Bulls Jim Paulsen and Tobias Levkovich Weigh on Recent Stock Weakness

By on June 3, 2013

Levkovich Citigroup Paulsen Wells CapitalAfter higher bond yields, a big equity drop on Friday and a lower than expected ISM report today created a few cracks in the bullish case, CNBC brought in stock market bulls Jim Paulsen and Tobias Levkovich to provide their perspective.

Levkovich said he was not as worried about the ISM report as he was about the Citi panic/euphoria sentiment indicator. He said the model “tiptoed” into euphoria Friday morning which was the first time that has happened since 2007 and early 2008.

Levkovich said credit environments weren’t breaking down like in ’07 and ’08, but sentiment is consistent with the view the second half is going to be tougher in the equity market. However, he doesn’t expect a 10% correction, but said a 5% pullback would be normal.

Paulsen’s view is that the S&P 500 will hit 1,700 this year and he said he’s not inclined to raise that number. He expects the market to move sideways for the next several months as better than expected growth reaches a standoff with rising bond yields.

Levkovich said the August/September timeframe had him concerned because of Jackson Hole (Fed meeting), concerns about the new budget and continuation resolution, and the significant drag from Europe where corporate credit is very tight.

Levkovich agreed with Paulsen that the U. S. economy will surprise to the upside in the second half.

Paulsen said the emerging world should get stronger and there will be “green shoots” in Europe. The only risks he sees is higher rates and the Fed tapering or quitting their bond buying program.

Back in September 2012, Tobias Levkovich, chief U.S. equity strategist at Citigroup, provided his bullish case in a CNBC interview predicting the S&P 500 could rise to 1,615 [link].

In October 2012, James Paulsen, chief investment strategist of Wells Capital Management, made the bullish case for investing in emerging markets [link].

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