If investors aren’t positioned right, Paulsen said, the damage could be downright painful. He expects the S&P 500 to end the year flat or slightly lower from current levels.
But he has a game plan to weather a correction-prone market.
“You can move away from the United States. I don’t think overseas markets have nearly the issues that we have here,” he said, adding that a commodity ETF, hedge fund exposure and capital goods sectors as places for portfolio protection.
Paulsen is also advocating cash as an option.
“The Federal Reserve is paying a little money on that now, and you might as well take advantage of it,” he said. “If the market does hit another air pocket again, then you can use some of that cash and maybe the commodity ETF to go back in a bigger way towards equities.”
He may have a cautious outlook, but he doesn’t believe stocks have entered a bear market. Paulsen has been referring to 2018 as a “re-evaluation year.”
“I am not convinced the bull [market] is over. I think this is more a pause, and maybe restart again in 2019. So, I don’t want to get completely out,” Paulsen said.
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