The economy overall is weaker than widely anticipated, says Jim Paulsen

Speakers

Mark Zandi — Chief Economist, Moody's

Jim Paulsen — Former Chief Investment Strategist, Paulsen Perspectives

Steve Liesman — Reporter, CNBC

Carl Quintanilla — Host, CNBC

Summary

Jim Paulsen argues the US economy is significantly weaker than consensus, citing flat real retail sales and a stagnant job market (zero creation since April).
Mark Zandi counters that inflation is actually higher than reported (closer to 3% than 2%) due to data collection gaps during the government shutdown, specifically in housing and medical care.
The Trump Administration (via Peter Navarro) explicitly denied reports of reducing steel and aluminum tariffs, calling the metals "sacred" and maintaining a "no exemptions" policy.
A major market rotation is predicted by Paulsen: moving from "New Era" tech stocks to "Old Era" cyclicals and international equities, driven by necessary Fed easing and a weakening dollar.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
SMALL CAPS /CYCLICAL STOCKS /INTERNATIONAL EQUITIES	LONG	Jim Paulsen Former Chief Investment Strategist, Paulsen Perspectives	Paulsen states the economy is at "stall speed" (real GDP ex-trade is weak) and the job market has flatlined. He notes money supply is picking up, the dollar is falling, and the yield curve is steepening. The Fed will be forced to ease aggressively to prevent a recession. Historically, a backdrop of Fed easing, a lower dollar, and a steepening curve triggers a rotation away from crowded "New Era" growth stocks (Tech/AI) into neglected "Old Era" assets (Small Caps, Cyclicals, International). Long exposure to sectors that benefit from liquidity injections and a weaker dollar. If Zandi is right and inflation remains sticky at 3%, the Fed may not be able to ease as quickly as Paulsen expects.	—
STEEL /ALUMINUM /NUE /X	LONG	Steve Liesman Senior Economics Reporter	Peter Navarro (White House Trade Advisor) explicitly refuted reports that the administration would lower tariffs, stating there are "no plans" to scale them back and that steel/aluminum are "sacred." The market had begun pricing in a potential reduction in tariffs (which would lower prices and hurt domestic producers). The confirmation that high tariffs (up to 50%) remain in place protects the pricing power and market share of domestic US steel and aluminum producers against foreign competition. Long domestic metal producers who retain protectionist advantages. Retaliatory tariffs from trading partners or demand destruction due to high prices.	2:18
US TREASURIES /TLT	LONG	Jim Paulsen Former Chief Investment Strategist, Paulsen Perspectives	Paulsen argues "no jobs is just unacceptable" and notes the average duration of unemployment is nearing half a year. The Federal Reserve has a dual mandate (inflation and employment). With employment stalling, the Fed will be forced to cut interest rates to stimulate the economy, which mechanically drives bond yields down and bond prices up. Long duration assets (Treasuries) to capture price appreciation from falling rates. Sticky inflation (Zandi's point) prevents the Fed from cutting rates.	—
US DOLLAR	SHORT	Jim Paulsen Former Chief Investment Strategist, Paulsen Perspectives	Paulsen observes that "the dollar's come off" and money supply has picked up. As the Fed moves to ease policy to save the labor market, interest rate differentials will likely narrow, and increased money supply will put downward pressure on the currency. A weaker dollar is explicitly cited as a driver for the rotation into International Stocks. Short USD to play the easing cycle. Global instability driving a "flight to safety" back into the Dollar.	6:12