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Paulsen's Perspective

Feb 11 2019

Nothing But Noodling?

  • Feb 11, 2019

Just some noodling over an array of issues including:

  • What private sector confidence currently suggests about the stock-bond allocation tilt?
  • Is the fuel for Populism fading? 
  • Will winning the trade war cause U.S. stocks to lose?
  • How have stocks performed once the unemployment rate bottoms?
  • What does a 2019 U.S. economic slowdown imply for the 2020 election?
  • A nice revaluation refresh for stocks!
     
Feb 04 2019

‘EMERGING’ For The Finish?

  • Feb 4, 2019

Emerging Markets (EM) are not generally considered defensive investments and, therefore, investors do not often turn toward these economically-sensitive stocks near the end of a bull market cycle. However, as Chart 1 highlights, if the current economic expansion/bull market is in its late innings, perhaps you should consider “Emerging for the Finish.”
 

Feb 01 2019

Here Comes The Cavalry...

  • Feb 1, 2019

During the December carnage many Bulls were killed on the battlefield and others badly wounded. This year, although the skirmish has quieted, most remain on edge. However, investors may just now be jumping out of their foxholes because the Cavalry has recently been sighted coming over the hill with bugles blaring!

Jan 29 2019

Supportively ‘Sour’ Sentiment?

  • Jan 29, 2019

While many factors will determine how the stock market ultimately does this year (e.g., the pace of economic and earnings growth, valuation, policy support, and technicals), a few indicators show “sentiment” remains supportive for the stock market. 

Jan 22 2019

Policy Paralysis

  • Jan 22, 2019

The next recession, whenever it is, could face an unusual headwind. Normally, recessions are about liquidating fundamental excesses. Restoring health to balance sheets which were abused in the last expansion, purging bad business decisions, restoring liquidity, replenishing savings, and restarting the profit, job, and income creation cycles. 
 

Jan 16 2019

A Recovery Refresh?

  • Jan 16, 2019

In 2018, the U.S. recovery was on a path toward recession. It couldn’t last much longer growing above 3% in real terms and 5.5% in nominal terms, with an unemployment rate below 4%. Wages, consumer, producer, and commodity prices were rising and the Federal Reserve (Fed) and bond vigilantes were tightening.

Jan 08 2019

A Few Encouraging Signs...

  • Jan 8, 2019

Amongst the carnage and ongoing financial market volatility are a few encouraging signs the stock market may eventually regain its footing. As the pictures below illustrate, a proprietary U.S. economic momentum indicator suggests that recession fears may lessen by the spring, valuations have now fallen well below levels justified by bond yields, investor mindsets are quickly shifting away from overheat fears, and the U.S. dollar may finally be breaking down.

Jan 03 2019

Some 2019 Market Musings?

  • Jan 3, 2019

Welcome to 2019! As we begin the New Year, volatility (the stock market’s VIX volatility index spiked above 30 last week) and uncertainty (Bear Market, Recession?) reign. Amongst all the chaos, and with much personal trepidation over what may actually happen this year, here are some observations and a few guesses for 2019.

Dec 20 2018

Do Emerging Market Stocks Play Offense And Defense?

  • Dec 20, 2018

Emerging Markets (EM) are not normally considered a safe place to hide during severe stock market corrections—but they have been in the latest equities swoon. As shown in Chart 1, while the S&P 500 composite stock price index has declined by more than 14% from its high on September 20th, the MSCI Emerging Market stock price index has only declined by about 7%. 

Dec 17 2018

Stag, Flation, Or Both?

  • Dec 17, 2018

Stagflation is normally considered an economic condition characterized by weak real growth accompanied by rising inflation. Today, however, this condition may be most noticeable in the mindset of equity investors. 

Dec 06 2018

Problems Aplenty

  • Dec 6, 2018

Recently, when Federal Reserve Chairman Jerome Powell and President Donald Trump both blinked—one on rate hikes and the other on trade wars—the S&P 500 surged by more than 6% in about a week! Many sensed the primary challenges holding back stocks were finally resolving and sentiment quickly turned bullish as investors did not want to miss the Santa Rally! 

Dec 03 2018

P/E Pressures

  • Dec 3, 2018

The valuation of the stock market has been under steady pressure this year. The S&P 500 trailing price-earnings (P/E) multiple has declined by about 25% from a recovery peak of 23 in January to about 18. The hope for this bull market is that P/E contraction is almost over, allowing stock prices to again rise with earnings gains. 

Nov 20 2018

Popular/Panned (PP) Ratio — An Update

  • Nov 20, 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 March, in a very similar fashion as shown, the PP Ratio has eerily traced the same path as during the dot-com era.
 

Nov 19 2018

Velocity Quietly Rises?

  • Nov 19, 2018

he velocity of the money supply measures the pace at which cash is spent in the economy, or the amount of total GDP activity created by each dollar of the money supply. Monetary velocity has long been a focal point for the Federal Reserve, economists, and investors because its growth often shapes the character of the recovery.

Nov 12 2018

“Trending” To “Timing”

  • Nov 12, 2018

From the mid-1920s until the mid-2000s, the performance cycles of small cap stocks relative to large cap stocks (i.e., the small/large market cap factor or SLF) were typically multi-year events.

Nov 05 2018

A Fundamentals Farewell…

  • Nov 5, 2018

Solid economic growth and fabulous profit results have underpinned the stock market in the last couple years. Since the presidential election, the global economic recovery exhibited a rare synchronization for a time, and within the U.S., confidence measures rose from mediocre to near post-war highs...

Nov 02 2018

Are Wages Now On the 4% Freeway?

  • Nov 2, 2018

The accompanying chart illustrates the annual rate of wage inflation for all U.S. nonsupervisory private nonfarm payrolls. This was the primary wage series used by the Bureau of Labor (BLS) until 2006 when it began using a wage series based on all private sector workers.

Oct 29 2018

“Crowding-Out” Productivity?

  • Oct 29, 2018

Productivity has been weaker in the contemporary recovery than any other in the post-war era. At just a little above 1% per annum, the pace of productivity growth in this recovery has only been about 40% of the average growth experienced during past periods of economic expansion! 
 

Oct 25 2018

VIX Volatility Vignettes!

  • Oct 25, 2018

Amongst a week of elevated financial market volatility, a few random short vignettes on recent action.

Oct 22 2018

It Only Takes A Little Inflation…

  • Oct 22, 2018

U.S. inflation has been modest for the last 35 years. The annual rate of core consumer price inflation has only briefly been above 5% since 1983, and for the last 20 years has been below 3%! Since inflation has been low for so long, an entire generation of investors often consider it a nonevent. 
 

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