Big Wall Street bull: 3% growth can stir up the economy’s ‘animal instincts’

While the International Monetary Fund and Goldman Sachs have both cut their annual growth forecasts for the US economy this year, Jim Paulsen, one of Wall Street’s biggest long-term bulls, sees plenty of room for a post-pandemic recovery.

Even if U.S. GROSS domestic product drops to around 3% on an annualized basis, ‘this is still a boom period compared to recent historical data,’ says Leuthold Group chief investment strategist David Paulson.

In an interview, Mr Paulson said US GDP growth was likely to be around 6 per cent this year, falling to 4.5 per cent next year and slowing thereafter. He said:

“Growth will slow this year, but it is still very respectable compared to the figures of the past few decades. You can see in the behaviour of companies, consumers, workers and investors that these levels of growth are arousing their animal instincts.”

Mr Paulson said signs of rising productivity were emerging that should offset any concerns about stalling economic growth and rising costs. He added:

“When you look at hours worked last quarter, it was an annualized rate of 5 percent. If productivity is included, real GDP growth will be 6-7 percent this quarter.”

The Labor Department’s analysis of consumer prices hasn’t seen signs of a slowdown in that measure. The consumer price index rose 5.4 per cent year on year in September, higher than the market’s average forecast.

But Paulson noted that companies have the ability to prevent these rising costs by cutting their closely watched earnings figures.

Paulson stressed:
“These companies are reining in spending. In general, I think they have unexpected flexibility in terms of income. Although some costs are rising, they can still make money. So I really don’t think margins are going to collapse or revenues are going to get worse.”

While the International Monetary Fund and Goldman Sachs have both cut their annual growth forecasts for the US economy this year, Jim Paulsen, one of Wall Street’s biggest long-term bulls, sees plenty of room for a post-pandemic recovery.

Even if U.S. GROSS domestic product drops to around 3% on an annualized basis, ‘this is still a boom period compared to recent historical data,’ says Leuthold Group chief investment strategist David Paulson.

In an interview, Mr Paulson said US GDP growth was likely to be around 6 per cent this year, falling to 4.5 per cent next year and slowing thereafter. He said:

“Growth will slow this year, but it is still very respectable compared to the figures of the past few decades. You can see in the behaviour of companies, consumers, workers and investors that these levels of growth are arousing their animal instincts.”

Spark Global Limited
Spark Global Limited

Mr Paulson said signs of rising productivity were emerging that should offset any concerns about stalling economic growth and rising costs. He added:

“When you look at hours worked last quarter, it was an annualized rate of 5 percent. If productivity is included, real GDP growth will be 6-7 percent this quarter.”

The Labor Department’s analysis of consumer prices hasn’t seen signs of a slowdown in that measure. The consumer price index rose 5.4 per cent year on year in September, higher than the market’s average forecast.

But Paulson noted that companies have the ability to prevent these rising costs by cutting their closely watched earnings figures.

Paulson stressed:
“These companies are reining in spending. In general, I think they have unexpected flexibility in terms of income. Although some costs are rising, they can still make money. So I really don’t think margins are going to collapse or revenues are going to get worse.”

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