The bond market is flashing a major buy sign for stocks, says Jim Paulsen

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Worried investors searching for meaning in the bond market and its relationship to stocks may feel vindication after this week. They would be wrong, says Jim Paulsen.

div > div.group > p:first-child"> The S&P 500, Dow and Nasdaq just had their worst week of the year with all three down for a fifth day in a row. That's the first time all the indices have been down every day of the week since November 2016.

"The bond yields went down and they just have not come back up even though the stock market has recovered, commodity prices have come back. People wonder whether the bond market knows something that the other markets don't," Jim Paulsen, chief investment strategist at Leuthold Group, told CNBC's"Trading Nation" on Friday.

Paulsen also sees similarities between the bond and stock market moves so far this year, even though stocks have roared off lows while the 10-year yield has remained below 3 percent. The price-earnings multiple in the stock market has risen back to early December levels, and the earnings yield has fallen; likewise, the price-to-coupon ratio in the bond market has increased while yields have fallen.

 

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