After reaching all-time record highs last week, market indexes are in a tug-of-war to stay above these benchmarks; the S&P 500 (^GSPC) is holding above 5,300 while the Dow Jones Industrial Average (^DJI) rolls further back below 40,000. Yardeni Research President Ed Yardeni forecasts the Dow shooting up as high as 60,000 by 2030.
Yardeni sits down with Market Domination to discuss the multitude of factors that could either accelerate or derail market growth, including the higher interest rate environment sustained by the Federal Reserve.
“Usually recessions are caused by credit crunches and at this point, I don’t see something like that. But a spike in oil prices (CL=F, BZ=F) is something that from a geopolitical perspective, is still not out of the realm of possibilities here,” Yardeni notes to Yahoo Finance. “Fortunately, the price of oil has actually moderated quite a bit ever since Israel and Iran launched missiles at each other and then kind of backed off. So I think there’s enough oil so we don’t get a kind of big spike the way we had in the 1970s.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Luke Carberry Mogan.
Video Transcript
And the S and P 500 fighting for another record day while the Dow is back below the 40,000 level.
But our next guest sees only more gains ahead for the benchmark index calling for the Dow Industrials to hit 60,000 by 2030.
Joining us now is Ed Yardeni Yardeni Search President.
Ed Thank you for joining us here today.
Uh Let me just ask you about your call here.
That would be a 50% rise if the Dow went from 40,000 to 60,000, I just did the math.
We went 50% in the last four years from 20 to 40.
So there you go.
Yeah, I think the uh economy is performing extremely well in the face of what seemed to be high interest rates.
I think increasingly it’s becoming clear that interest rates are simply normalized back to where they were before the great financial crisis.
And meanwhile, inflation is moderating.
So I don’t think that we actually need the fed to cut interest rates for the market to continue to go up on earnings.
I would prefer that it goes up on earnings rather than valuation because valuations are already a bit stretched.
Ed.
Hey, it’s Julie here.
It’s good to see you.
So, do you, what you, what’s gonna be the main sort of tail wind for the continued gains in earnings that you are expecting?
Well, I think productivity is the big story from a macroeconomic standpoint.
We have a shortage of skilled workers.
I think companies are seeing that their business is really quite good, even with the global economy kind of muddling along.
It’s not exactly booming, but us companies are doing extremely well.
We’ve got analysts raising their expectations for earnings in 2025 and 2026.
And so I think companies are gonna want to take advantage of the uh strong environment that they’re seeing uh by increasing their productivity so they can bring their goods and services to the market if they can do that and using technology.
And then I think we’re going to see better than expected economic growth lower than expected inflation with real wages going up and expanding profit margins.
So put it all together and you’ve got a uh AAA great scenario for the market to continue to move higher.
And can you talk about some of the importance of that technology?
A lot of which is based on A I, at least that’s where the hype is.
We’ve seen this play out in the chip market with NVIDIA, but we’ve also seen the infrastructure play the uh electrical electricity play all these other things.
Copper record highs.
Where do you see that fitting in?
Well, I think all these things uh are uh you know, the very, there’s a lot of moving parts here and as, as you just indicated, and I think that the technology revolution that started in the 19 nineties has evolved to the point where a lot of these technologies are very user friendly, they’re relatively affordable, uh they’re relatively easy to operate and they have tremendous impacts on every business.
I think every business these days is not uh is a, is a technology company.
They either make technology or they use it.
If you don’t use technology to increase your productivity, you’re gonna lose it, you’re gonna be out of business.
So I, I think that’s where the story lies is in the productivity boom uh based on the productivity uh revolution ed, what do you think is the biggest risk to further upside in the market?
Well, there’s always a risk and uh clearly there’s still plenty of geopolitical risk.
Uh uh Look uh recessions uh tend to uh lead to bear markets or bear markets, anticipate recessions.
Uh The the market didn’t do a very good job of that in 2022 expecting a recession that never happened, but usually recessions are caused by credit crunches.
And at this point, I don’t see something like that, but a spike in oil prices is something that from a geopolitical perspective is still not out of the realm of possibilities here.
Fortunately, the price of oil has actually moderated quite a bit ever since Israel and Iran launched missiles at each other and then kind of backed off.
So I think there’s enough oil.
So we don’t get a kind of big spike the way we had in the 19 seventies when we had two spikes.
And now this decade we had one in 2022.
I don’t think we’re going to get another one, but that would be the risk.
But let me ask you about sentiment here and we, you can measure that a few different ways.
One way is the equity put to call ratio.
Um I guess where I’m coming from is we see the indices at record highs right now, but we’re not seeing those frothy valuations.
We’re not seeing the euphoria that we’ve seen at other extremes.
So, uh where do you see the path forward and where do you see that euphoria and perhaps sentiment that gets too elevated?
Where do you see that coming in?
Well, sentiment has been pretty flaky of late uh a few weeks ago, it got uh really high.
Uh And then in April, we had to sell off as, as you typically do when there are too many bulls and not enough bears.
Uh And uh then the bears came in and now we’re back to seeing a lot of bulls.
But uh all in all, I think the market uh is uh is in good shape from a fundamental perspective in terms of earnings, uh, the valuation is, is, is definitely stretched, but all in all, um, with the economy doing well and, uh, the first quarter earnings season turning out to be really better than expected.
Uh, I think, uh, we’ve got the market, uh, in, still in fairly good shape to, to make more, more gains.
And it’s interesting to me that you’re somewhat, I don’t know, fed agnostic is the right way to characterize it.
But fed agnostic when it comes to the long term continued, um, returns in the market.
But, you know, when you watch the fed here, um, what, what is your current thinking?
Do you think we will not get an interest rate increase this year?
I think the last time we talked, maybe we’re still looking for one in December.
Well, they just won’t listen to me.
I told him to take the rest of the year off and I, I haven’t heard them announce that they will do that.
Uh But, uh I, I don’t think the economy needs uh rate cuts.
The economy is doing fine.
I don’t think any rates increases either.
Look, uh I think the economy is gonna continue to grow with inflation moderating.
Uh Why mess with a good thing.
Why mess with success.
Uh uh My concern actually is if they do come in and lower interest rates and then we’ll have uh something more like the late 19 nineties where, uh, you know, party like it’s 1999 that, uh, would, would be the song that comes to mind.
I don’t want to see a melt up in the, uh, technology led melt up the way we had in the late 19 nineties followed by a tech wreck as we all recall what happened back then.
It, I don’t wanna see that either, but I’m all in favor of giving the Fed a few months off, maybe till the end of the year as well.
Thank you, Ed, as always.
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