Yardeni Research President Ed Yardeni Talks Markets, Earnings Momentum

**SPEAKER_1** (0:02)
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**Tom Keene** (0:07)
Edward Yardeni with us. We just had Ben Laidler on, who nailed the Christmas Eve 2018 call. Then there was a pandemic, and Mr. Yardeni climbed on board October of 22 and said, it is the roaring 20s.
John Templeton, I mentioned him this week on my Twitter thing.
Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. How close to euphoria are we, Dr. Yardeni?

**Ed Yardeni** (0:37)
Yeah, I mean, clearly we're closer to euphoria now than we were at the beginning of what I still think will be called the roaring 2020s. And I think we're seeing that though this time around, the euphoria is what I call femo, which is fabulous earnings momentum. It's not FOMO.
The PE has actually hung around 20 for a while. Earnings have been phenomenal. And then this morning, we just heard that some of these AI companies are continuing to have home runs.

**Paul Sweeney** (1:11)
Have home runs, absolutely. We core-wave last night. Yeah, I'm looking at the SPX, you know, the weight, the normal weighted up 12, 13 percent, but the equal weighted is up 15 percent.

**Ed Yardeni** (1:22)
That's right.

**Paul Sweeney** (1:23)
That's a good sign, right?

**Ed Yardeni** (1:24)
That's a very, very good sign. It's very healthy. And I call the 493, you know, there's a magnificent seven, and then there's the impressive 493 And so far this year, they're doing very well, which really shows that the market's broadening. And I think, you know, I think people have AI fatigue to a large extent. I don't really know which companies are going to be the winners or the losers, so they're kind of maybe buying indexes on technology. But the other companies in financials, industrials, health care, those sectors are at all-time record highs.
And that's because people understand their businesses, and they also figure they might actually benefit from AI.

**Paul Sweeney** (2:06)
Yeah, I think everybody's trying to figure out the winners and losers. It doesn't appear that the Fed's going to help the market here. I guess it's a question of, will they potentially hurt the market by aggressively raising rates?

**Ed Yardeni** (2:18)
I don't think it's going to be aggressive. I think the markets were sort of surprised when, during the first FOMC meeting that was chaired by the new Fed Chair, and that is Kevin Warsh, where he came out so hawkish and said that his number one priority was to have price stability because he admitted that the Fed has failed to get down to 2% for over five years.
And then in July, he said it again, and the market said, well, you said that in June, why don't you do something in July? And so I think the markets are expecting a September rate hike. And look, I think the bond market would react positively to it, which then would be a positive for the stock market.

**Tom Keene** (3:04)
Thank you so much for joining Bloomberg Money a couple weeks ago. We had a huge response to that. And the single Yardeni sentence, Paul, that stopped traffic on a Friday afternoon was rates are normal. Where rates are now is what they're supposed to be. Companies, this is an important concept. I want you to take it back to Yale Dynamics linking economics and investment in finance.
Companies can operate in a legitimate real interest rate, nominal interest rate environment. A lot of the younger crew don't think so. They don't believe that.

**Ed Yardeni** (3:36)
Yeah, well, something that does kind of get my attention is these days is when people say, oh, interest rates are going to stay higher for longer, which implies that they should be lower. You know, it's just we're going to be frustrated. But so what do you mean higher for longer? The 45% is normal. This is where they should be. This is where they were. The tenure was before the great financial crisis. It was between four and 5% before the inflation crisis in the 70s, it was four to 5%.
Four to 5% is actually a vote of confidence. It shows that the economy can function very well. And by the way, it's kind of refreshing to see that the capital markets have been liberated from quantitative easing so that they can actually vote on where rates should actually be.
And right now, I think four to 5% is a positive sign.

**Paul Sweeney** (4:28)
And we're seeing the new issuance in the investment grade bond market is off the charts.

**Ed Yardeni** (4:32)
And it's been absorbed very, very well.

**Paul Sweeney** (4:35)
How about US versus non-U.S.? I'm looking at my WEI function, and there's good returns out there around the world, and maybe some better valuations outside the US.