Jim Paulsen is bullish on stocks again and says it’s time to ‘buy the dips’

  • It’s time to go back to buying the dips when stock prices fall and the market is “dying,” says Jim Paulsen of Leuthold.
  • The strategist expects the recent market volatility to last for a few more weeks, but says there’s no sign of recession, which is making him bullish again.
  • ‘Buy the dips’ is a strategy that has been popular during most of the more than 9-year-old bull market, but investors abandoned it in droves during the recent stock market correction.
Jim Paulsen

Cameron Costa | CNBC
Jim Paulsen

The stock market is likely to remain highly volatile, but the economy is unlikely to fall into a recession and that makes it a good time to “buy the dips” again when stocks fall, Leuthold chief investment strategist Jim Paulsen said.

“If there’s no recession, to me it’s a buyable correction. They don’t tend to get super deep and they tend to reverse. The whole key is the recession,” he said in a telephone interview.

Paulsen agrees with many Wall Street forecasts that 2019 will see a slower pace of growth in the low 2 percent range, but no recession.

“That’s one of the reasons I’m bullish again here. I’m betting we don’t have a recession. I think if we didn’t see the low, we saw something pretty close to it,” he said. “On days when it’s really dying, it’s a good time to buy … on days, when it’s rallying hard, just stand pat. That’s what I would look at doing.”

The S&P 500’s closing low was 2,351 Monday, after a sharp drop in the half-day Christmas Eve session, giving it a 19.8 percent decline from its September high. Since Monday, it has swung hard in both directions, but was up about 3 percent for the week as of Friday morning.

WATCH: Don’t panic when stocks are getting slammed

Why you shouldn't panic when stocks are getting slammed

Why you shouldn’t panic when stocks are getting slammed  9:47 AM ET Fri, 12 Oct 2018 | 02:11

Technical strategists said the market could continue to chop aroundfor weeks or months before it finds a definitive floor, even if it is at recent lows.

“We’re just into volatility now. You’re going to see ups and downs now at least for a while,” he said. “I don’t think it’s going to be months, but for the next couple of weeks it’s going to be volatile.”

Paulsen said that after the sell off and with strong earnings growth this year, valuations have become much more attractive. The forward price-to-earnings ratio for the S&P 500 is now 14.4, compared to 18.4 at the beginning of the year.

“We took valuations from the upper quintile to the lower quintile in less than a year. Then if growth slows, that will put a pause on the Fed and bond vigilantes,” he said. “If the economy doesn’t go into a recession, then it can be revived again without rate pressure and from a much lower valuation level that has room to run.”


SINCE YOU’RE HERE…

… we have a small favour to ask. Hurn Publications is editorially independent, meaning we set our own agenda. Our journalism is free from commercial bias and not influenced by billionaire owners, politicians or shareholders. No one edits our editor. No one steers our opinion. This is important because it enables us to give a voice to the voiceless, challenge the powerful and hold them to account. It’s what makes us different to so many others in the media, at a time when factual, honest reporting is critical.

If everyone who reads our reporting and writing, who likes it, helps to support it, our future would be much more secure. We ask that you follow us and subscribe to our publication.

Copy of Happy
Happy
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s