One on One With James Paulsen, Chief Investment Strategist at Wells Capital Management
Monday, September 19, 2005GHARIB: Our guest says today`s stock sell-off will not have a lasting impact. He`s James Paulsen, chief investment strategist at Wells Capital Management. Hi Jim, nice to have you on the program again.
JAMES PAULSEN, CHIEF INVESTMENT STRATEGIST, WELLS CAPITAL MANAGEMENT: Good to be here, Susie.
GHARIB: Tell us your take on today`s market action. You say it`s not going to have a lasting impact.
PAULSEN: Well, it was certainly a nasty day. But fortunately it follows a very good week last week and it`s kind of like the markets have turned into weather forecasters here and kind of erring on the side of expecting the worse, which is sort of understandable after what we went through with Katrina. I think chances are that Rita will prove to not be as bad as people think or expect even if it does have some impact. Over the pull, I think that we`re already seeing that some of the lights are coming back on in Louisiana and could have a dent for the economy for a quarter, a fiscal stimulus that`s coming behind that to rebuild that area is likely to create even faster growth when we look ahead.
GHARIB: So what are you saying long term? What is your expectation as far as the market is concerned?
PAULSEN: I really like the market. I like... It seems like it wants to go up. Even though we had this horrendous hurricane with Katrina, the market last week got within a couple points, the S&P 500 almost setting another new cycle high. And I think that profits keep coming through unexpectedly better than expected. I still think we got a shot yet, Susie, of perhaps challenging the S&P 500 1300 level here before the year is out.
GHARIB: Jim, what do you say to some of the statistics that we`ve been giving that give us some feel for how the consumer is feeling? Consumer sentiment at a 13-year low, very high gas prices which obviously have got to be hurting consumers and making them think twice about how they spend their money and just a general sense that worries about the economy and the stock market. You heard our report. Some consumers may be on pause until they see that, you know, some bright lights here.
PAULSEN: I think that the human tragedy of Katrina was very emotional. The survey that went out to measure how consumers were feeling was right around that time that that hit. And I think that that big dip in consumer confidence that we saw is likely to snap back a little bit when they do a survey at a time a little more removed from the emotion of that event. I think if you look outside of that confidence measure, Susie, that a lot of the consumer statistics look pretty good. We`ve been creating about 2.5 million jobs in the last year. Real labor compensation has been growing 6 percent in the last 12 months. Household net worth is at all-time record highs. Retail sales have been very strong even in the last report that we got (INAUDIBLE). So I think in many ways if there is a shock here in the short run, it`s much better than we have it now than a year ago or two years ago.
GHARIB: If things are so good, if things are so good as you`re painting, why aren`t we seeing stocks making a more dramatic move higher?
PAULSEN: Well, I think that`s a good question. I think that we`re building up a lot of possibility here because all year long profits have been growing much faster than expected and stock market has been flat. Interest rates per long-term bonds have stayed flat as well. So stocks have gotten cheaper and cheaper and cheaper relative to earnings all year long and I think that reflects caution -- caution about the economy rolling over, caution that Fed tightening will (INAUDIBLE) the oil prices. I think that ultimately I think optimism might win out.
GHARIB: I hope you`re right about that. Thanks so much, Jim.
PAULSEN: We`ll see. Thank you Susie.
GHARIB: We`ve been speaking with James Paulsen, chief investment strategist at Wells Capital Management.
