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According to Wall Street veteran Jim Paulsen, Jerome Powell’s speech in Jackson Hole heralded the start of a new bull market.
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According to Paulsen, the Fed’s intention to cut rates provides new support for stocks.
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“I think it’s hard to find something to cling to during a recession, some vulnerability that can bring us down,” Paulsen said.
Jerome Powell’s speech in Jackson Hole on Friday reset the clock on the stock market rally and opened the door for further gains.
Wall Street veteran Jim Paulse said in an interview with CNBC on Friday that there is “a brand new bull market” in sight after the Federal Reserve confirmed its intention to cut interest rates.
“They’ve opened up a lot more positive forces for the stock market that weren’t there before,” said Paulsen, who writes the newsletter Paulsen Perspectives since retiring in 2022 after a 40-year career on Wall Street.
He added: “This is the only bull market in post-World War II history where the Fed has been tight throughout its entire existence. Normally the Fed eases before the bull even starts. So in a way I think the Fed is taking us back to the beginning of the bull.”
The positive forces the Fed is unlocking include falling interest rates and bond yields and accelerating money growth. All of these factors were absent during the current boom that began in October 2022.
These forces, combined with positive real GDP growth and continued declines in inflation, should improve sentiment among businesses and consumers.
“If you add all of this together, which we haven’t had at all, we’re going to have an increase in private sector confidence. I think consumer confidence and business confidence will also increase, as will the sense of a brand new bull market,” Paulsen said, adding that these conditions typically precede a broad rally in stocks.
A rising stock price until 2025 fits Paulsen’s optimistic view of the economy, as he does not foresee a recession happening anytime soon.
Paulsen pointed to strong consumer and corporate balance sheets and the $6 trillion in money market funds as reasons for his optimism.
“I think it’s hard for a recession to find something to bite on, a vulnerability to pull us down,” Paulsen said. “And then, if pessimism is still very high, that is, confidence is very low, it tells me that people have been pretty conservative.”
Paulsen said it doesn’t matter going forward whether the Fed cuts rates by 25 or 50 basis points at the September FOMC meeting; all that matters is that officials cut rates.
“It’s not just the Fed taking 25 or 50 actions, it’s the Fed’s intention to ease monetary policy. That provides a whole new level of support for stocks. I think that support will continue well into next year,” Paulsen concluded.
Read the original article on Business Insider
