Jim Paulsen, a veteran strategist and former chief investment strategist at Leuthold Group, warns that the U.S. stock market has exhausted most of the room it traditionally relies on to keep climbing higher. The S&P 500 sits about 60% above its post-World War II trend line, a level only matched once before, at the peak of the dot-com bubble. Trailing 12-month earnings, corporate profit margins, and household exposure to equities have all reached record highs, while cash holdings are near all-time lows. Paulsen also points to recent weakening economic data and warns that falling interest rates could coincide with falling stock prices rather than triggering the rally investors typically expect.
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