Ed Yardeni's Inflation Insights You Won't Hear Elsewhere

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01. well look I I think the big issue for the stock market is the bond market and the bond market uh we argued back in August of last year I would in this video Ed yard Deni expresses concerns about potential inflation risk in the coming months noting that while recent inflation data has shown signs of cooling an unexpectedly High consumer price index report could negatively impact the stocks and bond markets he highlights the importance of the bond market as rising interest rates may prompt a shift in investments from stocks to bonds despite these inflation concerns yard Deni maintains a bullish outlook on the S&P 500 predicting strong earnings and acknowledging the resilence of the economy amid low to moderate inflation the so-called super core uh which of course is uh Services excluding uh rent inflation uh and in addition to that we've got Energy prices going up here and it was good deflation over the past several months that helped to bring inflation down it wasn't services so now we we've got to be concerned that the next couple of months we may have an inflation scare I mean doesn't the PPI though tend to be a better read into the pce yeah which certainly is a more important gauge on inflation at least according to what the FED watches oh you're absolutely right it's a very good point uh I I would say that the month over month number was better than expected but when you look at it year-over-year you're still seeing an upward Trend in the services area and uh so uh you know the best of the inflation news is behind us for the next few months but again that's not the only issue for the for the bond market or the stock market I think both of them have had to Discount the fact that the FED may very well be at a none and done outlook for um the federal funds rate for the rest of the year and I'm not sure everybody's uh understood that meanwhile as you said just a while ago a few minutes ago with one of your other guests uh pretty close to 5% I think there's something magical about that number I think you'll see some rebalancing out of stocks and into bonds I think 5% is an awfully attractive rate may are you changing your view on the equity Market you've been positive you've been bullish um are you are you moving that ball um in in the different in a different direction as a result of the backup in rates yeah no good question I'm no I'm still looking for 7,000 on the S&P 500 by the by year end I still think that the economy is going to be res I still expect that uh we're in a productivity growth boom and I think that S&P 500 earnings are going to be $285 a share this year uh which I think is probably one of the highest on on the street so I remain very positive on on the earning situation uh maybe it's wishful thinking but I'm hoping for a buying opportunity I'm I'm not uh recommending that anybody sell into this but if uh you've got some cash I I would look for an opportunity to buy but at the same time I would also recommend buying some bonds at 5% I mean cash is looking pretty good at 5% too there is there's competition again I mean I guess that's the point that you're making for certain but what happens if the FED let's just I don't know if the FED doesn't cut anym this year however outlandish that that might be maybe once maybe none is that a problem or does it not matter as long as the economy remains strong I think it would happen because the economy remains strong you know for the past three years there's been a lot of talk about a recession I think that's uh largely behind us it may come back of course but I think uh interest rates have normalized I think four and a half% on the on the 10-year bond yield maybe plus minus 25 or even 50 basis points is kind of the range we're going to see for the next few years and that's what we had before the great financial crisis so I think it just reflects the fact that the economy is resilient it's it's growing at a at a decent pace I think it's going to grow at a faster pace because I'm very bullish on productivity and you put it all together and uh you get an economy that's uh strong with low low moderate inflation uh and a stock market that moves higher on earnings not valuation what part of the market do you like the best right now I mean if we're talking about earnings we you know we start to get them tomorrow with the banks for example what do you like what don't you like I think you could start with the banks I think the banks will report uh solid earnings loan demand has been picking up the financial markets have had more volatility and their Traders are pretty good at making money in that kind of environment I think m& is starting to to pick up uh so the banks the financials generally speaking look quite good we've got uh more deregulation coming and a lot of that's going to benefit uh the banks uh fed regulator has left and will be replaced by somebody who's likely to be uh less stringent about the kind of regulations they want on banks so financials for sure uh I would say stick with technology I wouldn't be selling technology I'd be looking for opportunities maybe to to buy some more Industrials still look fine to me uh so really all the all the sectors that we've been uh pushing uh have done quite well and uh we're going to maybe overstay our welcome here but we're going to stay with them and we would uh overweight the US relative to foreign portfolios uh we would overweight the S&P 500 relative to the smid gaps and we think the S&P 493 outside the Magnificent 7 uh are all going to be viewed increasingly over the next few years as tech stocks uh these days you either make Tech or you use Tech to increase your your efficiency your productivity your relationship with customers and those companies are going to show good earnings I'm expecting profit margins to to go to a record high this year or next year