Episode summary
Jim Paulsen Sees a Tech Bear Market Coming | The 27 Charts Behind His Warning for Stocks
Excess Returns
· · 1 hr 1 min · Hosts: Jack Forehand, Matt Zeigler · Guests: Jim Paulsen
Summary
Jim Paulsen argues that the headline strength in U.S. markets is masking a much weaker underlying economy. He says earnings are being distorted by a narrow mix of AI-related technology profits and energy gains, while the other seven sectors are growing much more slowly. That bifurcation, in his view, matters because policy makers are looking at an average that makes the economy look healthier than it is.
Paulsen is most worried about the labor market. He points to flat to negative job creation, unemployment claims that have not yet spiked, and a job-market misery index that he says is unusually high without a recession already being officially present. He also says business investment no longer has its historical job-creating relationship, consumer spending is vulnerable because real disposable income is weak and savings are low, and higher oil prices are again pressuring purchasing power.
On markets, Paulsen expects the tech-heavy part of the rally to be the most vulnerable. He argues that AI spending is increasingly debt-financed, credit spreads are widening, and profit growth may slow as the yield curve and policy tightening bite. He does not call for a full S&P 500 bear market, but he does expect a 20%+ decline in technology and telecom and a broader correction that could eventually force the Fed to ease.
Key takeaways
- Jim Paulsen says S&P 500 earnings look strong mainly because of technology and energy, while the rest of the market is only growing modestly in real terms.
- Paulsen argues the labor market is weaker than unemployment claims suggest because payroll growth and household employment have flattened for months.
- He says the U.S. job-market misery index is unusually elevated and historically aligns with recessionary or easing conditions, not another Fed hike.
- Paulsen expects Treasury yields could fall back toward 4% if economic momentum keeps slowing, even with renewed inflation worries.
- He thinks debt-funded AI spending and wider credit spreads make technology the most vulnerable part of the market, with a 20%+ drawdown possible.
Notable quotes
“I think people are looking at an average of the overall data of the economy and it's really like two completely separate things”
“I don't see how you could look at this chart and say that the job market is okay. It doesn't need any assistance or any help”
“the one part of the economy that's driving all the data in a good fashion is the one part that's using debt now in a big way”
“I think there's a bare market in tech coming. 20% plus decline in tech and telekcom, the blue line companies”
How the episode opens
Welcome to the Jim Pollson Show. I'm Jack Forehand and the co-host seat with me today is Matt Ziggler. Um, and joined by the man the show is named after, uh, Jim Pollson. Jim, how you doing today? — Very good. Very good. Thanks for having me, guys, as always.
Yeah, we we always look forward to talking to you. And today we've got a lot of good stuff going on because just so much going on in the market. U, we had a CPI report that I guess was not as good as people expected, but the market's up anyway.
We've got a big Fed meeting next week. We've got a lot going on with AI. We and you've got I think 26 or so charts uh to help to help us work through it.
So we're excited to get through.
Yeah. Yeah. I think we had like 34 last time. So you're actually slacking a little bit over there, Jim, in terms of your charts, but
But uh yeah, we're excited to go to go through it. Um for for anybody who wants to follow your work or the charts, you can find it at paulson perspectives.substack.com. We appreciate you sharing all this stuff with our listeners and our viewers.
Um, and I guess to to start, we should probably start with what I just said, which is there's a lot of things going on, and you've always been great at helping us dissect what the most important things to pay attention to are. So, what are you looking at as we head into a Fed meeting? We just got a CPI report.
What are the most important things you're paying attention to right now?
Well, I I know that uh, you know, the CPI report, sexy, and the jobs report and the the Fed is always, you know, our major draw.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai earnings
- tech bear market
- labor market slowdown
- oil and treasury yields
- fed policy easing
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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