently, New-Era stocks have clearly rolled over and fallen out of favor. Stronger economic growth (fueled by policy stimulus and reopenings) certainly benefits investments that are more sensitive to improved economic-recovery speed. This includes small caps, cyclical sectors, value stocks, and international equities.

Replay of a Zoom Call with Chief Investment Strategist, Jim Paulsen where he shared his thoughts and observations on today's market and what he sees looking ahead. The slides are available through the PDF Download.

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The financial markets have become obsessed with “Yield PRESSURE!” The 10-year Treasury yield has tripled from its low a year ago and has surged from below 1.0% to 1.6% since year-end. This pressure has killed bonds and is increasingly causing turbulence in the high-flying stock market.

Considering how well the stock market has done this past year, it is not surprising that most indicators show optimism reigns on Wall Street. Individual and institutional investors, Wall Street strategists, and newsletter writers all currently have rosy outlooks.