Paulsen: Calmness And Valuation Make Market Vulnerable

While investors have been fixated on the Greek debt crisis, James Paulsen of Wells Capital Management says there’s another big factor that markets must deal with.

Paulsen tells CNBC that he thinks the Federal Reserve will soon raise interest rates, and the yield on 10-year Treasurys will climb toward 3%. “They have come right back up to the highs they were at before Greece turmoil started,” he said of Treasury yields. “Ultimately this is going to come back to when rates are going to start to rise, and we’ll have to wait and see how Wall Street handles that.”

According to Paulsen, the combination of calm investors and high valuations make stocks vulnerable. “There’s a lot of money that shows up on every dip,” he said. “I think that says something about how calm and confident people have become about the future here, maybe for the first time in this recovery.”