The ever optimistic Jim Paulsen, Chief Investment Strategist at Wells Capital Management, was the guest market monitor on the latest Nightly Business Report. Paulsen believes the economy will grow at a rate of 3%, ahead of the consensus view of 2 1/4%.
Paulsen said the number of jobs created in the last 4 months was the strongest in this recovery. He added that housing and auto sales were the best we’ve seen in this recovery, along with bank loans increasing.
Paulsen said, on top of the good numbers, we’re adding stimulus with record low mortgage rates and pump prices falling which would lead to a suprise [in economic growth].
When asked by interviewer Tom Hudson why he believed concerns over Europe would ease in the summer and fall, Paulsen explained the thing we’ve learned since the European crisis started in January 2010 is that it flares up and scares everybody, but then tends to calm down. Paulsen believes the pattern will repeat this summer leading to a rally in stocks.
Hudson brought up Paulsen’s belief that the S&P 500 would reach 1500. Paulsen said a surge to new highs in the stock market would get investors questioning if they were missing out, leading to more mutual fund flows and putting the market higher.
Paulsen expects emerging markets to do well highlighting iShares MSCI Emerging Markets Index (EEM, 37.29). He said there was a move last fall by emerging markets officials to moderate their recoveries by raising rates and restricting money supply which hurt their stock markets. Now most of these policy officials are dropping interest rates to speed up their recoveries according to Paulsen. He believes in the second half of the year we’ll see evidence of China, India and elsewhere picking up again. Paulsen stated right now investors have an opportunity to pick up these stocks at very attractive valuations.
Paulsen still likes his previous recommendations of Industrial Select Sector SPDR (XLI, 34.12) and Materials Select Sector SPDR (XLB, 32.77) which he said are under the same pressures as the emerging world.