By Barbara Kollmeyer
While the footing has been a bit less steady for stocks lately, March is still set to deliver solid gains for most of Wall Street, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.26% up 7% and the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.44% up 4%. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.74% is lagging with a 1% drop as the shift toward cyclical stocks continues.
The big bull calls for this market remain scarce though, and that may be down to some disbelief, said Jim Paulsen, chief investment strategist at money management and research firm The Leuthold Group.
“There’s a lot of thought that people are too giddy, there’s too much optimism, sentiment is too strong, but I just can’t help but feel it’s going to be a lot stronger,” said Paulsen, in an interview on Monday with MarketWatch.
In our call of the day , he brushes away the naysayers, and looks ahead to the coming autumn, when almost everyone in the U.S. who wants a COVID-19 vaccine will get one, and we’ve got reopenings, re-employment and people “flush with stimulus” cash.
“I just can’t imagine that at that point, when, in some sense in this country, when we declare victory over COVID that we’re not going to feel a whole lot more giddy than we do right now sitting in my basement,” including growth better than 8% this year, Paulsen said. “So I think that sentiment is going to run through Main Street and Wall Street.”
Fundamentals go along with that, as he expects U.S. growth of better than 8% this year, among the strongest of the postwar era. Earnings are also expected to surge, with Wall Street forecasting a rebound for S&P 500 earnings to $175 this year — Paulsen sees $200 as possible.
“And if it does, that means we’re selling on less than 20 times earnings right now on the S&P 500, and probably broader markets are even better valuation,” he said. What he thinks is happening is that sentiment just can’t keep up with the better-and-better scenario unfolding.
“There’s not another period I can think of in postwar history where we effectively took the world economy to a Depression-era bust, and then within about a year…a postwar boom,” he said. And while rising bond yields — something to watch for Tuesday — hover over investors, Paulsen sees a “stepwise” move up to 2%.
For investors, he suggests continuing to steer toward economically sensitive areas, via cyclical, small cap and international stocks. He owns technology, but is underweight as sees some underperformance ahead. “But I don’t think it’s going to crater. I think it’s going to participate in this bull.”
Investors shouldn’t abandon the sector, because it has been such a domineering force throughout the globe. And down the road, he said tech companies, because they permeate so many sectors, may start to be categorized differently.
What to avoid? Paulsen said he would be wary of healthcare, utilities, real-estate investment trusts, cash, bonds, gold. And yes he does see a correction likely, a big risk for this year.
“I think it might come later this year but I wouldn’t be shocked, starting right now,” he said. “And that’s the biggest risk this year and I don’t think that’s a cycle ender, it certainly is painful. And I think we’re going to get one of those.”
Yields are creeping up, Archegos lingers
Tech stocks are struggling to get a foothold in a holiday-shortened week, with the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.74% /zigman2/quotes/210598065/realtime DJIA +1.26% /zigman2/quotes/210599714/realtime SPX +1.44% dropping 0.8%, leading the way south for stocks . The yield on the 10-year U.S. Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -2.29% has hit a 14-year high of 1.78% .
Score another for cryptocurrencies. U.S. customers of online payment provider PayPal /zigman2/quotes/208054269/composite PYPL +2.08% can now purchase items with bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.32% and other digital assets.
Videogames retailer GameStop /zigman2/quotes/203755179/composite GME +2.31% has appointed Elliot Wilke , former executive at e-commerce giant Amazon, as chief growth officer.
European stocks and banks /zigman2/quotes/210599654/delayed XX:SXXP +0.66% are getting a breather after Monday’s selloff, led by Credit Suisse /zigman2/quotes/202835784/composite CS +2.18% . That is as Archegos Capital Management, the U.S. fund believed to be behind the forced sale of more than $20 billion in stocks, says “all plans are being discussed.” Wall Street banks were reportedly summoned by U.S. regulators to discuss the risks and fallout.
Read: The complex bets behind ‘unprecedented’ Archegos-linked $30 billion margin call
The COVID-19 vaccines from drug company Pfizer /zigman2/quotes/202877789/composite PFE +1.04% and biotech Moderna /zigman2/quotes/205619834/composite MRNA +4.16% stopped infections and illness in 90% of fully vaccinated people. Meanwhile, Canada has suspended the shots from drug company AstraZeneca /zigman2/quotes/200304487/composite AZN +0.30% for adults under 55. Germany’s vaccine regulator reported nine people died from a rare brain blood clot after taking AstraZeneca’s drug.
The New York City Police Department is hunting the suspect of a vicious assault on an elderly Asian-American woman.
Random reads
A seven-year-old builds and launches her own rocket during lockdown.
“Satan’s Shoes” complete with a drop of human blood, sell out in a minute. Footwear maker Nike sues .
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily , a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.
Add to watchlist
DJIA
Add to watchlist
DJIA
Add to watchlist
BX:TMUBMUSD10Y
Add to watchlist
PYPL
Add to watchlist
GME
Add to watchlist
PFE
Add to watchlist
MRNA
Add to watchlist
AZN
