Forget bulls and bears, at least one economist says this is a bunny market.
“Unlike an enthusiastic bull or a scary bear, a bunny market hops about a bit but really does not go anywhere,” said James W. Paulsen, chief investment strategist, Wells Capital Management Inc., in a written market report.
Bunnies tend to pop in during the latter stages of economic recoveries, he wrote.
There hasn't been a bunny market in 20 years, since the mid-1990s, Mr. Paulsen noted. One reason for Mr. Paulsen's bunny-market sighting is Wells Capital Management executives' belief in the low risk of a U.S. recession. They also think a sustained bear market is unlikely.
To play the bunny market, he suggested some market timing — adding equities when the stock market is weak and selling stocks when the equity markets are stronger — and stock picking at the margins. International stocks might also be a good bet.
With bunny-expected returns less than bull returns, Mr. Paulsen also suggested investors hop outside of stocks and bonds into commodities and other real assets. And although hedged strategies struggled during the bull cycle of the current recovery, they might enhance risk and return in a bunny market, he wrote.