저자: EdYardeni · 외국인
요약 보기
연준 금리 인상(525bp)에도 경기침체가 오지 않은 이유를 설명. 정상화된 금리 수준에서 소비(베이비부머 지출·서비스)와 생산성(AI 등 기술)이 경기를 떠받치며, 장기금리는 실질금리 약 2%+기대인플레 2~2.5% 구조로 4~4.5% 정상 범위라 주장. 주식시장은 연말 S&P500 5400, 2025년 6000, 2026년 6500, 2030년 다우 60000·8000(표기 혼선 가능) 등 강세 전망. 연준 금리인하 필요성에는 회의적.
다듬은 글
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Right now, there is nobody better to be speaking to than Ed Yardeni, who really has had the correct take on markets. While people were talking about recession, he was saying he didn't see what they were seeing. Why have economists gotten this cycle so incredibly wrong? What have people been missing so much? Ed?
Well, I think expecting a recession was perfectly logical, and it kind of made sense. The Federal Reserve increased the federal funds rate by 525 basis points, basically from zero, over a very short period of time, from March 2022 to roughly the summer of 2023. It would make sense that such a dramatic tightening of monetary policy would cause a recession. Along the way, I concluded that maybe the Fed wasn't just tightening; it was actually normalizing. It was bringing interest rates back up to levels the economy had shown it could handle before the Great Financial Crisis and through the Great Virus Crisis. That was what I call the Great Abnormal Period of ultra-easy monetary policy. There's no point in debating whether that made sense or not, but the reality is that period is behind us. We're no longer in an abnormally low interest rate environment, and the economy has proven itself perfectly resilient in the face of the level of interest rates we have.
A lot of that resilience obviously has to do with the consumer. Over the past couple of years, economists have been saying that wouldn't last, that consumers had piled up a bunch of excess savings. I think there's a Federal Reserve estimate that $2 trillion was the peak of excess savings, and now, as of March of this year, excess savings is down to zero. So I guess any day now we should see a pile of economic indicators suggesting the consumer has to retrench because they have to save more. But I think that misses the demography of our economy. We've seen the Baby Boomers starting to retire, and they're sitting on $76 trillion.
So on one side, you have $2 trillion of excess savings that has gone to zero. On the other side, you have a bunch of Baby Boomers retiring. Retirement is a dramatic change in lifestyle. You're no longer saving out of earned income. If you're lucky enough, you've saved enough that you can live on interest and dividend income, and if you're not, you start drawing down your nest egg. The Baby Boomers are spending, and they're spending a lot on services, and guess what? Those are the areas where employment has been very strong. So it's kind of been feeding on itself. There are lots of other explanations for why the recession didn't happen, but I think that's the most important one.
Taking a step back, there's a lot to unpack there. I want to start with where Fed rates are now and the idea that they've been normalized. Are rates restrictive, as Federal Reserve Chair Jay Powell says?
Well, the Fed is not restrictive if you look at the pace of economic growth. If you look at the stock market at all-time highs here and around the world, that matters a great deal, not only to our financial markets but to overseas markets. The dollar has been strong, so I guess that's somewhat restrictive, but it hasn't been so strong as to really restrict anybody's exports from the United States. If you look at the inflation rate, it has come down, and I guess you can say the federal funds rate is restrictive enough to bring inflation down. But what we've learned over the past couple of years is that inflation is a very complex process, and a lot of what we've experienced has had to do with, guess what, the pandemic. That has to be factored into how people think the economy is performing. We all know there were supply chain disruptions, and those have been ameliorated, and as a result that has helped bring inflation down.
A lot of economists had this notion that the only way to bring inflation down is with a recession. So they thought the Federal Reserve would have to keep raising interest rates until we got a financial crisis that led to a credit crunch, which led to a recession. So far that hasn't happened, and yet inflation has come down. One of the things economists missed is China. We didn't have to have a recession, because China has had a significant recession, particularly in its property market. As a result, they've been trying to stimulate their economy by, guess what, exporting more, particularly electric vehicles and other state-of-the-art green technologies. The prices they're charging have actually been deflating, so they've been exporting deflation on goods to the United States. Meanwhile, we're waiting for services inflation to come down, particularly shelter, and by every indication it should continue to come down.
When you put all those things together, you come to the conclusion that interest rates are neutral. They're where they should be. The so-called real interest rate seems to be where we are now, because in that kind of environment you're supposed to get a growing economy with falling, stable, low inflation, which I think we're approaching.
That raises the issue of why people are talking about rate cuts. I know you don't think they should be. You think there's no reason to be talking about cutting rates from here, even insurance cuts or mid-cycle adjustments. What are you looking for to justify that kind of move, at a time when Jay Powell seems pretty committed to cutting at some point, as soon as they have a window of opportunity?
Yes, again, I don't really understand that. I certainly didn't understand why the widespread view was that markets were anticipating six or seven rate cuts of 25 basis points each, starting in March. That's where we started the year, and then gradually those started to become fewer and later and later, and here we are, with economists not talking about "higher for longer." I would prefer to call it "normal for longer." So I don't have any particular reason to believe the Fed really needs lower interest rates now. Of course, if you're a believer in the real rate, you take the fed funds rate, subtract out the inflation rate, and say, if we don't lower the nominal federal funds rate in an environment where inflation is coming down, then we're becoming more restrictive. Some Fed officials have expressed that view.
But first, I'd like to question the idea that the fed funds rate minus inflation means anything. The fed funds rate is an overnight rate, and we're subtracting a year-over-year percent change in inflation. What does that mean, and who possibly acts on that kind of variable? Clearly real bond yields matter, but the Fed doesn't control real bond yields. It controls the federal funds rate. So this notion that the fed funds rate might become too restrictive in a real sense if inflation comes down, I think we just have to wing it and see how that plays out. Right now, it looks as though we've seen quite a bit of decline in inflation, and interest rates haven't come down.
The other thing, Becky, is that there has been a lot of what I call technical analysis of macroeconomic data. People look at charts and say, look at that, once the fed funds rate peaks it comes down pretty quickly, and plateaus don't last very long. I think a lot of economists just don't appreciate what causes recessions. Recessions are caused by the Fed tightening monetary policy to the point where something breaks. That's why the yield curve inverts: people start buying 10-year bonds at 4% while knowing they could buy a two-year at 5%. Why would they possibly do that? Because they figure they're not great market timers, and at some point, past 5%, the economy is going to break something in the financial system, which leads to a credit crunch. Credit crunches cause recessions. The other two explanations for recessions are a spike in oil prices, which we had in 2022 but which has been quite calm since, and bursting speculative bubbles. We saw lots of small speculative bubbles burst in 2022, and the stock market had a bear market. Yet here we are, with the economy doing fine, no official recession, and real GDP at all-time highs. So I don't understand why Powell has been signaling that he'd like to lower interest rates, if interest rates are in fact where they should be, empirically.
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This 5% target, I want to sit on that for a second. Not a target, but this idea that if longer-term rates get to 5%, something could break. But they could get to 5% without something breaking. And if you have this curve inversion, let me set it up this way. I was speaking with Mike Wilson of Morgan Stanley today, and he explained what he got wrong this year and why he came in with a bearish view. He said, "Welcome to the bull camp." Hold on, not exactly. Maybe, but we'll see. There are a lot of asterisks there. One of them is that he didn't fully appreciate how stimulative fiscal policy was, and in some ways monetary policy as well, not just with respect to rate policy, which is restrictive, but with respect to the balance sheet and the repo lines and all of that, which added to the liquidity profile. He said that if bond investors start to really push back on how we're financing that fiscal stimulus, that would cause equity valuations to come down significantly. Do you agree?
Well, that sounds bearish. It was again a very nuanced take, very nuanced. Okay, that's fine. My view on bond yields is that they've normalized. They're back to 4 to 5%. That's the range we should be in, and that's where we were before the Great Financial Crisis. I just wrote about the anatomy of the bond deal in our publication, Quick Takes. It's pretty simple. It's the TIPS yield, the 10-year TIPS yield, which we quote in the marketplace on a daily basis, and it's been running around 2%. I think it'll continue to run around 2%, reflecting an economy that's resilient and growing. The expected inflation premium you add on top is about 2 to 2.5%, which gives you 4 to 4.5%. You can widen the range and get 5% in there, but all that reflects a normal interest rate environment. Now, of course, some things are going to blow up along the way, maybe in downtown office buildings that have to be refinanced. That's already been happening. It's important to realize that a lot of this exposure isn't just to banks. A lot of private money is invested in these kinds of assets, and for them it's a haircut on a rate of return. It's not that they suddenly can't lend. There could be problems with some of the small banks, but we're not seeing it. The Fed really stabilized that whole situation.
In the past, an inverted yield curve accurately predicted a financial crisis, a credit crunch, and a recession. This time around, the yield curve is inverted, and it has accurately predicted a financial crisis. We had that last March. On March 10th, which was a Friday, and March 12th, which was a Sunday, the Fed came in with a liquidity facility that stabilized the situation really well. Becky, the Fed has been really good at playing whack-a-mole in credit markets ever since the Great Financial Crisis and the Great Virus Crisis. The Fed has figured out how to create liquidity facilities to keep things from blowing up. If financial crises don't turn into credit crunches, you don't get recessions in that kind of scenario. So I may be pushing my luck here, but I think the economy can live with 5%. By the way, we had 5% last October, at the end of October, and that was because of some really sloppy auctions. Clearly, I'm not going to put lipstick on the pig of the federal deficit. But Janet Yellen, I went to Yale six years after Janet Yellen was there, and I owe her a lot because I studied from her Xerox notes and got through Tobin's class. Janet Yellen is very clever. On November 1st, the Treasury announced that if you don't like our bonds, we're going to sell fewer of them, or we're going to give you more bills. Over the past year, $2.5 trillion of marketable securities have been issued by the Treasury, and $1.9 trillion of that was bills. Bills are really easy to finance, and money market funds are sitting on about half a trillion dollars' worth of repos that, depending on incentives, could easily be converted into Treasury bills. So for the here and now, I don't see a real problem with bond yields suddenly gapping up to 5% or higher and causing a calamity for the economy.
Does that mean you think stocks can actually continue to climb even if Treasury yields on the long end get to 5%?
Well, I think we've seen that the stock market has learned to live with high interest rates, or normal interest rates. I should say I have to remind myself these are normal, because we're all used to such a low interest rate environment. But yes, I think the stock market is doing quite well here. The stock market started to discount what I've been calling a "Roaring 2020s" scenario. Since the beginning of the decade, that didn't look too smart for a while, with the pandemic and all the other calamities. But I think the stock market started to discount the Roaring 2020s scenario, and I know exactly when: November 30, 2022, which is when OpenAI introduced ChatGPT. Artificial intelligence has been the rage ever since. I'm not of the belief that AI is the only reason the market is up. There are a lot of other technologies that are very user-friendly, cheap, and that lend themselves to increasing not just the physical strength of humans, as previous technologies did, but most importantly, the power of the brain. It's augmenting the brain. So I think the potential for productivity gains over the rest of the decade is tremendous, and I think productivity is going to be the answer.
As for Mike Wilson's issue about the federal deficit, I think it is a problem. Debt is a problem. But if we get better-than-expected productivity, we'll get better-than-expected growth and lower-than-expected inflation. In that situation, the Fed might very well decide at some point, why not lower interest rates and take some of the pressure off the deficit? They're not supposed to be concerned about fiscal policy, but it might be an issue. So along the way, there's certainly a case to be made for a strong stock market. As you know, Becky, I've been talking about 5,400 for the S&P 500 by the end of the year. I'm working it out, and it might be by the end of next week, the way things are going. We're already at 5,300, and 5,400 looked pretty delusional about a year ago. Now I'm also talking about 6,000 on the S&P 500 in 2025 and 6,500 by 2026. And then I'll up the ante: I'm talking about 60,000 on the Dow by 2030 and 8,000 on the S&P by 2030. I've thrown a lot of numbers at you, hoping you won't remember them if they're wrong, and if they're right, I'll bring them to your attention.
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