- The economist who predicts a "growth bomb" in the U.S.
Jim Paulsen, Chief Investment Strategist of The Leuthold Group, argues that rising consumer confidence in the U.S. will lead to rapid growth.
The business and consumer sentiment surveys were positive and hinted at rapid growth within the economy. The sentiment survey of the business sector and consumer confidence, which were also positive, suggest that the U.S. economy is sitting on a "growth bomb.” The economy is only getting warmer and warmer.
“No additional fuel is needed,” he wrote in an email to Bloomberg. "One only has to light the fuse: more than $2.5 trillion of savings sitting on the sidelines are the way to the growth bomb that is going to explode."
Importantly, for the first time in nearly four years, Republicans and Democrats' financial expectations were roughly equal. Three months ago, the expectations index rose by 50% among Democrats, but just 7% among Republicans.
In the last quarter, the U.S. economy jumped at an annual rate of about 33%. This was after it contracted at a record pace following the Coronavirus in the previous quarter, according to MarketWatch data.
The U.S. presidential election put some fear in the future of the world's largest economy. According to Paulson, the situation could change soon, and it all depends on rising consumer confidence.
Its growth estimates for the current quarter and the following four quarters are 7%, 5%, 8%, 5%, and 5% (respectively) – being much higher than the growth forecast, according to a survey conducted by Bloomberg among economists.
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In mid-March, when closures were imposed worldwide to prevent the epidemic from spreading, Paulson told Bloomberg that subsequent economic reports would reflect the negative effects of the economy shut down.
The basic assumption that the crisis will be temporary is still plausible. Markets need to look beyond the current economic situation. Stock prices and businesses will rise because fears will subside and they will reflect the economic recovery.