March 30th was the market bottom and we will not retest those lows, says Ed Yardeni

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For more, I'm joined by Ed Yardeni, president of Yardeni Research. Good to see you in person. You have a 7,700 target for the S&P. Right. You still think it's achievable? Yeah, I think it's achievable. I mean, it didn't look quite as achievable back on on March 30th when we made a low on the on the pullback.

But, it's been a remarkable recovery and I think it's been because the earning story is is good and the reason for that is because the economy is amazingly resilient. It is. So, you think that March 30th low is the low? that was the low, yes. And we will not be testing those levels again? think we will.

Doesn't come with a money-back guarantee, but I think what's going to continue to power the market higher is is earnings. I think we had a pretty significant sell-off that offered a good opportunity. Yeah, the problem is everybody now knows that geopolitical crises are great buying opportunities. So, when we get one, you don't really have much time to act, you know?

I mean, the the fear is still there and so it takes a quite a bit of guts to kind of jump in and say, "Well, I think the war's over when it's clearly even now not necessarily over." But, as you mentioned, the economy is resilient. It's much less levered to energy than perhaps it was in previous situations like this.

What do you think that means for rates? We had the confirmation hearing earlier this week for the potential chair Borsch. You disagree that the Fed should cut the Fed funds rate. You know, I mean, the Fed's been talking about or there's been talk about the Fed cutting interest rates all year. I'm I'm just not in that camp.

I don't think the economy needs it. It's doing just fine. Inflation is still above 2% target, especially now with this surge in energy prices. And I'm not quite sure what lower rates are going to do. They're not going to really help the labor market in my opinion. What they'll probably do is just increase speculative excesses and that's the last thing we need right now.

Given all of this, you are moving overweight in energy. Yeah. We've seen so far there's been a inverse correlation between energy prices and the stock market. Correct. Do you believe they can go up in tandem or are you overweight as a hedge we have broader equity? We've had a bit of a sell-off here in the energy stocks and I just thought saw that as an opportunity that if you haven't been in the sector, to you know, the sector's only like 3 4% of the market capitalization of the S&P 500.

So, when you're talking about overweight, you're not talking about a big number, maybe 5 to 10% of a portfolio. And by the way, there's a lot of these stocks pay really good dividends. They've been around for a long, long time. And especially the ones that are going to rebuild some of the infrastructure in the Middle East that's been destroyed or needs repair, they're going to do quite well for for a while.

So, I kind of view it as a hedge against the possibility that, hey, maybe this war really isn't over yet. You know, the problem is on our side, Washington thinks we've won the war. On the Iranian side, there's there's nobody to surrender. I mean, as the president's rightly pointing out that we took out their leadership and now we don't know who to talk to.

And so then what happens next? Well, I think we have this stalemate in the Middle East because the Iranians just are are not are leaderless is the bottom line. But yet, the oil market's telling me that one way or the other, the oil's getting out. I mean, if Saudi Arabia's got the pipelines to get 6 to 7 million barrels a day out.

I think there's also going to be increased production from from other places and I think unfortunately Washington is being forced to kind of look the other way with regards to Russia selling oil to China and India and I think that's taking some of the pressure off. So, this could be a a kind of a stalemate situation, but that doesn't necessarily mean that that's going to be uh cause a recession or create some problems for the US economy.

The earning story is still good and as you said, the energy intensity of the US is is much lower. I think now if you look at gasoline consumption, it's like less than 2% of total consumption and had been more like 5% back, you know, 20 years ago. So, we're we're definitely less reliant on energy. Yeah.