The Man Who Predicted Stocks In 2019 Says This Is What'll Happen In 2020

Fears of a recession and bear market largely receded in 2019, giving way to a massive rally in the stock market last year.

One person that predicted this on our show in 2019 was Jim Paulsen, Chief Investment Strategist at the Leuthold Group, who gave us an update on his outlook for 2020. Here's what he told listeners in a recent interview with FS Insider...

The 'Three-Gun Gooser' in 2019

The big drivers of the stock market last year included, one, an expanding money supply created by the Fed’s dramatic about-face, two, expanding fiscal stimulus and, three, declining yields.

What we saw as a result was a dramatic move higher in stocks as fears of recession gave way to economic re-acceleration, Paulsen noted, all of which he correctly predicted would goose stocks higher when we spoke to him in 2019 (see If There's a Recession It May Be Over, Says Jim Paulsen).

Another factor that helped substantially last year was the large year-end correction in 2018 that took many by surprise. The 20 percent decline and subsequently lower PE ratios gave markets a strong base upon which to build a rally throughout the year.

It also put some fear into the market, which allowed us to climb the proverbial ‘Wall of Worry,’ Paulsen noted, which is often a positive factor for equities.

We also dramatically lowered the competitive long-term interest rate, he added, with the 10-year yield falling from 3.25% in October 2018 down around 1.5% in 2019.

“On top of all this, we had the full policy support of officials, which I refer to as the calvary coming to the rescue,” Paulsen stated. “They were just as panicked as anyone else that the recovery was ending. And so they brought all three guns and applied them to the situation, not only here, but globally. The three-gun gooser has only existed about 15 percent of the time in post-war history and it’s typically brought out only when we're in a recession. … That’s a pretty good combo: much better valuations, a wall of worry, much lower rates and a full policy calvary support.”

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