Continued high unemployment won't be an obstacle to stock market and economic growth, James W. Paulsen, chief investment strategist, Wells Capital Management, said June 14, speaking before the CFA Society of Chicago.
“Unemployment is looked at as a real issue and problem in this country. ... but unemployment is not a problem historically in the stock market or the future growth of the economy,” Mr. Paulsen said.
Since 1948, the stock market has generated higher returns and lower volatility in periods of highest unemployment, he said.
“The dirty little secret on Wall Street: We love high unemployment rates on Main Street,” Mr. Paulsen said.
“Why does this work? Because what does the stock market like better than anything else? Rapid earnings growth without inflation or interest rate consequences. How do you get there? You promote growth with massive slack on Main Street so interest rates and inflation don't have to go up,” Mr. Paulsen said.
But there is “no way the president can get up and say there is good news” for your 401(k), Mr. Paulsen added.
On other issues, Mr. Paulsen said inflation will continue to fall. “Inflation falls after a recession for (typically) 18 to 24 months,” he said. “Beyond that, I don't know.” — Barry B. Burr