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Veteran Wall Street analyst Jim Paulsen says Jerome Powell's speech in Jackson Hole was a signal to reset the bull market clock.
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Paulson said the Fed's intention to cut interest rates provides fresh support for stocks.
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“I think it's hard for a recession to find something to bite on, or a weakness that will make us fall,” Paulsen said.
Jerome Powell Peaceful Speech in Jackson Hole on Friday It reset the clock for the stock market rally and opened the door to further gains.
Wall Street veteran Jim Bolles said in CNBC Interview On Friday, it became clear that there was a “new bull market” in stocks after the Federal Reserve confirmed its intention to cut interest rates.
“They’ve unlocked a lot of positive forces for the stock market that weren’t there before,” said Paulsen, who writes the Paulsen Perspectives newsletter after retiring from a 40-year career on Wall Street in 2022.
“This is the only bull market in post-World War II history where the Fed has been hawkish for its entire existence,” he added. “Usually, the Fed eases monetary policy before a rally starts. So, I think the Fed is doing that in a way, and getting us back to the beginning of the rally.”
The positive forces unleashed by the Fed include lower interest rates and bond yields and accelerating monetary growth, all of which were absent from the current bull market that began in October 2022.
These forces, combined with positive real GDP growth and Continued contraction This should improve the mood among business owners and consumers alike.
“If you put all of these factors together, which we haven’t seen at all so far, you’re going to see a pick-up in private sector confidence. And I think consumer and business confidence will start to pick up as well, just like the feeling of a new bull market,” Paulsen said, adding that these conditions typically precede a broad-based rally in stocks.
The stock market rally through 2025 coincides with Paulsen's optimistic view of the economy, as he doesn't see a recession happening anytime soon.
Paulson pointed to strong consumer and corporate balance sheets and the $6 trillion in money market funds as reasons for his optimism.
“I think it's hard for a recession to find a reason to affect it, a weakness that would push us back,” Paulsen said. “When pessimism is very high, when confidence is very low, that means people have been very conservative.”
Paulson said it wouldn't matter whether the Fed cuts interest rates by 25 or 50 basis points at its September FOMC meeting; all that matters is that officials cut rates.
“It’s not just the Fed cutting rates by 25 or 50 basis points, it’s the intention to ease monetary policy that opens the door to a whole new level of support for stocks, which I think will continue into next year,” Paulsen concluded.
Read the original article on Business Insider
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