Excess Returns: The Walmart Indicator Just Hit 2008 Levels | Jim Paulsen on the Big Difference This Time

Date: April 8, 2026
Guests: Jim Paulsen (Paulsen Perspectives), Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

Episode Overview

In this packed episode, the Excess Returns team sits down with economist and strategist Jim Paulsen for a deep dive into his unique “Walmart Indicator,” macro signals, and the evolving nature of the current bull market. Paulsen unpacks recent economic developments, discusses the muted economic reaction to rising oil prices and global unrest, and provides a nuanced take on why he believes this cycle is fundamentally different from past crises. The team explores the broader implications for investors, including credit risk, sentiment, liquidity, productivity trends, and market leadership shifts.

Key Topics & Insights

1. The Current State of the Economy and Market Backdrop

Timestamps: 00:25–07:44

• War & Uncertainty: Paulsen expresses fatigue over daily geopolitical surprises, noting how they can obscure underlying economic signals (02:55).
• Oil Shock’s Limited Impact: Despite the major surge in oil due to Middle East tensions, the impact on the U.S. 10-year Treasury yield and inflation expectations has been surprisingly minor (02:55, 04:00).
  • "I’m kind of amazed a little bit of sort of the limited impact that such a big surge in oil has had... We're talking what, 10 to 15 basis points... That’s just a good day trade." — Jim Paulsen (02:55)
• Stagflation Not Like the 1970s: Jim differentiates current conditions from genuine stagflation, emphasizing the absence of runaway demand, low productivity, and excessive debt build-up (07:44).
  • "Whatever this is, it’s not stagflation like the 1970s... We still got all the disinflationary, almost deflationary... tendencies." — Jim Paulsen (07:44)
• Growth Slowing, But No Recession Yet: Paulsen foresees slower growth, partly due to the ‘oil tax’ and delayed policy easing, but still believes recession is avoidable in the near term (05:30).

2. The Walmart Indicator: What It’s Saying Now

Timestamps: 11:24–18:36

• Concept & History: The ratio of Walmart stock price to the S&P Global Luxury Retailer Index is used as a gauge for lower-income consumer stress — often preceding broad economic slowdowns or improvements.
  • "Recessions... show up first in the lower income part of the distribution. If things start to get a little worse, they’re going to feel that quicker... The Walmart indicator gives us an early peek." — Jim Paulsen (11:40)
• 2008 Parallels & Today's Signal: The latest reading has dropped to levels not seen since 2008, but Paulsen emphasizes a critical distinction: balance sheets are much healthier now (18:36).
  • "It’s now about as bad as it was in... the 08 crisis... But maybe what it’s picking up this time is... a private credit problem... not a public [credit] problem." — Jim Paulsen (15:40)
• Indicator Limitations: Recent divergence from credit spreads suggests the indicator currently tracks stress in private credit, not the broader lending system (16:30).
• GDP & Unemployment Correlations: Historically, a falling Walmart indicator aligns with slowing GDP and rising unemployment — both trends are flashing yellow now (17:00–18:00).

3. Private Credit: Risk or Overstated?

Timestamps: 20:50–23:34

• Nature of Private Credit: While fallout in private credit could affect investor portfolios and market sentiment, it’s more contained than a banking-led public credit crisis.
  • "It is a much less frightening animal for the economy... but it doesn't mean it’s not anything. If enough investors lose enough money, that’s going to have some fallout." — Jim Paulsen (21:17)
• Systemic Risk Lower: Private credit issues may lead to conservative shifts in asset allocation and market attitudes, but are unlikely to spark an economy-wide crash.

4. Bull Market or Bear Market? Diagnosing Sentiment, Leadership, and Cycle Position

Timestamps: 23:34–32:04

• Pessimism at the Bull Market’s “Start”: Despite corrections in growth and small-cap indices, sentiment is strikingly bearish for a market three and a half years into a bull, which historically suggests more upside.
  • "I'm kind of amazed... the feeling by a lot of people that, oh, boy, bear risk is pretty high, valuations are high... But I’m seeing... indications that look more like the start of a new bull market." — Jim Paulsen (23:49)
• Leadership Rotation: There’s been a handoff from mega-cap “New Era” stocks to broad market sectors—small caps, value, energy, utilities—which have room to recover.
  • "There’s been a successful baton pass like in a track meet from New Era stock leadership to broad market stock leadership... we could perhaps have a bull within a bull..." — Jim Paulsen (32:47)
• Corporate Profits: Total U.S. corporate profits remain below trend, showing “recession-like” conditions outside the S&P’s leaders and leaving pent-up capacity for future earnings (36:44).
  • "My point about this is... we still got corporate profits... that look like they’ve been in recession the whole time... If we brought a little policy stimulus... we’ve got a lot of capacity and potential to expand profitability..." — Jim Paulsen (36:44)

5. Macro Condition Signals: Sentiment, Liquidity, Policy Uncertainty

Timestamps: 38:16–46:01

• Economic Policy Uncertainty: Remarkably, historic peaks in uncertainty have often preceded strong stock market returns, while periods of calm have been poor entry points (38:28).
  • "The best returns... are from times when there is great uncertainty... When everyone is fully hunkered down... it’s hard to get a terrible thing [to happen]..." — Jim Paulsen (38:28; 42:11)
• High Cash Balances: Households and corporations hold near-record levels of cash, possibly fueling future risk-taking and asset allocation shifts (44:06).
  • "That’s a lot of powerful flows that could come towards risk assets if somebody on television just says ‘oh, I guess it’s turned out better than we thought’..." — Jim Paulsen (44:06)
• Put/Call Ratios, Gold, and Credit: High put/call ratios, gold’s rollover, and slow consumer credit growth are all typically found near market lows and recovery points (45:15–46:01).

6. New Data Tools: PolyMarket and Economic Sentiment

Timestamps: 48:00–49:30

• Market-Implied Recession Probabilities: PolyMarket data reflects spiking recession fears during turmoil, which have historically marked strong market entry points (48:17).
• San Francisco Fed’s Sentiment Index: Economic sentiment has soured significantly since the recent war, mirroring risk-off periods that precede recoveries.

7. Productivity: Real Gains or Staff-Cutting Mirage?

Timestamps: 52:16–57:42

• Most Growth Is in Tech, Not the Broader Economy: Information sector’s productivity surges dwarf persistent stagnation elsewhere (52:24).
  • "Productivity in the rest of the economy is just barely over 1%... [Tech] has been perpetually about five times higher over the period..." — Jim Paulsen (52:24)
• Current Productivity Growth Tied to Slowdowns: Spikes in overall productivity often coincide with economic slowdowns—frequently a result of headcount reduction rather than true efficiency gains (52:24–55:00).
  • "Are we really getting any productivity gains or are we just staff cutting? I suspect we're just staff cutting. I don't know if we're seeing a lot of evidence of productivity... yet." — Jim Paulsen (55:00)
• Implications for Labor and Growth: With job growth at zero, further productivity gains may be difficult to achieve without genuine technological diffusion.

Notable Quotes & Memorable Moments

• On Using Indicators in Context:
  "I use a lot of indicators, Jack... because things change over time. 08, it called it... That was a time when we still had debt-to-income ratios going straight north. Today, those [ratios] are close to the lowest they've been in decades... It’s a completely different private balance sheet situation." — Jim Paulsen (18:36)
• On Market Psychology:
  "If you’re into a period of stability, surety, and forecastability... you probably should pick up your phone, call your broker and sell, because those are awful times." — Jim Paulsen (38:28)
• On Policy Uncertainty under President Trump:
  "The thing that President Trump has brought is he's bought, brought a lot of uncertainty and constant... sense of, of, of randomness and shock and awe..." — Jim Paulsen (38:28)
• On High Cash & Bullish Setups:
  "There’s a lot of people then that are under allocated risk right now... That’s a lot of powerful flows that could come towards risk assets..." — Jim Paulsen (44:06)

What Jim Paulsen Is Watching Next

Timestamps: 57:54–60:36

• Growth Trajectory: Will the U.S. economy continue to soften, or is there a genuine pickup as some reports suggest? Skeptical given recent job numbers revisions.
• Market Leadership: Will broad market sectors continue to lead, or will mega-caps regain dominance if the crisis settles?

Conclusion & Takeaways

Jim Paulsen’s data-led analysis provides a nuanced message: while some leading indicators (like the Walmart Ratio) are flashing caution and stress among lower and middle-income consumers, the U.S. economy and markets remain on much sturdier footing than in past crises, thanks to healthy balance sheets and ongoing pessimism. Multiple macro and sentiment indicators, alongside robust liquidity, argue that today’s market resembles an early bull setup, particularly for broad and undervalued sectors, rather than the end of the cycle. Key risks linger in private credit and productivity, but the overall case remains mildly optimistic unless proven otherwise.

For the full conversation and more unique macro commentary, listen to the episode or follow Jim Paulsen’s work at paulsonperspectives.substack.com