Wall Street veteran: Bull returns quickly! The Federal Reserve has started a new bull market

Federal Reserve Chairman Powell's dovish speech at the Jackson Hole Symposium last Friday has reset the clock for the bull market in US stocks and opened the door to further gains.

Jim Paulsen, a senior figure on Wall Street, stated in an interview last Friday that a "brand new bull market" in US stocks has emerged after the Fed confirmed its intention to cut interest rates.

Paulsen said, "The Fed has unleashed many positive forces for US stocks that did not exist before," having worked on Wall Street for 40 years before retiring.

He added, "This is the only bull market since World War II in which the Fed has remained tight throughout the entire bull market. Typically, the Fed starts easing policy before the bull market begins. So, in some ways, I think the Fed has actually brought us back to the starting point of the bull market."

The positive forces released by the Fed include the decline in interest rates and US bond yields, as well as the accelerated growth in money supply, all of which were missing factors in the current bull market that began in October 2022.

These forces, along with positive real GDP growth and a sustained trend of de-inflation, should boost sentiment among businesses and consumers.

Paulsen said, "Taking all these factors into account, we have not experienced a situation like this before, and we will see an increase in confidence in the private sector. I believe consumer and business confidence will also start to rise, giving the feeling of a brand new bull market," noting that these conditions typically herald a broad-based rise in US stocks.

The rise in US stocks until 2025 aligns with Paulsen's optimistic view of the economy, as he does not foresee a recession in the near future.

Paulsen pointed to the robust balance sheets of consumers and businesses, as well as the $6 trillion money market fund, as reasons for his optimism.

"It's hard for me to find a vulnerability that would lead to a recession," Paulsen said. "And when pessimism remains high, meaning confidence is low, this tells me that people have been cautious all along."

Looking ahead, Paulsen stated that whether the Fed cuts rates by 25 or 50 basis points at the September FOMC meeting is not important; what matters is that officials will cut rates.

In conclusion, Paulsen said, "It's not just about whether the Fed cuts rates by 25 or 50 basis points, but the intent to cut rates is opening up a whole new level of support for US stocks. I believe this support will continue into next year and beyond."