Episode summary
Jim Paulsen Sees a Growth Scare Coming | The 34 Charts That Make Him Cautious
Excess Returns
· · 1 hr · Hosts: Jim Paulsen
Summary
Jim Paulsen argues that the macro backdrop has shifted away from inflation fear and toward growth fear. He says the latest weak jobs data and benign inflation readings have changed Fed expectations, bond yields have already rolled over, and the more likely risk now is that slowing consumer demand and lagged policy tightening show up in weaker growth later this year. He expects the Fed to ease before year-end rather than hike.
He walks through a broad set of charts showing labor-force weakness, stalled payroll growth, poor real personal income growth excluding subsidies, low savings, and a housing market stuck near record affordability lows. In his view, the consumer is too weak to carry the economy much further, and the economic surprise data are turning down fast.
Paulsen is also skeptical that today’s AI-led productivity gains represent a true productivity boom. He argues measured productivity is being boosted by slow growth and cutbacks rather than a 1960s- or 1990s-style expansion, while AI capital spending is still helping support the economy and stock market. On markets, he thinks new-era tech and communications stocks could see further correction, bond yields look too high versus growth and inflation, and investors may want to rebalance modestly toward old-era stocks and bonds.
Key takeaways
- Jim Paulsen says weak labor data and softer inflation have pushed him from inflation worries toward growth and recession worries.
- Paulsen expects the Fed to cut rates before year-end and thinks Treasury yields could move back toward the three-handle.
- He argues consumer fundamentals are deteriorating, citing flat labor-force growth, weak real income, and record-low savings.
- Paulsen says the AI productivity boom is likely overstated because current productivity gains look more like a slow-growth artifact than a true boom.
- He thinks new-era tech and communications stocks could underperform further, while old-era stocks and bonds may become relatively more attractive.
Notable quotes
“I think that's going to kind of raise its head again uh a little bit. You know, I think we covered up ongoing weakness in general”
“I think we're going to see a full-fledged correction in the S&P 500, which we didn't see earlier this year yet”
“I think we're going to be cutting rates before the year's out”
How the episode opens
Jim, welcome back. Thanks for joining us today. — Oh, thanks for having me, guys.
We like to have you on these monthly discussions to talk about the economy and the data that you're paying attention to and highlighting for your readers at Paulson Perspectives, which is your Substack newsletter. You spend a lot of time looking at a lot of different unique indicators that you've tracked for years. And I think that this discussion just given the raw number of charts and different things we're going to look at is going to do a good job of highlighting the things that you're paying attention to.
But where we I think always like to start with you is just try to get your take on where you think we are generally with the economy and if anything has kind of changed or you paying attention to anything specifically is kind of coming to the top of your list from um from our conversation from last month.
Right. Well, I think you know probably the biggest news is just the uh jobs numbers and then followed up by u today's inflation numbers um that are job numbers were really weak um and inflation numbers were real benign and we put that together and people have done a 180 on their tightening uh expectations out of the Fed and the bond yields have uh come off their straight upside cycle. I think that's kind of the biggest change since we spoke last time.
Um I'm still kind of I guess in the camp that uh economic growth is going to slow more than people appreciate at the moment and uh inflation is not going to be the issue. Um and um it's going to be more concern about growth particularly on the consumer side of the equation.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed policy outlook
- growth versus recession fears
- ai productivity debate
- treasury yields
- portfolio rebalancing tech versus bonds
Watch the episode
Watch “Jim Paulsen Sees a Growth Scare Coming | The 34 Charts That Make Him Cautious” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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