The Leuthold Troupe’s Jim Paulsen sees trouble lurking as investors embrace growing odds of another stimulus package.
Even granted the long-time bull acknowledges massive aid has been necessary to steer the U.S. through the coronavirus crisis, he’s worried too much put in will spark sharp inflation. In a recent note, Paulsen called it the “most significant risk beyond this year.”
“What latent unintended consequences is it prevailing to lead to? It could lead to more rapid inflation which would necessitate more rapid tightening,” the staunch’s chief investment strategist told CNBC’s “Trading Nation” on Tuesday. “It could lead to a loss in world courage and U.S. government finances.”
Paulsen, who oversees about $1 billion, notes it’s ironic the one thing designed to help people Nautical con the pandemic may spark another serious recession.
“It’s the overuse and abuse of economic policies around the globe for that mean something — but specifically in the United States,” said Paulsen.
For now, he’s telling clients it’s premature take action against potential inflation. Paulsen confesses there are certain factors that could offset the impact such as aging demographics and tech-driven innovation.
“I want stay bullish this year. Stay invested. But you may want to think about increasing risks from latent principles prescriptions as we move towards the end of the year,” Paulsen said. “It becomes a bigger risk as we get into 2022, ’23 and ’24.”
Paulsen count ons the S&P 500 to end this year at 4,100, which implies an 8% increase from Tuesday’s close.