Stocks could see an oversized comeback well into next year.
Jim Paulsen of the Leuthold Group sees the depression-like collapse as the basis for a war-type boom.
"It has forced companies to react with only one jolt – to do everything possible to survive this pandemic," the company's chief investment strategist told CNBC's "Trading Nation" on Wednesday. "That put them in a unique position with incredible profit leverage because they kept costs so low and increased efficiency."
According to Paulsen, that means enormous earnings growth potential. He believes it's a by-product that Wall Street is radically underestimating.
"Much of this boom will be bottom line to a greater extent than currently expected," said Paulsen. "We could have a big profit recovery."
Its schedule is based on projections of economic growth for the next year. For example, the latest Moody & # 39; s Analytics survey found that economists are forecasting GDP growth to grow by nearly 20% on average this quarter, followed by 9.6% in the fourth quarter and 7.7% in the first quarter of 2021.
"It would be one of the strongest periods of growth we have ever seen, and it would come after the biggest collapse we have ever seen," he noted.
Paulsen predicts the impact will benefit the entire stock market with economically sensitive stocks leading the way. He especially likes industry, materials, finance and small caps.
"I don't know how high this thing can go," said Paulsen, who expects an effective coronavirus vaccine to go widely and help the US reopen permanently.
Despite his angry bull case, Paulsen admits there are risk factors – namely, another surge in the virus or a new, deadlier strain. But it's far from its base case.
"I like that so many worry," said Paulsen. "There are a lot of portfolios waiting to be withdrawn, and if they don't, there are $ 5 trillion money market funds that could come back on the market next year."
On Wednesday, the S&P 500 closed two tenths of a percent of its previous closing price.
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