After briefly pretending to care about what Fed Chairperson Janet Yellen says about valuation, investors resumed buying stocks again on Wednesday, taking the Dow (^DJI) to all-time highs and pushing the long, long awaited correction back for at least one more day.
In the attached clip Jim Paulsen of Wells Capital Management makes the case that the biggest risk to the bull isn’t Yellen but rather prosperity. Like a Hollywood starlet, the only thing stocks can’t handle is success itself.
In a way his view is less paradoxical than it at first seems. The one constant over the life of this rally has been the apparent disconnect between stocks and the plight of Main Street. Despite what the official data says, the perception in the real world is that the nature and pay of jobs available today are lousy compared to the pre-crisis world. Whatever you think of that notion it’s hard to deny that it’s a been a bullish mix for stocks.
“A perpetual wall of worry has been the foundation of this bull market. Main Street is looking a little better… as soon as we start to feel that Main Street is finally getting better it wouldn’t be unrealistic to think that Wall Street will run into a little trouble.”
Selling the rumor of a recovery would be a perfect capstone to the near triple that’s been racked up since the ominous 666 low on the S&P 500 (^GSPC) from way back in 2009. Then again, irony isn’t a trading thesis. Those who’ve been trying to call a top on stocks have been getting taken out in a box for more than five years. To be clear, Paulsen isn’t taking off his bull costume just yet. He’s simply looking for a more volatile tape driven by wild emotional swings in the investing public.
Sometimes the best trade is staying long stocks and buckling up for a wild ride.
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