Wells Capital's Paulsen: Stocks May Drop 15 Percent Before Year-End

The S&P 500 gained 3.8 percent in August, its best performance for that month in 14 years. The index hit a record high of 2005.04 last week and closed at 2002.28 Tuesday.

But many experts warn that the party could end soon.

"I am a little worried," James Paulsen, chief investment strategist at Wells Capital Management, tells The Wall Street Journal. Stocks may plummet 15 percent before the end of the year, he predicts.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

Paulsen recommends foreign stocks for their more attractive valuations.

To be sure, the five-year old bull market may only be half over, he adds. "But bull markets aren't typically straight-line events."

Russ Koesterich, chief investment strategist at BlackRock, tells The Journal that fear of a Federal Reserve interest-rate increase could hurt stocks.

Many economists forecast that the Fed will move in the second or third quarter next year.

September is historically a bearish period for the stock market. It's the only month that has seen a decline on average for the last 20, 50 and 100 years, according to the paper.

But some investors remain bullish.

"Overall, data supports the idea that the economy is accelerating going into the second half of the year, which certainly helps the equity markets," Kevin Caron, a portfolio manager at Stifel Nicolaus, tells Bloomberg.

"You've had investors who have been increasingly encouraged by the direction of the data in the economy. They've been discouraged from holding assets in low-yielding, safer assets."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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