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Paulsen's Perspective

Dec 05 2019

A New Recession Gauge

  • Dec 5, 2019

Tomorrow is another “Payroll Friday” and, after a disappointing ADP employment report yesterday, Wall Street will be watching for any indication that businesses are pulling back on job creation. 

Dec 02 2019

Unused Capacity?

  • Dec 2, 2019

Based on the calendar, both the economic recovery and bull market are the oldest in U.S. history. Other measures also support this view: 1) the unemployment rate is below 4%, suggesting the job market is at full employment; 2) compared to long-term benchmarks, both the U.S. stock market and bond market are richly priced; 3) several global bond yields are negative; 4) central bank balance sheets have been abnormally expanded; and, 5) the current U.S. federal deficit (as a percent of GDP) is one of the largest non-recessionary deficits of the post-war era.

Nov 21 2019

Cyclical Stocks?

  • Nov 21, 2019

True to their name, cyclical stocks are volatile. They are not to be used in big doses, they are not for the faint of heart, and they are not to be “bought and held!” The overall stock market and therefore most portfolios are exposed to some cyclicality. The question is always, “how much?” While it is admittedly challenging, well-timed tilts away or toward some cyclical sectors can add handsomely to total portfolio performance. 
 

Nov 19 2019

Discounted Destiny?

  • Nov 19, 2019

The dividend discount model is a popular, conventional method of valuing a stock using the present value of its future dividend payments. The two major components comprising this valuation approach are earnings (from which dividends are paid) and the bond yield (or discount rate used to determine the present value of the future dividend stream).  
 

Nov 14 2019

Powell’s PRESSURE?

  • Nov 14, 2019

After a tumultuous year trying to ignore the president of the United States’ constant public criticism, Federal Reserve Chairman Powell reported during his testimony yesterday, “Monetary Policy is in a good place!”
 

Nov 08 2019

If The U.S. Succeeds… Buy Foreign!

  • Nov 8, 2019

President Trump is focused on improving “fair” trade. He has renegotiated several U.S. trade agreements aimed at making U.S. producers more competitive, reducing significant U.S. trade deficits, and ensuring the U.S. dollar is priced appropriately. 

Nov 04 2019

A "Dollar Downer?"

  • Nov 4, 2019

Although it has been essentially flat since early 2015, dollar strength in 2019, in combination with a slowdown in the global recovery, has been particularly hurtful for the U.S. economy.

Oct 31 2019

We Need Some Manufacturing Momentum!

  • Oct 31, 2019

Tomorrow is the monthly jobs report. It’s always widely anticipated since it frequently moves the financial markets. Moreover, it concludes a week that has been filled with potential blockbuster events, including significant earnings reports, ongoing official trade-war commentary, a Fed decision, the elimination of an ISIS leader, and a formal Congressional presidential impeachment inquiry. 
 

Oct 28 2019

Cyclical Scarcity

  • Oct 28, 2019

Scarcity is a good attribute for an investment. A limited supply tends to curb downside risk and fuel upside price potential once the asset is in vogue. In the stock market, scarcity is often associated with a temporary restriction (e.g., an oil crisis) or with a company possessing a monopoly of an innovative must-have product. For an investor, a scarce asset that becomes popular when most don’t own it is a beautiful thing! 

Oct 22 2019

A Crescendo Of FEAR… And… CHANGE Afoot?

  • Oct 22, 2019

Despite a significant stock market rally, this year has been beset by escalating recession fears. The list of worries include broad-based slowing in the global economic recovery (centered in the manufacturing sector), a never-ending trade war, persistent political and geo-political drama, a chronic decline in global bond yields, a surge in negative yielding bonds, an inversion in the U.S. yield curve, and an expansion that recently celebrated a birthday which makes it the oldest ever in U.S. history!

Oct 14 2019

Too Much Courage Or Fear?

  • Oct 14, 2019

The underlying character of the financial markets is often a good indication of investor sentiment. It takes courage (or stupidity in retrospect?) to buy certain assets, while the purchase of other investments is driven mostly by fear. In this fashion, a good read on whether the stock market is being propelled by excessive hope or angst can be obtained by monitoring the character of its leadership. 

Oct 07 2019

A “Mini-FANGs” Swap?

  • Oct 7, 2019

Despite a slowdown in old-era business investment (manufacturing) during the last year, new-era business spending (information processing equipment and intellectual products) remains healthy. This argues for continued leadership among technology stocks. 

Oct 03 2019

ISM or CYC?

  • Oct 3, 2019

The ISM manufacturing and services reports have significantly increased recession anxieties and have been wreaking havoc with the stock market over the last couple days. And, who knows, the real pain for equity investors may come tomorrow morning when the monthly payroll employment numbers are released?

Sep 30 2019

Preemptive Policy

  • Sep 30, 2019

One of the features arguing for an extension of this economic recovery and its corollary bull market is aggressive and “preemptive” economic policies! Hesitancy has frequently spelled trouble during past economic expansions. 

Sep 23 2019

Earnings Set To POP?

  • Sep 23, 2019

Several factors helped the stock market resume a climb to marginal new highs this year. Valuations came down, inflation pressures moderated, yields collapsed, and policy officials became universally supportive. However, a key element remains elusive and, without it, a further significant advance in this bull market seems doubtful. 

Sep 19 2019

Private Sector Press Conference

  • Sep 19, 2019

Yesterday, the Federal Reserve held one of its regularly scheduled press conferences, which are “must see TV” for investors. We all tune in to hear what the Board thinks about the economy and what they plan do about it. 

Sep 17 2019

A Shift In Leadership?

  • Sep 17, 2019

In the last couple weeks, the stock market has undergone a significant shift in leadership. Perhaps it is the long-awaited swing from “growth” to “value,” but so far it appears more like a shift from “defensive” to “cyclical.” 

Sep 12 2019

A Silent Productivity Miracle

  • Sep 12, 2019

Lost in the roar surrounding the trade war, the inverted yield curve, an expanding wave of negative global bond yields, and persistent recession chatter, is a “silent U.S. productivity miracle!” Largely AWOL in this expansion until recently, and despite being barely acknowledged due to widespread recession fears, productivity has finally arrived, adding yet another wildcard to the remaining years of this economic recovery. 

Sep 05 2019

A Low-Vol Signal SWITCH!

  • Sep 5, 2019

Investors have been playing defense in recent months, piling into bonds despite low yields, sleeping well at night with gold purchases, staying with the perceived safety of U.S. stocks, avoiding risky small cap companies, and buying traditional low-risk sectors including Utilities, Consumer Staples, and REITS.

Sep 03 2019

Stock Market STIMULUS!

  • Sep 3, 2019

What’s driving the stock market? Trade wars, inverted yield curves, Presidential Tweets, manufacturing weakness, negative yields, Fed confusion, earnings woes? Yes, all the above! 

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