Wall Street Veteran Warns S&P 500 Faces 20% Correction Amid Overheated Market

Jim Paulsen, former chief strategist at Leuthold Group, warns the S&P 500 could face a 10-20% correction in the coming months. Paulsen cites an "overheated" market, despite second-quarter gains, as several indicators signal a potential downturn and advises investors to adopt a more conservative portfolio allocation. Among the six warning signs, Paulsen highlights tightening economic policy, with the 10-year Treasury yield reaching 4.49% on June 21, 2026. He also notes a significant disconnect between the S&P 500's performance and declining consumer confidence, which fell to historical lows in May. Investor optimism is also near levels seen before the 2000 dot-com bubble, with stock allocations approaching 55% of portfolios, historically preceding market underperformance.