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MARKET STRATEGIST and economist Ed Yardeni says the current bull market is “the most hated and feared bull market that any of us have experienced, maybe in history.” This quote came from an interesting interview published in ThinkAdvisor, a magazine for financial professionals.
Worried about today’s lofty stock prices? You may find Yardeni’s views comforting. When asked about his market outlook, he commented on the strength of the current bull market, which started in 2009. He claims to have identified 71 market “panic attacks” during that stretch. One of the most recent happened the day after Thanksgiving, when the Dow Jones Industrial Average dropped 905 points, or 2.5%. This was in reaction to a World Health Organization report that Omicron, the new COVID-19 variant, had been detected in South Africa.
Yardeni said that, looking back, all 71 panic attacks were buying opportunities. In fact, while we had a brief bear market in March 2020, Yardeni said it was actually “more of a panic attack.” He doesn’t expect the bull to let up for several years. He believes the market isn’t concerned that inflation will spin out of control, like it did in the 1970s.
His explanation for this: Productivity growth has been on the rebound since 2015. Current productivity is growing at around 2% a year. He believes it’ll accelerate to 4% by the second half of the decade. This would help offset some of the inflationary pressures and allow wages to rise faster than prices.
Today’s inflation is due to a combination of the Federal Reserve’s stimulus and the Biden Administration’s American Rescue Plan (ARP), Yardeni believes. The funds provided by the ARP created a “demand shock” that “overwhelmed the supply system.”
Yardeni thinks we’re learning to live with the COVID-19 virus and its variants. He doesn’t foresee further large-scale lockdowns, but possibly localized versions to attack local flare-ups. He said we’ve seen “extraordinary economic strength and growth” since April 2020.
Interested in keeping up with the markets and the economy? I’d encourage you to check out Yardeni’s website, which offers an enormous amount of free financial and economic data.
I don’t always agree with Dr Yardeni, but I think he’s a voice of reason, and respect his views.
I think he’s generally correct about this. The market is just waiting for Covid to resolve before taking off again. It could be a long wait… or maybe not.
Either way, my portfolio doesn’t change. Prognostication is the enemy of a wise investment process.
Thanks Mr. Connor. I’ve found Dr. Ed’s website very insightful over the years. I’m another one of those who hates this market even though I’m staying in at about 65% and that’s only cuz my time frame is still 10 years. As for interest rates in 2022, I’ll listen to the bond market more than the Fed.