Inflation fears get downplayed by market bull Jim Paulsen

Inflation fears get downplayed by market bull Jim Paulsen

A protracted-term bull believes inflation should not scare traders.

Based on Jim Paulsen of the Leuthold Group, rising costs ought to enhance the market and financial system.

“If we just end up elevating the rate of inflation a little bit on a permanent basis, I think that might actually do a lot of good,” the agency’s chief funding strategist informed CNBC’s “Trading Nation” on Monday. “We’ve been fighting inflation for four decades in this country — always being quick to tighten, slow to ease. And the result is we’ve created some of the most sluggish growth over the last 15 years we’ve had in the entire postwar history.”

Paulsen contends increased inflation encourages extra aggressive behaviors by each companies and shoppers with worthwhile outcomes.

“It stokes animal spirits,” he stated. “If people think prices are going to go up over time, that means you might feel better about getting higher wage hikes, for example. And, it might cause businesses to expand more operations because they know they can grow into it with pricing flexibility.”

He is additionally not fearful concerning the long-term affect of the availability chain turmoil. Paulsen attributes the backlog to a brief shock brought on by the Covid-19 lockdowns.

“When you get companies preparing for a depressionary bust and instead give them a postwar boom, they just can’t catch up,” stated Paulsen. “They contracted operations to the minimums to survive a pandemic.”

Paulsen, who predicted on “Trading Nation” in August 2020 that the financial collapse would spark a large comeback, expects the availability chain upheaval to reasonable subsequent yr and go away a parting present.

“I still think we might be left with a persistently higher average rate of inflation,” he stated.

His base case requires 3% to three.25% inflation changing into the norm, and he suggests it is a candy spot for the financial system. Over the previous 20 years years, it has hovered round 2%.

“There are some good things from a little higher inflation. Not runaway, but from a little higher inflation,” Paulsen stated. “Maybe we’re headed to that environment. And if we are, maybe we’re going to get a little better economic outcome.”

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