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Stocks May Be 'Remarkably Expensive': Chief Investor

Friday, 10 Sep 2010 | 10:45 AM ET

Stocks rose Friday for a third session straight, with the energy sector in the lead. James Paulsen, chief investment strategist at Wells Capital Management and Jack Ablin, executive vice president and chief investment officer of Harris Private Bank, shared their market outlooks.

The Early Tick: Markets
Insight on the market action, with James Paulsen, Wells Capital Management, and Jack Ablin, Harris Private Bank.

“There’s a decent reason to expect that the economy improves in the fourth quarter,” Paulsen told CNBC.

There has been a big drop in long-term yields from Treasurys, mortgage rates to corporates, in addition to falling oil prices and the dollar, he explained.

“And Chinese stopped their tightening campaign,” Paulsen added. “That, with a lag, is likely to pick us back up from this soft patch and rebuild confidence.”

Ablin's Outlook:

In the meantime, Ablin said he is slightly cautious on the markets.

“Investors are playing scenario analysis and they’re reserving the chance of a double dip with earnings decline and P/E compression,” he said. “If you take a 9 to 11 percent chance of a worse-case scenario, then it would appear that stocks and bonds are roughly equally valued.”

“So before we run away and say we’re table-poundingly cheap, there are scenarios out there that suggest stocks are remarkably expensive,” said Ablin.

Ablin Likes:

Preferred stock, particularly bank preferreds

International small caps

Global mega caps

Paulsen Likes:

Consumer discretionary

Emerging markets

Technology

Energy

Scorecard—What They Said:

  • Ablin's Previous Appearance on CNBC (Sept. 2, 2010)
  • Paulsen's Previous Appearance on CNBC (Aug. 26, 2010)

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Market Views—Across the Board:

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CNBC Slideshows:

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CNBC Data Pages:

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CNBC's Companies in the News:

Deutsche Bank

  • Deutsche Bank Takes First Step in Rush for Capital

Nokia

  • Nokia Fires CEO Amid Fierce Competition, Taps Elop

Hewlett-Packard

Google

BP

  • BP Delays Results on Oil Spill Complexities

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Disclosures:

No immediate information was available for Ablin or Paulsen.

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Disclaimer

  Price   Change %Change
BP.
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DBK
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HPQ
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NOK
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GOOGL
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