Veteran strategist Jim Paulsen said Wednesday that the stock market has shown signs of panic and that investors should consider buying stocks on down days.
“I don’t know where the bottom is here. I think we’re close to it, though, I really do. This thing just oozes panic to me,” Paulsen, the chief investment strategist at Leuthold Group, said on “Squawk Box.”
U.S. markets opened sharply lower on Wednesday, continuing a volatile period of trading. The Dow Jones Industrial Average has seen five daily swings of more than 1,000 points over the last two weeks, including a drop of more than 2,000 points, or 7.8%, on Monday.
“The movement — the ferociousness and speed by which stocks have fallen — and now bond yields looks more like the end of a colossal panic … I would start to nip away at it on these kind of down days that we have,” Paulsen said.
The Dow, S&P 500 and Nasdaq are all trading in correction territory, more than 10% below last month’s all-time highs. The wild moves have come as the coronavirus has spread around the world, leaving investors unsure about its impact on the global economy.
The lack of clarity about the economic effects could mean that the market has fallen too far, Paulsen said.
“If you have no fundamental thing to look at to keep you grounded, what happens is you end up pricing securities on the basis of your worst nightmare. So investors, completely untethered from any fundamental information, are just pricing on their fears,” he said.
Upcoming economic data, like Thursday’s scheduled release of weekly jobless claims, could spur stocks to climb even if it shows a weakening economy, Paulsen said.
“The real question isn’t is it going to be bad. The question is is it going to be worse than feared. Because if it turns out the economy isn’t collapsing as bad as we fear, that’s good news,” he said.