Excess Returns · Saturday, July 11, 2026
Jim Paulsen explains that economic policy has become contractionary since early in the year, citing increased yields, slowed money supply growth, and a contracting fiscal deficit. He believes these reversals, which previously helped the economy, will now negatively impact economic data with a lag.
“what the hostilities did was it brought back tightening of economic policy again. Uh, it raised yields, it slowed the rate of growth and real money supply, raised inflation, lowering, uh, the real wages and real growth and monetary aggregates.”
“So, uh, we have a contraction of fiscal policy. We've had the 10-year yield go up, uh, about 70 basis points from its low, it's low 4% almost 4.60 this morning.”
“And as we sort of reversed all that, and with a lag, I think that's going to hit a lot of economic, uh, information and and take sort of the thrust out of the economy that everyone sort of betting.”