Ed Yardeni has been bullish for the better part of the most recent bull market. He recently turned more cautious due to the Federal Reserve raising rates, a slowing global economy, the China trade impasse, and domestic politics. From his research today:

“On balance, Trump’s policies have boosted economic growth and further tightened the labor market. As a result, Fed officials—who did a good job of prepping the financial markets for a gradual course of hikes in the federal funds rate, aiming for a “neutral” 3.00% level by the end of next year—have recently been chattering about even higher rates, i.e., turning restrictive. Consequently, the trade-weighted dollar has soared. The combination of higher US interest rates and a stronger dollar is suppressing US inflation while depressing commodity prices as well as the global economy, particularly emerging market economies. The situation is akin to driving a car with the left foot bearing down on the accelerator while the right foot taps the brakes, as we’ve noted frequently this year.

The outlook for 2019 is most likely for more volatility. That’s assuming that tensions between the US and China continue to mount, as discussed below. On the bullish side, the latest FOMC statement did hint faintly that a pause in the Fed’s quarterly rate hiking might be possible next year. Meanwhile, the global economy continues to weaken. In any event, the growth rates of both S&P 500 revenues and earnings will certainly be slower in 2019 than this year.

It’s widely believed that the stock market likes gridlock, which now is assured for the next two years given the mid-term election results. However, the country has been experiencing an escalating uncivil war between the Left and the Right. It will only get worse, as explained in the cover story of the latest Bloomberg BusinessWeek titled “Republicans Weaponized the House. Now, Democrats Will Use It Against Trump.” That may contribute to more stock market volatility next year.

Joe and I curbed our enthusiasm for the stock market’s upside in the 10/30 Morning Briefing. We lowered our outlook for earnings growth over the next two years, as we reviewed yesterday. At the end of last month, we also reduced our target for the S&P 500 from 3100 to 2900 for the end of this year and from 3500 to 3100 by year-end next year. We aren’t bearish because we expect that the US economy will continue to grow over the next two years. Furthermore, we remain open to the possibility that productivity will make a long-awaited comeback.”
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It’s Election Day

by Marilou Moursund on November 6, 2018 in equity market

The Wall Street Journal had a good summary today of the various concerns facing the market titled “Why the Election Shouldn’t Distract Investors”.  From the linked article: Every market pundit has a view on how the election will affect markets. The truth is, the economic and financial forces at work right now are so powerful […]

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No Shortage of Workers

by Laura Ehrenberg-Chesler on November 5, 2018 in Economic Indicators

Turns out, there are more workers coming in to the labor force, so we are not running out of workers. Today, from Ed Yardeni: “No shortage of workers. Another widespread and erroneous notion is that we are running out of workers because the unemployment rate is so low. The labor force jumped 711,000 during October, […]

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GDP Grows at 3.5% in the Third Quarter

by Marilou Moursund on October 26, 2018 in Economic Indicators

The U.S. economy grew at a 3.5% rate in the third quarter led by consumer and government spending.  From the linked WSJ article: Gross domestic product—the value of all goods and services produced in the U.S.—grew at a seasonally and inflation-adjusted annual rate of 3.5% from July through September, the Commerce Department said Friday. That […]

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Ed Yardeni: The Economy is Running Hard, Not Hot

by Laura Ehrenberg-Chesler on October 22, 2018 in Economic Indicators

Today, from Ed Yardeni: “In recent weeks, Fed officials have been signaling that the economy may be too strong. No doubt, it has been running hard thanks, in part to President Donald Trump’s tax cuts. But it has yet to show any sign of running too hot—i.e., hot enough to kindle inflation fires—based on the […]

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The Healthy Consumer

by Laura Ehrenberg-Chesler on September 27, 2018 in Debt

Today from Ed Yardeni: “Consumers are sitting pretty these days. Initial claims for state unemployment benefits fell last week to the lowest level since 1969, and the number of people receiving benefits after an initial week of aid fell to the lowest level since 1973. Household net worth rose to a record $106.9 trillion in […]

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Theodore Roosevelt – A Great Quote from a Great President

by Laura Ehrenberg-Chesler on September 20, 2018 in Tribute

A conversation with one of my partner’s this morning reminded me of this great quote from Theodore Roosevelt. Enjoy. “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who […]

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Good News from the Census Bureau

by Laura Ehrenberg-Chesler on September 12, 2018 in capitalism

From the WSJ today: “U.S. household incomes rose again in 2017, according to Census Bureau figures released Wednesday that suggest more Americans are benefiting from the strong economy. Median household income increased to $61,372 last year, up 1.8% when adjusted for inflation. The poverty rate inched down 0.4 percentage point. The percentage of people without […]

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More Good Economic News

by Laura Ehrenberg-Chesler on September 7, 2018 in Economic Indicators

From today’s WSJ: “Meanwhile, the number of open jobs this spring exceeded the number of unemployed Americans seeking work for the first time in records going back to 2000. The appearance of plentiful job openings is pulling people from the sidelines who may have been discouraged from looking earlier in the expansion, but businesses have […]

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Ignore the Noise

by Laura Ehrenberg-Chesler on September 6, 2018 in Earnings

If one can ignore the noise of the day, and ignore of all the distractions, the economy is clicking on all cylinders. Here are some facts and commentary from Ed Yardeni yesterday: “I’ve said it before, and I’ll say it again: “There is method in Trump’s madness.” Hamlet said it first in 1602: “Though this […]

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