Monday, 18 June 2018

Paulsen: Economic growth “too good”

Last week, the Federal Reserve raised interest rates and the European Central Bank announced a tapering of its asset-purchase programme.

Markets were largely indifferent to the announcements. The S&P 500 was flat last week and the STOXX Europe 600 rose 1 percent.

However, Jim Paulsen, chief investment strategist at The Leuthold Group, suggested that interest rate increases could weigh on the stock market.

“A big part of this stock market, when it did the best was when Main Street was not doing the best. We had a lot of excess slack, and you could grow the economy and not create any cost pressures, any interest rate pressures, any inflation pressures,” Paulsen told CNBC last week.

Now, economic growth is “too good”, he said, and is bringing pressure on interest rates, costs and profit margins. “It forces the Fed to restrict the money supply and liquidity conditions,” he added.

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