Jim Paulsen of the Leuthold Group sees problems as investors take advantage of the growing opportunities for another stimulus package.
Although the longtime bull recognizes that massive aid was needed to steer the US through the coronavirus crisis, he fears that spending too much will trigger severe inflation. In a recent notice Paulsen called it “the most significant risk beyond this year”.
“What latent unintended consequences will it lead to? It could lead to faster inflation that would require a faster tightening,” the company’s chief investment strategist told CNBC’s Trading Nation on Tuesday. “It could lead to a loss of world confidence and the US government’s finances.”
Paulsen, who oversees about $ 1 billion, notes that it’s ironic that the one thing meant to help people navigate the pandemic could spark another serious recession.
“It’s the overuse and abuse of economic policy around the globe – but specifically in the United States,” Paulsen said.
He is currently telling his clients that it is premature to take action against possible inflation. Paulsen acknowledges that there are certain factors that could offset the impact, such as: B. the aging of demographics and technology-driven innovations.
“I would stay optimistic this year. Stay invested. But you may want to consider the increasing risks of latent regulatory requirements as we near the end of the year,” Paulsen said. “There’s going to be a bigger risk as we get into 2022, ’23 and ’24.”
Paulsen expects the S&P 500 to end at 4,100 this year, an 8% increase from Tuesday’s close.
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