Wells Capital Management

Economic and Market Perspective

A commentary on national and global economic trends written by our chief investment strategist, James Paulsen, Ph.D.

October 28, 2014 | Complacency is Still a Risk  (PDF/New Window)
October 28, 2014 | Complacency is Still a Risk (PDF/New Window) October 28, 2014 | Complacency is Still a Risk
Perhaps for the first time in this recovery, “investor complacency” has become a problem. Until the last couple years, the primary legacy of the Great 2008 Recession was an economic recovery and stock market dominated by fears. With investors hoarding cash and high-quality bonds while waiting for another imminent Armageddon, complacency was never a problem. During the last couple years, however, the S&P 500 Index has risen in a very persistent and methodical manner to a significant new all-time high above 2,000. While this market action has not produced wild optimism among investors, it has arguably resulted in the greatest sense of calm and hope about the future than at another time in this recovery.
October 10, 2014 | Buying the Eurozone?  (PDF/New Window)
October 10, 2014 | Buying the Eurozone? (PDF/New Window) October 10, 2014 | Buying the Eurozone?
The speed by which the eurozone has again returned to crisis is unnerving, but for several reasons we think the recent panic may represent an opportunity for investors. First, while eurozone stocks have underperformed U.S. stocks significantly in this recovery, they have traded in a broad range relative to U.S. stocks since the fall of 2012 and currently reside near the low end of this range. Second, because of very different policy responses to the 2008 crisis (i.e., eurozone policy officials initially addressed the crisis with fiscal austerity while U.S. officials immediately implemented monetary stimulus), we believe the eurozone economic recovery has been trailing the U.S. recovery by about two years and expect it to close the gap relative to the U.S. in the next couple years. Third, economic conditions in the eurozone have recently worsened which will likely force policy officials to soon introduce more aggressive stimulus at a time when U.S. policies are turning more restrictive. Finally, the U.S. dollar has recently strengthened substantially relative to the euro. The euro-dollar exchange rate is now near the lower end of a range which has been in force for almost a decade. Consequently, U.S. investors can buy eurozone stocks today with a reasonable expectation returns could be boosted should the euro revive some in the next year.
September 4, 2014 | Inflation is the Biggest Correction Risk!  (PDF/New Window)
September 4, 2014 | Inflation is the Biggest Correction Risk! (PDF/New Window) September 4, 2014 | Inflation is the Biggest Correction Risk!
The accompanying chart is a good reminder that even a little inflation can evoke havoc for stock investors. The chart overlays the S&P 500 Stock Price Index (solid line) with the annual core consumer price inflation rate (dotted line). The darkened black segments on each series represent those periods since 1982 (the era of disinflation) when rising inflation caused turbulence in the stock market. In the last 30-plus years prior to 2014, the annual rate of core inflation has risen significantly seven times. In six of these episodes, the stock market fairly immediately suffered either a correction or a bear market. The notable exception was the rise in inflation commencing at the start of 2004 and peaking in late 2006. Although the stock market did well during this period, it peaked in 2007 and collapsed in 2008.
August 28, 2014 | A Rare Stock Market Run?!  (PDF/New Window)
August 28, 2014 | A Rare Stock Market Run?! (PDF/New Window) August 28, 2014 | A Rare Stock Market Run?!
Since 1950, the U.S. stock market has experienced 15 periods of significant valuation enhancement. In 11 of these cases, the price-earnings (P/E) multiple rose while earnings declined. Most frequently, rising P/E multiples reflect falling earnings rather than improved valuations. In two other cases, the P/E multiple rose while earnings were essentially flat. In only two market cycles, the late 1990s and today, has the stock market been driven higher by a simultaneous rise in both earnings and the P/E multiple. Consequently, although the character of the current stock market run during the last couple years is not unique, it is certainly rare.
August 18, 2014 | Deep in the Jackson Hole  (PDF/New Window)
August 18, 2014 | Deep in the Jackson Hole (PDF/New Window) August 18, 2014 | Deep in the Jackson Hole
The Federal Reserve and its entourage meet in Jackson Hole, Wyoming this week for the annual pilgrimage to discuss the state of monetary policy. The investment community will be attentive to the proceedings, parsing speeches and watching for any nuances which suggest when the Fed may begin raising the federal funds interest rate.
August 11, 2014 | Telltale Tidbits  (PDF/New Window)
August 11, 2014 | Telltale Tidbits (PDF/New Window) August 11, 2014 | Telltale Tidbits
The dog days of summer are a good time to clean up some random thinking. What follows is a stream of independent concepts. Each, hopefully, is individually thought provoking and helpful in accessing the investment climate, but they do not obviously connect to form a consistent story.
July 31, 2014 | Will the U.S. become a trade surplus nation?  (PDF/New Window)
July 31, 2014 | Will the U.S. become a trade surplus nation? (PDF/New Window) July 31, 2014 | Will the U.S. become a trade surplus nation?
Since the exchange value of the U.S. dollar doubled during the first half of the 1980s, the U.S. has continuously run trade deficits during the last 30 years! This economic character has been so prevalent and so pronounced (at its worst, the U.S. trade deficit was about 6% of GDP) most cannot imagine a scenario whereby the U.S. economy could again become a surplus nation.
July 30, 2014 | Worried about PE contraction? Buy some materials stocks!  (PDF/New Window)
July 30, 2014 | Worried about PE contraction? Buy some materials stocks! (PDF/New Window) July 30, 2014 | Worried about PE contraction? Buy some materials stocks!
With this morning’s GDP release, overheat/inflation/is the Fed behind the curve fears among investors are increasingly evident. Perhaps for the first time since the 2008 crisis, “good news on Main Street may no longer always be good news for Wall Street.” As of this writing, the bond market is understandably getting killed and the stock market is struggling to post a positive day despite receiving “good news from Main Street” this morning. The enclosed chart may provide at least a partial solution for those investors worried that Main Street might getting a little too hot and fear the financial markets may be headed toward a period of turbulence as it attempts to sort out whether inflation is real a threat and/or what, if anything, the Fed may do about it.
July 22, 2014 | When will the Fed’s boss order a tightening?  (PDF/New Window)
July 22, 2014 | When will the Fed’s boss order a tightening? (PDF/New Window) July 22, 2014 | When will the Fed’s boss order a tightening?
A common perception of the Federal Reserve is of an all powerful institution which dictates the direction and performance of the economy by its decisions regarding monetary policy. For this reason, every action, every spoken word, any wordsmith changes, whether an eyebrow is furrowed, the thickness of the briefcases of every member of the Fed is constantly scrutinized for clues as to what they will do and when they will do it.
July 10, 2014 | Halftime Hunches???  (PDF/New Window)
July 10, 2014 | Halftime Hunches??? (PDF/New Window) July 10, 2014 | Halftime Hunches???
It’s mid-year and both stocks and bonds are sporting solid returns. Officially, due to a bizarre first-quarter real GDP report (suggesting the economy collapsed at almost a 3% annualized pace), the economy supposedly has not grown so far this year despite the fact that almost 1.4 million jobs were created!

Nonsense! We believe economic growth has been solid so far this year as evidenced by numerous reports including strong ISM manufacturing and non-manufacturing surveys, healthy job creation, a persistently declining unemployment rate, continued profit growth, the strongest bank loan growth of the recovery, surging M&A deals, improved business capital goods spending trends, robust auto sales, and a return to housing starts running at an annualized pace above 1 million units. Indeed, real GDP for the second quarter should exceed 3% and we expect growth to remain north of 3% during the second half of this year. With the S&P 500 near an all-time record high of almost 2000, cash yields still near zero and with a 10-year Treasury bond yield recently falling back to only about 2.5% (even though the core consumer inflation rate has risen to 2%), how should investors now be positioned? Here are some “halftime hunches” for the second half.
June 19, 2014 | Initial Unemployment Claims Take on a New Interpretation!?!  (PDF/New Window)
June 13, 2014 | Is Capital Spending Finally Awakening? (PDF/New Window) June 19, 2014 | Initial Unemployment Claims Take on a New Interpretation!?!
For economists and investment managers there probably isn’t a more chronically important weekly report than the Thursday morning release of weekly initial unemployment insurance claims. Outside of the mark to market pricing data provided daily by the financial markets, the information content embodied in the weekly claims numbers provides an unrivaled regular assessment of economic health. Few other economic statistics are as timely or as closely associated with stock and bond performance than is movements in weekly unemployment claims. Indeed, it is not surprising that since early-2013, long-term bond yields have bottomed and the stock market has persistently risen coincident with weekly unemployment claims steadily declining from near 400K to about 300K
June 13, 2014 | Is Capital Spending Finally Awakening?  (PDF/New Window)
June 13, 2014 | Is Capital Spending Finally Awakening? (PDF/New Window) June 13, 2014 | Is Capital Spending Finally Awakening?
U.S. corporations have been criticized throughout this recovery for not spending their considerable cash hoards. As shown in Chart 1, after an initial recovery bounce from the 2008 recession, in the last three years, capital spending has been no better than sluggish overall nominal GDP growth.
May 19, 2014 | A Technician’s Tsunami Meets Main Street’s Momentum! (PDF/New Window)
May 19, 2014 | A Technician’s Tsunami Meets Main Street’s Momentum! (PDF/New Window) May 19, 2014 | A Technician’s Tsunami Meets Main Street’s Momentum!
Several financial market technicals have broken down in recent weeks amplifying investor anxieties. Although not a technician, I too am unnerved by the number of recent “breaks” in various financial markets. Are they a signal the stock market overall is about to suffer a correction or perhaps something worse? Will the growing “technical tsunami” eventually overwhelm this bull market? Or, is the other big elephant in the financial arena—ongoing and improving Main Street Economic Momentum—enough to quiet the recent technical market storm?
April 29, 2014 | Are Bonds Cruising for a Bruising? (PDF/New Window)
April 29, 2014 | Are Bonds Cruising for a Bruising? (PDF/New Window) April 29, 2014 | Are Bonds Cruising for a Bruising?
While bond yields seem mostly benign so far this year, investors should not be overly complacent about the potential for yields to rise significantly yet in 2014. Several forces are aligning which are darkening the environment surrounding the fixed income market. Indeed, we highlight 10 reasons why the 10-year Treasury yield may still near 4% this year suggesting recent bond market action may simply represent the calm before the storm. Are bonds cruising for another bruising in 2014?
April 10, 2014 | A Supplemental Valuation Metric for Growth (PDF/New Window)
April 10, 2014 | A Supplemental Valuation Metric for Growth (PDF/New Window) April 10, 2014 | A Supplemental Valuation Metric for Growth
One of the most popular valuation techniques used to assess growth stocks is the PEG ratio—a stock’s price-earnings (PE) multiple divided by its estimated long-term sustainable growth rate (LTG). Growth managers often muse over how cheaply they can buy growth (that is, what is the value of growth?). For example, “the stock sells at twice its growth rate” implies the PE is valued at double the company’s LTG.
April 2, 2014 | History Doesn’t Repeat … But Does it Rhyme??? (PDF/New Window)
April 2, 2014 | History Doesn’t Repeat … But Does it Rhyme??? (PDF/New Window) April 2, 2014 | History Doesn’t Repeat … But Does it Rhyme???
A somewhat interesting anniversary passed on March 31, 2014 with little fanfare. It is an anniversary which is intriguing rather than necessarily important but nonetheless noteworthy. As the enclosed chart illustrates, the contemporary bull market has been following the 1982 bull market fairly closely. As recently as last year-end, both bulls were up about 175% from their respective bear market lows! The important anniversary passed just a couple days ago was the 1274th trading day of both bull markets—the day on August 25, 1987 when the 1982 bull market reached a notable peak. On that day, the S&P 500 Index peaked for the year at 336.77. Moreover, we are now just 37 trading days from another important anniversary in financial history—October 19, 1987 when the S&P 500 Index suffered its biggest single day collapse ever!
March 28, 2014 | It’s not when Interest Rates Rise .... It’s when Confidence Falls (PDF/New Window)
March 28, 2014 | It’s not when Interest Rates Rise .... It’s when Confidence Falls (PDF/New Window) March 28, 2014 | It’s not when Interest Rates Rise .... It’s when Confidence Falls
U.S. bond yields have risen significantly in the last year, monetary officials have finally begun tapering and expectations about when the Fed will first hike the funds rate are moving closer. These events have understandably combined to focus stock investors on interest rate risk. However, the stock market often does quite well during periods of rising yields provided consumer confidence remains healthy. Despite a year characterized so far by higher bond yields, Fed tapering, discussions of early Fed rate hikes, weak weather-impacted economic reports, and some old school cold war rumbles, consumer confidence rose to its highest level in more than six years in March!
March 11, 2014 | A New Inflation-Expectation Monitor (PDF/New Window)
March 11, 2014 | A New Inflation-Expectation Monitor? (PDF/New Window) March 11, 2014 | A New Inflation-Expectation Monitor
Inflation expectations are constantly monitored by both investors and economic policy officials. Stock and bond investors frequently fear potential inflationary or deflationary risks and the Federal Reserve always faces a decision either to lean toward growth or against inflation. Since the 2008 crisis, the primary concern has been the potential for deflation. However, for the first time since the last recovery, broader inflation concerns may be returning.
February 27, 2014 | Is Monetary Velocity Finally Rising?? (PDF/New Window)
February 27, 2014 | Is Monetary Velocity Finally Rising?? (PDF/New Window) February 27, 2014 | Is Monetary Velocity Finally Rising???
Although money supply velocity (i.e., the turn of the money supply or how much nominal GDP is produced by each dollar of the money supply) declined again in the fourth quarter, there are growing indications it may finally be starting to rise. As we have discussed elsewhere (see Economic and Market Perspective from November 11, 2013), the direction velocity takes this year may prove critically important both for the economy and for the financial markets.
PDF/New Window: February 12, 2014 | Is monetary policy still supportive for the stock market?
PDF/New Window: February 12, 2014 | Is monetary policy still supportive for the stock market? February 12, 2014 | Is monetary policy still supportive for the stock market?
Since the Fed recently began tapering its quantitative easing (QE) program and since mortgage rates and other long-term yields bounced from last year's near record-setting lows, many investors believe monetary policy has now turned negative for the stock market. However, monetary policy is a joint effort implemented by both the Federal Reserve and by the laissez-faire marketplace. The Fed primarily controls reserve injections and the level of short-term interest rates while laissez-faire typically establishes the pace of velocity (how fast the money supply turns over creating economic transactions) and the level of long-term yields. Finally, both the Fed and laissez-faire combine to establish the slope of the yield curve.
PDF/New Window: January 31, 2014 | Recovery gaps still suggest considerable potential for stocks
PDF/New Window: January 31, 2014 | Recovery gaps still suggest considerable potential for stocks January 31, 2014 | Recovery gaps still suggest considerable potential for stocks
Although the stock market is struggling at the beginning of this new year, numerous and deep "gaps" in the recovery continue to suggest there is still considerable longer-term potential for stocks. Bull markets have seldom ended when so many major economic metrics remain remarkably below normal levels as they do today. The nominal GDP output gap remains near its widest level since WWII, so far measures of consumer confidence have recovered only to average levels, the trailing 12-month price-earnings multiple on the S&P 500 Index is likewise only about average, and economy-wide pent-up demand remains as large as any time in the post-war era.
PDF/New Window: January 2, 2014 | Some Guesses About 2014???
PDF/New Window: January 2, 2014 | Some Guesses About 2014??? January 2, 2014 | Some Guesses About 2014???
The new year will certainly be characterized by the Federal Reserve finally backing off from its full-throttle approach toward the monetary accelerator. However, we also suspect U.S. and global economic growth will quicken more than most anticipate. Stronger economic growth combined with a further tightening in the resource markets (that is, expect the unemployment rate to decline toward 6% by year-end and for the factory utilization rate to rise above 80% during the year) may lead to a modest rise in the U.S. inflation rate and produce the first "inflation scare/overheat/can the Fed exit fast enough" panic of the recovery.
PDF/New Window: December 4, 2013 | A New Valuation Range for the Stock Market?
PDF/New Window: December 4, 2013 | A New Valuation Range for the Stock Market? December 4, 2013 | A New Valuation Range for the Stock Market?
When I started in this business three decades ago, a historic 100-year-plus valuation range for the stock market was well established and remarkably consistent. For example, the U.S. stock market price/earnings multiple based on trailing 12-month earnings per share ranged consistently between about 7 times and 21 times from 1870 to the late 1980s. Similar well-documented valuation ranges were also evident in valuing the stock market against dividends or book value.
PDF/New Window: November 11, 2013 | Will "Velocity" Change the Conversation?
PDF/New Window: November 11, 2013 | Will "Velocity" Change the Conversation? November 11, 2013 | Will "Velocity" Change the Conversation?
Throughout this recovery, money velocity (the amount of nominal GDP created by each dollar of the money supply) has mostly declined. Since the monetary "bang for the buck" has proved disappointingly weak, the national conversation has persistently focused on what could be done to improve and sustain the pace of economic growth. Chronically weakening velocity has also allowed the Fed to implement and maintain a unique, massively stimulative monetary policy without facing significant criticism or unacceptably boosting inflation concerns.
PDF/New Window: October 11, 2013 | That's not Complacency ... It's Sanity!
PDF/New Window: October 11, 2013 | That's not Complacency ... It's Sanity! October 11, 2013 | That's not Complacency ... It's Sanity!
Several commentators have noted how calm the financial markets have been about the current fiscal drama. Despite most government leaders suggesting the world could end next Thursday, should no agreement be reached in Washington, investors seem nonplussed. The stock market remains near all-time record highs and there has been no safe-haven rush toward Treasury bonds, the U.S. dollar, or gold. Many suggest the lack of evident worry among investors should be worrisome since this rather placid response smacks of complacency.
PDF/New Window: October 7, 2013 | While Washington Argues ... Adam Smith Solves Problems!
PDF/New Window: October 7, 2013 | While Washington Argues ... Adam Smith Solves Problems! October 7, 2013 | While Washington Argues ... Adam Smith Solves Problems!
The current fiscal drama highlights the cultural obsession this country has with its government. The 24/7 media blitz covering the pending debt ceiling deadline feeds an American mindset that impatiently looks to our government with disdain and fearful hope to solve what are perceived as the biggest challenges faced by our country. Since the results are seldom satisfactory, both sides of the political aisle are often in a perpetual state of chronic disappointment and utter astonishment at the seeming dysfunction exhibited by leaders that are supposed to guide us into the future.
PDF/New Window: September 23, 2013 | Five Job Market Myths
PDF/New Window: September 23, 2013 | Five Job Market Myths September 23, 2013 | Five Job Market Myths
Conditions in the job market have always dominated impressions of the overall economy. This is true not only for investors but also for policy officials. Indeed, in the contemporary recovery, decision-making at the Federal Reserve seems almost solely tethered to the unemployment rate.
PDF/New Window: September 13, 2013 | Where's the Juice ... for Economic Growth?
PDF/New Window: September 13, 2013 | Where's the Juice ... for Economic Growth? September 13, 2013 | Where's the Juice ... for Economic Growth?
Most conventional U.S. policies have recently turned, or are about to turn, restrictive for economic growth. Mortgage rates have surged by almost 1.25% since May, the government sequester has produced a significant tightening in fiscal policy, and the Federal Reserve seems poised to soon begin tapering its quantitative easing program. This rather abrupt change in policy leaves many questioning why the pace of economic growth should improve in the coming year. Indeed, the economic policy mix already adopted or about to be employed could arguably be expected to slow the economic recovery.
PDF/New Window: August 20, 2013 | Where Wall Street Meets Main Street ... Corner of Capital & Labor
PDF/New Window: August 20, 2013 | Where Wall Street Meets Main Street ... Corner of Capital & Labor August 20, 2013 | Where Wall Street Meets Main Street ... Corner of Capital & Labor
Often Wall Street and Main Street are antagonists. The stock market frequently rallies at the worst point of a recession when the unemployment rate is spiking and monetary accommodation appears only a benefit to stock investors. Likewise, when Main Street is hot, it often proves too hot for Wall Street, pushing bond yields higher, forcing price/earnings multiples lower, and forcing the Fed to take away the punch bowl. This combative nature is commonly great fodder for media stories, often stimulates plenty of political rhetoric from both sides of the aisle, and promulgates the idea that America is truly a divided country.
PDF/New Window: August 12, 2013 | Debunking the Great Fed Myth
PDF/New Window: August 12, 2013 | Debunking the Great Fed Myth August 12, 2013 | Debunking the Great Fed Myth
The Federal Reserve's unconventional and massive quantitative easing (QE) campaign has produced a widespread belief that both the economy and the stock market simply represent a sugar high that will abruptly end as soon as the Fed begins tapering. Since slower monetary accommodation appears to be forthcoming, we may soon find out whether anxieties surrounding the Fed are indeed fact or fiction. That is, for the next several months, both the economy and the financial markets will attempt to debunk the Great Fed Myth.
PDF/New Window: July 9, 2013 | A Couple Conundrums
PDF/New Window: July 9, 2013 | A Couple Conundrums July 9, 2013 | A Couple Conundrums
In recent decades, the financial community has faced two significant conundrums. First, after rising steadily since WWII, monetary velocity (the rate at which the money supply is converted into nominal GDP) has persistently declined in the last three decades. This has severely lessened the efficacy of monetary policy and heightened the challenge of managing the pace of growth in the economy. Second, since 2000, portfolio management has been complicated because the relationship between stock and bond returns has undergone a watershed transformation becoming strongly inversely correlated.
PDF/New Window: June 25, 2013 | Is this a Good or Bad Yield Rise?
PDF/New Window: June 25, 2013 | Is this a Good or Bad Yield Rise? June 25, 2013 | Is this a Good or Bad Yield Rise?
In recent days, the aggressive rise in bond yields has dominated financial market mindsets. The issue is whether the recent surge in the 10-year Treasury bond yield will soon curtail economic growth and lead to a more significant decline in the stock market. Ultimately, this depends on whether the rise in yields drives confidence lower (a bad yield rise) or whether it is rising confidence which is causing yields to be pushed higher (a good yield rise).
PDF/New Window: June 18, 2013 | Mid-Year Musings
PDF/New Window: June 18, 2013 | Mid-Year Musings June 18, 2013 | Mid-Year Musings
After the S&P 500 Index almost reached 1700 a few weeks ago, the stock market's upward momentum has been broken by various crosscurrents. With the mid-year July 4th holiday approaching, it's a good time to muse a little about what lies ahead in the rest of 2013 for both the economy and the financial markets?
PDF/New Window: May 29, 2013 | Rhyming with the 1982 Run
PDF/New Window: May 29, 2013 | Rhyming with the 1982 Run May 29, 2013 | Rhyming with the 1982 Run
History rarely repeats, but often rhymes. Such is the case with the contemporary bull market and the stock market run during the 1980s. We are not suggesting the current bull market will play out just like the 1980s stock market. However, its eerie similarity to date is worth noting, and if this continues, perhaps some "rhyming character nuggets" can be gleaned from examining the behavior of the 1982 bull market.
PDF/New Window: May 17, 2013 | Confidence Runs Through the Stock Market
PDF/New Window: May 17, 2013 | Confidence Runs Through the Stock Market May 17, 2013 | Confidence Runs Through the Stock Market
For the first time in this recovery, confidence is dominating fear in the stock market. Rather than suggesting irrational exuberance, this show of confidence may actually be a step toward rationality. Perhaps, emotional health is finally returning to an investment community severely scarred by the 2008 collapse which produced an obsession over multiple and mostly unrealistic calamity scenarios and widespread symptoms of "Armageddon psychosis."
PDF/New Window: April 30, 2013 | Buy in May and be OK?
PDF/New Window: April 30, 2013 | Buy in May and be OK? April 30, 2013 | Buy in May and be OK?
This week the calendar turns to May and most investors remember that for the last three years it has paid to "sell in May and go away." Are we headed for yet another stock market correction again this May? Possibly. After all, the stock market has lost momentum in the last couple months, economic reports have turned more disappointing and fears of a pullback have risen.
PDF/New Window: April 8, 2013 | A Value-Driven, Buy-and-Hold Stock Market?
PDF/New Window: April 8, 2013 | A Value-Driven, Buy-and-Hold Stock Market? April 8, 2013 | A Value-Driven, Buy-and-Hold Stock Market?
Since the U.S. stock market reached a new all-time record high last week, investors are understandably wondering "What now?" Is the stock market again at its peak for this cycle like it was the last two times it reached this level in early 2000 and again in late 2007? After all, profit growth has clearly slowed and as we enter the earnings reporting season this week, most are mindful of the challenges companies face in the next few years since profit margins are already near record highs. Moreover, isn't the Fed close to taking away the punch bowl officially ending this equity party?
PDF/New Window: March 22, 2013 | Stock Market Needs HIGHER Bond Yields
PDF/New Window: March 22, 2013 | Stock Market Needs HIGHER Bond Yields March 22, 2013 | Stock Market Needs HIGHER Bond Yields
Currently, there is considerable consternation surrounding the Fed's exit strategy, what it may mean for bond yields and ultimately for the stock market. Bond yields will likely rise once the Fed begins to slow or stop its quantitative easing program (and perhaps even before they change course on monetary policy). However, if the post-war era is any guide, a period of rising bond yields from current levels may be just what is needed to "improve" stock market valuations.

James W. Paulsen, Ph.D.

Chief Investment Strategist

Jim PaulsenJim Paulsen is the chief investment strategist at Wells Capital Management. Jim is internationally recognized for his views on the economy and he frequently appears on financial television outlets such as CNBC and Bloomberg TV in addition to being quoted prolifically in major financial publications and web outlets.

Subscribe to Jim Paulsen's newsletter

Sign up for our Economic and Market Perspective newsletter updates.

Subscribe Here Subscribe Here

Copyright 2006 - 2014 Wells Capital Management

WELLS CAPITAL MANAGEMENT® is a registered service mark of Wells Capital Management, Inc.