Excess Returns The New Valuation Regime | Jim Paulsen on Confidence, Inflation and the Coming Market Supports
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Sep 27, 2025 Jim Paulsen, a veteran market strategist and author of Paulsen Perspectives, shares his deep insights on the current economic landscape. He discusses the critical role of the job market in Fed decisions and the unusual bull market amidst low investor confidence. Paulsen highlights how recent Fed easing may affect market dynamics and discusses new era firms driving narrow market leadership. He also examines the implications of inflation, yields, and investor behavior, revealing how policy shifts could foster broader market participation and revive 'animal spirits'.
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Jobs Drive Fed Outcomes
- The job market is the key determinant of whether the economy slows further or re-accelerates.
- Jim Paulsen says worsening jobs will force the Fed's hand while stronger hiring could stave off further easing.
Bull Market Lacked Normal Supports
- This bull has run mostly under a tightening Fed, inverted curve, weak liquidity and strong dollar, which is unusual.
- Paulsen argues easing would add the missing supports and could broaden market participation beyond mega-cap tech.
Easing Powers Stronger Returns
- Months when the Fed lowers rates historically show vastly higher S&P returns than months it raises rates.
- Paulsen links easing to lower yields, steeper curve, stronger money growth and a weaker dollar, which boost stocks.