Concern that a surge in U.S. bond yields will curb the expansion is overblown, says money manager James Paulsen. When coupled with gains in confidence, higher borrowing costs are a healthy sign for the world’s largest economy.
“Confidence is at the center of everything here,” said Paulsen, the chief investment strategist at Wells Capital Management in Minneapolis with $340 billion in assets under management. “If I had to pick one overriding thing, it’s confidence that’s been running through the financial markets and the economy this year.”
Since 1967, stocks have risen at a 12.8 percent annualized rate in months when bond yields and the Conference Board’s consumer confidence measure rise in tandem, according Paulsen’s research. When borrowing costs increase and confidence drops, stocks — a proxy for investors’ views on the direction of the economy and corporate profits — have fallen at a 6.4 […]