Leuthold’s Paulsen Sees S&P 500 at 5,000 in New Bull Cycle

At a time when virtually all of Wall Street is on guard against a recession, Jim Paulsen of The Leuthold Group said stocks are about to rally at least 25% in the next year.

The chief investment strategist at Leuthold predicts the S&P 500 will hit 5,000 in the coming 12 months, a far more bullish call than any provided by the strategists Bloomberg regularly surveys. Investors are focusing too much on the Federal Reserve and the implication of its interest-rate hikes, Paulsen said in a Bloomberg Television interview Thursday, adding that the economy is slowing.

“The lows are in, and I think we are starting a new bull market,” Paulsen said in a Bloomberg Television interview Thursday. “The Fed is not the only policy driver in the room. There are others and a lot of those have already started to ease.”

The 10-year Treasury yield is hovering around a three-month low, while the US dollar has fallen nearly 9% from peak-to-trough and mortgage rates dropped for a fourth week in a row, the longest stretch of declines since May 2019.

While the Fed is expected to raise rates by another 50 basis points to curb inflation, the economy is slowing and Paulsen said, “they are going to have to be wrapping it up pretty soon.”

The average equity strategist is predicting a decline for the S&P 500 in 2023 as recent wage and services data suggest inflationary forces still grip the economy, boosting chances of higher rates.