Market bull Jim Paulsen believes that coronavirus hot spots across the country will not frustrate recovery.
According to Leuthold Group’s chief investment strategist, the new cases will not have much impact on the resumption of economic activity.
“At the same time, they have hot spots, New York is connecting to the network again,” he told CNBC on Monday for the “Trading Nation.” “Economic reports will continue to improve, and the hot spots will not affect whether the economy will grow or not, but whether it will grow faster or slower.”
Despite his optimism, Paulsen warns that the risk of coronavirus will not disappear in the near future. He argues that investors will have to cope with outbreaks until a vaccine arrives.
“When we get the headlines, there will be a reaction. This can cause kickbacks or corrections, ”said Paulsen.
But Paulsen does not depart from his forecast, which includes the likelihood that stocks may reach new all-time highs this year.
He lists three things that are right for markets right now: widespread investor anxiety, the unprecedented political leap by the Federal Reserve to ease the effects of the virus and the recession that is likely to have ended.
“We are in a new extension”
“However, he believes that they will not push the economy to a halt, because it is too expensive.
“It will be very difficult to shut down the economy again. I just don’t know if people will put up with this after returning to work, ”he said. “We are moving north. “I think we’re in a new expansion, and I think we’re in a new bull market.”
To navigate the environment, he uses a barbell approach to investing with an emphasis on growth and cyclical groups.
“I would continue to own some of the popular ones that I call“ new era stocks. ” Those stocks that have secular long-term excess growth are often tied to things other than the economy, ”he said. “Look at overweight in these areas and keep it even if the scores are a little high. I think that they will provide good protection during periods of rollback. “
On the other hand, it relates to economically sensitive groups, especially small caps and international stocks.
“Such games will lead the market if the global economy continues to improve,” Paulsen said. “But it will be a volatile trip with many of these names.”
On Monday, the S & P 500 closed at 3117.86, about 9% below its all-time high.