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Jerome Powell’s speech at Jackson Hole signaled a reset of the bull market clock, says Wall Street vet Jim Paulsen.
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The Fed’s intent to chop rates of interest offers recent support for stocks, Paulsen said.
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“I believe it’s hard for a recession to seek out something to bite on, a vulnerability to bring us down,” Paulsen said.
Jerome Powell’s dovish speech at Jackson Hole on Friday reset the clock for the stock market’s bull rally and opened the door for more gains.
Wall Street veteran Jim Paulse said in a CNBC interview on Friday that “a brand recent bull market” in stocks is clear after the Federal Reserve confirmed its intent to chop rates of interest.
“They opened up loads more positive forces for the stock market that just have not been there,” Paulsen, who writes the Paulsen Perspectives newsletter after retiring from a 40-year profession on Wall Street in 2022, said.
He added: “That is the one bull market in post-war history where the Fed has been tight throughout its entire existence. Normally, the Fed is easing before the bull even starts. So indirectly, I believe the Fed in doing this, is taking us back to the beginning of the bull.”
The positive forces unlocked by the Fed include falling rates of interest and bond yields and accelerating monetary growth, all of which have been absent for the present bull market that began in October 2022.
Those forces, combined with positive real GDP growth and continued disinflation, should improve the mood amongst business owners and consumers alike.
“In the event you put all these together, something we have not had in any respect yet, we’ll get an increase in private sector confidence. Consumer and business confidence, I believe, goes to start out to lift as well, very similar to the texture of a brand recent bull market,” Paulsen said, adding that these conditions typically precede a broad-based rally in stocks.
A rising stock market into 2025 coincides with Paulsen’s bullish view on the economy, as he doesn’t see a recession happening anytime soon.
Paulsen pointed to strong consumer and business balance sheets and $6 trillion in money market funds as reasons for his optimism.
“I believe it’s hard for a recession to seek out something to bite on, a vulnerability to bring us down,” Paulsen said. “After which when pessimism remains to be very elevated, that’s, confidence may be very low, it tells me that folks have been pretty conservative.”
Going forward, Paulsen said it doesn’t matter whether the Fed cuts rates of interest by 25 or 50 basis points at its September FOMC meeting; all that matters is that officials will probably be cutting rates of interest.
“It is not just concerning the Fed doing 25 or 50, it is the intention to ease monetary policy that is opening up a brand recent degree of support for stocks that I believe goes to persist well into next yr,” Paulsen concluded.
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