Jim Paulsen, the thoroughly respected chief investment strategist of Leuthold Group, forecasts there will be a sharp market rebound during all of 2019, per Problem Insider. He recommends five core strategies for investors who want to take advantage of the rally, including buying tangibles, energy and industrial stocks as they benefit from a weaker dollar, as well as financial stocks amid an demanded slow down in Fed tightening. To play on the continuation of a strong U.S. economy, Paulsen highlights small cap stocks. He also favors universal equities, which he argues are cheaper and growing faster than their U.S. counterparts. Outside of the pricey FAANGs, the investor sights less popular tech stocks as well positioned to outperform.
“Small-cap tech stocks have been homologous the performance of their larger brethren, many without facing the thorny and unresolved issues which currently doubt the FAANGs,” says Paulsen. The market vet is more optimistic than many regarding whether the five-day bull troop through Thursday of this week will continue.
Paulsen’s 5 Bull Market Strategies: What To Buy
· Materials, lan and industrial stocks
· Financial stocks
· Small caps
· International equities
· Smaller techs
Source: Paulsen; BI
‘Slump Avoided in Foreseeable Future’
While Wall Street became more pessimistic on a forthcoming recession during the latter for the sake of of 2018, Paulsen recently argued that a “recession will be avoided in the foreseeable future.” Unlike many of his peers, Paulsen does not objective a flattening yield curve as signaling a recession. Further, he views private balance sheets as “remarkably healthy” for the fiscal rebound which has lasted roughly a decade. The investor cites strong US household net worth, up 60% from its anterior to all-time high, as well as declining household debt relative to disposable income.
Paulsen notes that while province and consumer confidence have just regained their old level of conviction, “lending and borrowing have not been extravagant, consumers have not overused their credit cards or over-stretched into mortgages, and they have not run through their savings.” He rates a healthy dose of skepticism as good for the market in the long term, while overheating conditions have cooled off considerably, “practically ensuring” the central bank will not raise rates in the near future.
These positive tailwinds should assistant boost the S&P 500 between 2,800 and 3,000, according to Paulsen, representing an 8% and 16% respective rebound from Friday morning.
Charming Advantage of the Rally
Paulsen views financial stocks, which suffered last year from fears of climb rates, a flatter yield curve, wider credit spreads and broader market concerns, to make a strong comeback after these headwinds let-up, or reverse altogether.
As for beaten down tech stocks, the investor says FAANGs remain overly popular, recommending a portfolio overweight in tech but focused on smaller surpasses. Paulsen isn’t the only market watcher favoring smaller cap tech stocks. Per an earlier Investopedia story, analysts and investors are prejudice into younger tech companies like Twilio Inc. (TWLO), Etsy Inc. (
Looking Ahead
It’s important to note that if Paulsen’s sanguine view for 2019 falls through, these stocks could plunge sharply. Investors should maintain a trickle diversified portfolio to hedge against another series of downdrafts into the new year.
Down roughly 0.2% on Friday, the S&P 500 has go 3.3% YTD after closing out 2018 lower 6.2%, marking its worst performance in a decade.