In this episode, Jim Paulsen returns to dive deep into market valuations, why the traditional valuation range may have permanently shifted higher, and how shifts in recession frequency, liquidity, innovation cycles, and policy regimes are reshaping return expectations. We also explore why fear remains a powerful tailwind for markets, the broadening beneath the surface of the AI-led rally, and why Jim believes this cycle could still deliver strong returns even as leadership rotates.

Topics covered:
• Why market valuations may never return to historical norms
• How fewer recessions have structurally boosted market multiples
• The role of liquidity buildup across households and corporations
• Profit productivity and why companies are more valuable today
• The limits of valuation metrics like CAPE and forward PE
• Tech vs the rest of the market and the case for leadership rotation
• Why fear and pessimism are still fueling this bull market
• How policy regimes (monetary and fiscal) drive return frontiers
• Capex cycles, AI infrastructure build-out, and lessons from past tech booms
• Where Jim sees opportunity and where caution is warranted

Timestamps:
00:00 Intro
03:00 Fear, pessimism, and the wall of worry
10:00 Data blackout, volatility, and what markets are signaling
16:00 Valuations breaking historic ranges
22:00 Broad-based valuation expansion across the market
29:00 Why the mean may be drifting higher
33:00 Fewer recessions and higher multiples
40:00 Corporate balance sheets and liquidity boom
42:00 Profit productivity and tech’s structural shift
49:00 Forward PE as a sentiment indicator
51:00 Tech vs the rest of the market
55:00 Innovation cycle vs business cycle
57:00 What’s still cheap and market breadth trends
01:00:00 The risk-return frontier and policy regimes
01:05:00 Final thoughts on AI, capex, and market risk