'High returns with low risk': Why wildly unpredictable economic data is a reason to buy stocks, according to one Wall Street chief strategist
Traders working on the floor of the New York Stock Exchange are blur in this time exposure, just before the opening bell, 11 May, 2004.The Economic VIX — a gauge measuring GDP readings against their historical average — suggests the stock market is poised for years of strong gains, James Paulsen, chief investment strategist at The Leuthold Group, said.
The strategist created a metric — deemed the Economic VIX — for tracking such macro swings by measuring past quarters' gross domestic product growth against the historical average. The last post-war high was set in the wake of the financial crisis, when Paulsen's gauge spiked as high as 3.5, well into its highest quartile.
The reasoning supporting the trend is relatively simple, Paulsen said. Forward-looking markets tend to plunge before GDP readings highlight a spike in market volatility. Once data starts to detail the extent of the economic fallout, stocks are already starting their rebound.
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