Jim Paulsen, author of Paulsen Perspectives, explains why new opportunities may lie in undervalued sectors.
Transcript:
CAROLINE WOODS: Jim, do we see those sectors playing catch up at the expense of tech or in addition to tech? Do you think money will still flow into tech, and if not, does that amount to more muted market gains because the S&P 500 is so heavily weighted toward big tech?
JIM PAULSEN: That is that’s the big question. The great question, Caroline, because to me that is a bit of a still quite a bit of a question mark in my mind. But here’s where I lean at the moment. I would not outright just sell tech. I don’t think this is very likely anything like the.com top or, you know, anything remotely tech is going to not only underperform but collapse. I don’t think that’s what we’re looking at. I don’t think we’re going to have a recession anytime soon. And so I think that tech will participate in any ongoing bull market. But I think it underperforms from here. I think these other areas with policy leverage that they get more benefit from than does technology stocks. And the fact that there is so much more relatively undervalued are going to start to become more popular and favorite. And as a result, people will probably lead to allowing their tech weightings to decline or physically reduce them somewhat. Everyone probably is pretty highly weighted in tech, and I think it’s going to lead to some not wholesale selling like a panic, but I think it’s going to lead to slow lead of reducing those overweights in that area when they chronically underperform. And Yeah, I think that the result of that is probably going to be that the S&P 500 probably does a little less average percentage gains from here compared to the broader marketplace. You know, if we’ve been doing 1012 in this bull market. So far in the S&P, a big chunk of that is because the tech stocks, the mag stocks sevens have been doing far better than that, offsetting weakness elsewhere. And going forward I think we’ll have positive but much less returns in technology relative to the broader stock market gains. And that means probably S&P 500 underperforms. You know, maybe the Wilshire or the value line, you know, overall index or in particular just some of these other sectors like small cap stocks for a while. So my feeling is I wouldn’t panic and sell out. But I do think they’re going to maybe be underperformers during the balance of this bull. And it’s the reason another reason I wouldn’t sell out is because I’m sorry, but new era technology in this cycle in particular is unique. And it’s unprecedented. I don’t think this is like the Industrial Revolution or the invention of fire or anything else. This is something different that chronic technological advances are being made going on and on. We we’ve invented the automobile, and it’s still about the same today as it was when it was invented. OK we invented the airplane. It still does about the same thing it did then. But technology, when it first came out with IBM in the 60s, and we had the computer the size of a warehouse that did some calculation for NASA and others. That’s totally different today, and it continues to remake itself. So I don’t I think you want to own tech even when you don’t think it’s going to outperform, because you never know when that brand new sizzling innovation is going to arrive and take over all the motion in the room. So I would go to underweight position, but I wouldn’t dismiss it.
Watch the full interview with Jim Paulsen here:
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