Valuations, Sentiment, and Lower Emotional Risk

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In this episode of the Jim Paulsen Show, Jim Paulsen joins Jack Forehand and Justin Carbonneau to break down what the economy and markets may really be signaling beneath the headline numbers. Drawing from his recent outlook and long history studying market cycles, Jim explains why growth may be weaker than it appears, how policy lags are shaping the outlook, and why today’s market looks very different from past late-cycle environments. The conversation explores the divide between the “new era” economy and the rest of the market, what that means for investors in 2026, and where opportunities may be emerging as monetary and fiscal policy begin to shift.

Topics covered in this episode
• Why headline GDP growth may be overstating the true strength of the economy
• How trade distortions are affecting recent GDP data
• The concept of a “no-shaped economy” and the divide between new era and old era businesses
• Labor market signals that suggest economic sluggishness beneath the surface
• Why this may be one of the most disliked bull markets in history
• The role of policy lags and why easing could matter more than investors expect
• How market concentration has shaped returns over the last several years
• Warning signs emerging within the technology sector
• The relationship between corporate cash levels, R&D spending, and tech leadership
• Why market breadth and old era sectors may become more important going forward
• Thoughts on bonds, stocks, commodities, gold, and portfolio positioning
• Why international and emerging markets could benefit from a weaker dollar
• How investors might think about diversification in an unusual market cycle

Timestamps
00:00 Introduction and key themes from Jim’s outlook
03:00 Why the economy may be weaker than GDP headlines suggest
06:00 Labor market signals and recession-like dynamics
12:00 Policy lags, the Fed, and why growth could soften further
15:00 Market performance after multiple strong years
18:00 The no-shaped economy and the split between new era and old era
24:00 Strange market signals at all-time highs
27:00 Valuations, sentiment, and why pessimism matters
29:00 Fed easing expectations and consensus forecasts
35:00 Warning signs for technology stocks
42:00 Corporate cash, R&D spending, and tech leadership risks
47:00 Portfolio construction and asset allocation thinking
55:00 Final thoughts on opportunities and risks ahead