Jim Paulsen on the Weakening Economy, Tech Bear Market Risk and the Bull Market Built on Fear

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The economy has remained strong through a variety of headwinds this year, but that growth has become increasingly narrow. In the latest episode of the Jim Paulsen Show, Jim uses 27 charts to explain why he sees some near-term risk for both the economy and the market, especially in the technology sector. We are sharing this episode in the Excess Returns feed, but to receive future episodes, subscribe to the Jim Paulsen Show on your preferred podcast platform using the links in the episode description. Thank you for listening. We hope you enjoy the show.

Jack Forehand (1:24)

Welcome to the Jim Paulsen Show. I'm Jack Forehand, and the co-host here with me today is Matt Zeigler, and joined by the man the show is named after, Jim Paulsen. Jim, how are you doing today?

Jim Paulsen (1:32)

Very good. Very good. Thanks for having me, guys, as always.

Jack Forehand (1:37)

Yeah, we always look forward to talking to you, and today we've got a lot of good stuff going on, because just so much is going on in the market. We had a CTI report that I guess was not as good as people expected, but the market's up anyway. We've got a big Fed meeting next week. We've got a lot going on with AI, and you've got, I think, 26 or so charts to help us work through it. So we're excited to get through it. Yeah, I think we had like 34 last time, so you're actually slacking a little bit over there, Jim, in terms of your charts.

But yeah, we're excited to go through it. For anybody who wants to follow your work or the charts, you can find it at paulsanperspectives.substack.com.

We appreciate you sharing all this stuff with our listeners and our viewers. And I guess to start, we should probably start with what I just said, which is there's a lot of things going on, and you've always been great at helping us dissect what the most important things to pay attention to are. So what are you looking at as we head into a Fed meeting? We just got a CPI report. What are the most important things you're paying attention to right now?

Jim Paulsen (2:33)

Well, I know that the CPI report is sexy, and the jobs report, and the Fed is always our major draw, and all that will matter. I know it does, but I tend to have a little less attention to that stuff, because I think it just kind of creates volatility for the day and we move on.

But I guess what I am, I guess what I'm most focused on is that the, I think that, we'll talk a little bit about this, but I think people are looking at an average of the overall data of the economy, and it's really like two completely separate things that average out to be okay.

But if you, if you look at the separate components, it's really the story of two tales, and one of the tales is really not that good. And so what I'm most focused on is we continue to bring negative force to the part that's not doing well at all. And that, I think the longer that goes, the worse the possibilities are for, you know what, to, for the economy to grab the attention of everyone by, by suddenly not do, not looking to get so good. And, you know, it's kind of disappointing that in that regard, that, you know, we've respiked energy prices back up almost to previous highs. And we're now taking the 10-year bond yield to five and the two years running, like the Fed's already raised rates, the yield curve is almost back down to its flattest position of the year after coming off a lot from last year. I mean, policy force is very negative and also just the negative lagged force of higher inflation pressure from energy prices bleeding out into everything, you know, hitting real purchasing power, hitting margins and everything. So the longer that goes on, it just makes me more concerned. And I guess that's what I'm kind of watching. I kind of keep hoping we'd get kind of a dip and people would back away from, well, maybe we should not tighten, and maybe we should think a little differently, and then maybe it won't be so bad. But the longer this goes on, the more I get a little more bearish on the whole situation. So I guess that's what I'm focused on. That's not only one thing, but the accumulation of monitoring it. And I'm more concerned less about when the reports come out, because they're already passed, for the most part. I'm more concerned about what policy says about where reports might be headed coming in the future. But that's what disturbs me about policies being pretty tight.