(Bloomberg) -- At a time when virtually all of Wall Street is on guard against a recession, Jim Paulsen of The Leuthold Group said stocks are about to rally at least 25% in the next year.

The chief investment strategist at Leuthold predicts the S&P 500 will hit 5,000 in the coming 12 months, a far more bullish call than any provided by the strategists Bloomberg regularly surveys. Investors are focusing too much on the Federal Reserve and the implication of its interest-rate hikes, Paulsen said in a Bloomberg Television interview Thursday, adding that the economy is slowing. 

“The lows are in, and I think we are starting a new bull market,” Paulsen said in a Bloomberg Television interview Thursday. “The Fed is not the only policy driver in the room. There are others and a lot of those have already started to ease.”

The 10-year Treasury yield is hovering around a three-month low, while the US dollar has fallen nearly 9% from peak-to-trough and mortgage rates dropped for a fourth week in a row, the longest stretch of declines since May 2019.

While the Fed is expected to raise rates by another 50 basis points to curb inflation, the economy is slowing and Paulsen said, “they are going to have to be wrapping it up pretty soon.”

The average equity strategist is predicting a decline for the S&P 500 in 2023 as recent wage and services data suggest inflationary forces still grip the economy, boosting chances of higher rates. 

Read more: Burned Stock Pundits Ditch Two Decades of Unbroken Bullishness

Wall Street watchers are sounding the alarm ahead of next week’s Fed policy meeting, warning that the outlook for the US economy in 2023 is grim. Top bank CEOs from Goldman Sachs Group Inc.’s David Solomon to JPMorgan Chase & Co.’s Jamie Dimon recently shared their dire predictions of a possible recession.

“I don’t ever remember a time when the CEOs in this country are almost 100% universal that we are going to have a recession,” Paulsen said. “Usually, recessions are something that comes out of left field and surprises the market. That’s not going to happen here.”

Read more: Wall Street Chorus Grows Louder Warning 2023 Will Be Ugly 

However, Paulsen said he thinks the US can still avoid recession.

“There is too much pessimism,” he said. “Too much has already been discounted and that opens the door for a positive surprise and people have to catch up.”

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