Tags: jim paulsen | inflation | market | panic | investors

Jim Paulsen: Roaring Inflation Could Trigger Market 'Mini Panic'


By    |   Tuesday, 19 December 2017 03:11 PM

Investment guru Jim Paulsen warns savvy investors that roaring inflation will ultimately bring the stock market’s bull run rally on Wall Street to a crashing halt.

"It will be a challenge for stocks. I expect a correction next year is likely," the Leuthold Group firm's chief investment strategist told CNBC's "Trading Nation."

A "correction" is commonly defined as a temporary drop of at least 10 percent adjust for an overvaluation.

"The news is just too good which means it's doubtful to get a lot better and surprise people on the upside," said Paulsen. "It could come in a little worse and disappoint."

The situation could create a groundless "mini panic," predicted Paulsen, who has been a bull since the early 2016 stock market correction.

"I think it will be scary, but I think it could represent another really good buying opportunity for another leg sometime 2019 or beyond," he added.

He did explain that there are some safe havens in which investors can seek shelter from the coming economic storm.

 "By our estimates, crude oil stocks are now about 32 percent undervalued — the deepest they've been in this recovery relative to the price of crude oil. And, if you change that dynamic a little bit, there could be a lot of funds coming from high growth, high momentum technology back into the under-owned energy sector."

To be sure, Wall Street stocks drifted lower on Tuesday as the U.S. House of Representatives approved a long-awaited bill to overhaul the tax system.

Stocks added slightly to losses following the vote, which followed weeks of market gains on optimism that tax cuts would boost U.S. earnings and the economy, Reuters explained.

“We’ve had a run-up in preparation as people were expecting a tax cut,” said Brian Peery, portfolio manager at Hennessy Funds in Novato, California. “Today, the market is off a little bit, maybe because the bill is not as popular as the GOP hopes it would be in the public opinion.”

The Senate was expected to vote on the tax bill this evening. Republicans were confident of the bill being signed into law by the end of the week.

The bill, among other things, proposes lowering corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.

Earlier in the day, stocks were lower as Treasury yields rose on strong housing data. Domestic home construction hit a 13-month high in November.

(Newsmax wire services contributed to this report).

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Jim Paulsen: Roaring Inflation Could Trigger Market 'Mini Panic' Next Year
jim paulsen, inflation, market, panic, investors
Tuesday, 19 December 2017 03:11 PM
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