Tags: Paulsen | stocks | correction | economy

Wells Capital's Paulsen: Remain Overweight Stocks, But Prepare for Correction

By    |   Monday, 14 July 2014 09:51 AM

One school of thought has it that the five-year bull market in stocks will keep churning, while another has it that equities are overdue for a correction.

Jim Paulsen, chief investment strategist at Wells Capital Management, sits in both camps.

"We still find the longer-term outlook for stocks very favorable and therefore would not lessen the secular overweight toward the stock market, even though we would not be surprised by a second half pullback," he wrote in a commentary obtained by MarketWatch.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

It would be a big mistake to "get too focused on the chance of a temporary correction and miss the rest of this bull market," he said, noting that the "current economic recovery and stock market bull will likely last for several more years."

The economy shrank 2.9 percent in the first quarter, but many analysts predict GDP will grow more than 3 percent for the rest of the year.

Improvements on Main Street will cause inflation worries to "force bond yields higher, bring pressure on the Fed to accelerate their exit strategy and perhaps produce a correction in the stock market," he argued, adding that we still have "crisis-like monetary policy" for an economy that's "clearly no longer in crisis."

Paulsen recommends an allocation to both cyclical and defensive stocks.

The Standard & Poor's 500 index rose 9.53 points, or 0.5 percent, to 1,977.10. The index is down 0.4 percent from its most recent all-time high of 1,985.44 set July 3.

When it comes to the short term, renowned activist investor Carl Icahn expresses wariness toward equities.

"In my mind, it is time to be cautious about the U.S. stock market," he told Reuters. "While we are having a great year, I am being very selective about the companies I purchase."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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One school of thought has it that the five-year bull market in stocks will keep churning, while another has it that equities are overdue for a correction.
Paulsen, stocks, correction, economy
318
2014-51-14
Monday, 14 July 2014 09:51 AM
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