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While Paulsen is taking an optimistic view of banks, industrials, and materials companies, he thinks the consumer discretionary sector doesn't look as attractive.Every day, experts tells investors to buy stocks that look great but have escaped the public's notice. Less common is when those experts say to buy some stocks because, on the surface, they look bad.
"What is the best time to buy a stock that's really sensitive to the economy? It would be when you're in the pit of a recession and you're just about ready to exit," he told Business Insider in an exclusive interview. "They have been washed out on a relative basis," he says. "The fact that they have underperformed for as long as they have and by as much they have, that's one factor that makes them look attractive right now."
And that's a good sign because a similar pattern of stability, rather than a V-shaped recovery, played out after the Global Financial Crisis, the slowdown in 2011, and the oil price plunge in 2015-16.Paulsen continues that pessimism around the health of the economy is affecting the stocks to the point that a recession is more or less priced in. That means there's a lot of room for things to turn out better than investors expect.
"Policy officials are working really hard to improve the relative performance of your cyclical stocks by dropping the longterm cost of capital almost in half over the last year... by exploding the money supplies, by increasing fiscal juice over the last year, and kind of keeping the dollar flattish as opposed to continuing to go up," he said.
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