Ed Yardeni of Yardeni Research observes a shift in market sentiment. Concerns are easing across various fronts. Potential ceasefires are on the horizon, including talks between India and Pakistan. The US is also engaging in diplomatic efforts. Recession odds in the United States are decreasing. Trade negotiations are underway with multiple countries, including China. The next big trigger is going to be earnings and resilience of the economy.
It seems like a lot of uncertainty in the world is dissipating, but is it too soon to assume that all is well and it cannot get better than this?
Ed Yardeni: I agree with you that the market has in a matter of weeks moved from lots of things to worry about to suddenly maybe nothing to worry about. Even on the geopolitical front, there seems to be a lot of potential ceasefires going on, even a potential ceasefire between India and Pakistan, between the United States and the Houthis, between Russia and Ukraine. These are all tentative, but it certainly suggests that things are moving towards a more peaceful diplomatic and negotiating approach to dealing with world problems.
Here in the United States, the odds of a recession have gone down now that Trump's trade war seems to be simmering down and we have not only 90 days through July 8th for negotiating with every country around the world except China and now we have 90 days from today and negotiating with China with certainly lower tariffs than we had at the end of last week.
So, all in all, it looks pretty good and there just seems to be a tremendous amount of buying power, some of it may be short covering, but a lot of it is FOMO or fear of missing out, and the fundamentals are probably going to look better and better as we get approach 2026.
What could be the next big trigger for equity markets to go higher? Could it be Fed, could it be American earnings? What could be that next big trigger?
Ed Yardeni: I do not think it is going to be the Fed. If anything, the Fed is going to remain on hold for longer. There is no particular reason for the Fed to lower rates. If the labour market remains resilient, which it has, even as the trade war got started, now that the trade war is easing off, I would expect that the labour market would remain relatively robust. Yes, it is going to be earnings, it is going to be the resilience of the economy.
The US consumer is going to continue to spend. Capital spending which everyone thought would be very weak because of uncertainties, capital spending on technology seems to be quite resilient as well. The data centre spending has a lot to do with the demand for cloud computing and cloud computing demand is only increasing. Of course, we are rapidly approaching the age of humanoid robotics, autonomous driving. These are no longer theories. They are no longer toys. They are actually going to be items that influence our lives dramatically.
Today, as a matter of fact, I have raised my outlook for the S&P 500 back up from 6,000 to 6,500 by year end and also lowered my odds of a recession from 35% to 25%. The remaining 75% would be characterised as a potential for a roaring 2020 scenario. I am picking up on that theory of mine which I have held since the beginning of the decade.
It seems like a lot of uncertainty in the world is dissipating, but is it too soon to assume that all is well and it cannot get better than this?
Ed Yardeni: I agree with you that the market has in a matter of weeks moved from lots of things to worry about to suddenly maybe nothing to worry about. Even on the geopolitical front, there seems to be a lot of potential ceasefires going on, even a potential ceasefire between India and Pakistan, between the United States and the Houthis, between Russia and Ukraine. These are all tentative, but it certainly suggests that things are moving towards a more peaceful diplomatic and negotiating approach to dealing with world problems.
Here in the United States, the odds of a recession have gone down now that Trump's trade war seems to be simmering down and we have not only 90 days through July 8th for negotiating with every country around the world except China and now we have 90 days from today and negotiating with China with certainly lower tariffs than we had at the end of last week.
So, all in all, it looks pretty good and there just seems to be a tremendous amount of buying power, some of it may be short covering, but a lot of it is FOMO or fear of missing out, and the fundamentals are probably going to look better and better as we get approach 2026.
What could be the next big trigger for equity markets to go higher? Could it be Fed, could it be American earnings? What could be that next big trigger?
Ed Yardeni: I do not think it is going to be the Fed. If anything, the Fed is going to remain on hold for longer. There is no particular reason for the Fed to lower rates. If the labour market remains resilient, which it has, even as the trade war got started, now that the trade war is easing off, I would expect that the labour market would remain relatively robust. Yes, it is going to be earnings, it is going to be the resilience of the economy.
The US consumer is going to continue to spend. Capital spending which everyone thought would be very weak because of uncertainties, capital spending on technology seems to be quite resilient as well. The data centre spending has a lot to do with the demand for cloud computing and cloud computing demand is only increasing. Of course, we are rapidly approaching the age of humanoid robotics, autonomous driving. These are no longer theories. They are no longer toys. They are actually going to be items that influence our lives dramatically.
Today, as a matter of fact, I have raised my outlook for the S&P 500 back up from 6,000 to 6,500 by year end and also lowered my odds of a recession from 35% to 25%. The remaining 75% would be characterised as a potential for a roaring 2020 scenario. I am picking up on that theory of mine which I have held since the beginning of the decade.
