On the Money

Strategist Jim Paulsen says prepare for a stock market correction in 2018

Key Points
  • Jim Paulsen, chief investment strategist at Leuthold Group predicts a stock market correction in 2018.
  • It is a good time for investors to rebalance their 401(k) retirement accounts.
  • Paulsen says a correction is a buying opportunity for investors and there will be good buys in the financial and energy sector.
Market milestones

This week the Dow crossed 24,000. The stock market keeps rising as nearly every month milestones are reached and then surpassed.

It was less than a year ago when the Dow hit 20,000 on Jan. 25. Can the rally continue?

"I think we're due for a correction and we may well have that in 2018," The Leuthold Group's Jim Paulsen tells CNBC's "On The Money" in an interview.

But the chief investment strategist at the asset management firm said, "I don't really see the end of the recovery yet. And I don't see a bear market."

What will this year's rally mean for your retirement savings when you open your 401(k) statements at the end of the year?

"What I'd look at is making sure that you reallocate funds. Some of your best holdings will have gone up in weighing, and your stuff that is lagging would have fallen." It is the time to rebalance your portfolio for 2018, Paulsen suggests.

He cautions, "I still think you'll want to be prepared for a little more difficulty in 2018. Certainly (more difficult) than we've had this year." Considering that scenario, the strategist recommends investors be "a little more conservative in how they invest."

Paulsen suggests reallocating your mix "between stocks and bonds."

"But I'd also rebalance some of my sector exposures, and become a little more defensive. Paulsen says he would take "a little out of aggressive technology that's done really well, and move a a little bit to energy and financials for 2018."

But Paulsen told CNBC if there is a market correction, it could be a buying opportunity.

"I'd look at what I want to buy on the cheap at that point, or I'd allocate more funds too."

If you've missed this rally and don't own stocks is it too late to get in now? Paulsen disagreed.

"I wouldn't say that. I think if you haven't got money in the stock market, I would definitely get some in there, but I'd do it over the course of the next 12 months. A little bit every month, rather than deciding what day to put it all in."

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