Strategist Jim Paulsen Warns Against Adding Equity Exposure as Tightening Financial Conditions Threaten Seasonal Rally

Veteran strategist Jim Paulsen cautioned investors against increasing equity allocations, warning that tightening financial conditions could undermine the stock market's traditionally strong November-to-April seasonal window, according to a Substack post published Sept. 28, 2026. Paulsen's proprietary U.S. financial conditions index, which tracks five policy indicators—2-year and 10-year Treasury yields, their spread, the trailing 12-month federal deficit, and real money supply growth—plus three economic variables (oil prices, real wages, and CPI), shows seven of eight measures have reversed since May. Conditions are now in the tightest quartile since 1970. Historically, when conditions fall in that quartile, the S&P 500 has returned an average annualized 4.79% from November through April, versus 18.4% during the loosest quartile. Paulsen noted the seasonal pattern has produced negative returns 25% of the time, most recently in 2024 and 2019.