Ed Yardeni believes the US economy is on the cusp of “nirvana”.
Despite the uncertainty surrounding inflation and Covid-19 variants, the longtime bull believes the pandemic is greatly accelerating the adoption of cutting-edge technology by American companies to increase productivity.
According to Yardeni, the move on Wall Street heralds a modern Roaring Twenties.
“Buy a little of everything,” the president of Yardeni Research told CNBC’s “Trading Nation” on Friday. “Profits will continue to be at record highs.”
However, he admits that the current price may be hard to swallow.
“Nothing is cheap”
“Look, everything has been picked up. Nothing is cheap,” he said. “It’s hard to tell people here that the time is right to get in. But bonds certainly don’t look attractive at yields that could potentially go higher than I expect.”
Yardeni, who led investment strategy for Prudential and Deutsche Bank and worked for the New York Federal Reserve, sees encouraging signals that typically boost stocks.
“Workforce growth has slowed dramatically and there is tremendous pressure on companies to use technology to make up for this,” said Yardeni. “That means increasing productivity. So I think I have this very optimistic history for an activity that is currently growing 2%. I think it will be heading for 4% in the next few years.”
As a result, Yardeni sees wages rise faster than prices and margins stay high – a recipe for strong corporate profits.
But in the meantime, he’s keeping a close eye on headline risks.
“The Delta variant is obviously doing the nightly news and it’s certainly worrying,” said Yardeni.
His other sticking point: rising prices.
“Inflation has yet to prove to be actually temporary,” he added. “At the moment there is no evidence that it has peaked. So there are still concerns in this direction. “
Even if the challenges remain, Yardeni predicts that the S&P 500 will rise 12% from current levels as long as the US avoids another massive economic lockdown.
“I have 5,000 in the S&P 500 by the end of next year or sooner,” said Yardeni. “Every time I have a bullish outlook over the past year, we get there much earlier.”
On Friday the S&P 500 closed at 4,468, an all-time high. The index has risen 19% so far this year and 100% since the pandemic low.
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