The painful sell-out is working out of steam, says market bull Ed Yardeni
Some relief may be in sight for investors.
Long-time market bull Ed Yardeni believes the painful sell-off is running out of steam.
“I don’t expect more than a correction in the garden variety, which is a 10-15% decline,” the president of Yardeni Research told CNBC’s “Trading Nation” on Friday.
Though it’s been a painful couple of weeks on Wall Street, Yardeni claims the retreat actually began on September 3 – a day after the S&P 500 and tech-heavy Nasdaq hit their all-time highs. As of Friday’s close, the S&P 500 has since declined 9% while the Nasdaq is down 9.5%.
He cites foam as one of the original primary catalysts in technology.
“We still see that,” said Yardeni. “And then of course we have renewed concerns about the pandemic and when we will finally get one [coronavirus] Vaccine. So it’s not like choice regulates everything. “
But it can fix a big factor: uncertainty.
Yardeni’s base case is that the presidential elections on Tuesday will lead to a clear result within a few days and create the conditions for a rally at the end of the year. He speculates that the S&P 500 will hit 3,500, a level 2.5% below its all-time high of September 2nd.
Yardeni is forecasting an index of 3,800 by the middle of next year, an increase of 16% compared to the current level. He cites a post-presidential environment, simple monetary policy, economic growth and optimism about coronavirus vaccines as positive drivers.
“It’s a continuation of the bull market that started back in 2009 and it’s just been plagued by all of these panic attacks,” he said. “I counted them. This is number 67.”
Yardeni, who spent decades on Wall Street developing an investment strategy for companies like Prudential and Deutsche Bank, claims that there are currently few places other than stocks for investors to invest in, given that interest rates are so close be at zero.
“There will always be a lot going from perhaps overrated areas of the market to cheaper areas,” he said. “That will bring the market back.”
Yardeni also notes that the economic recovery should still be strong enough to support a record rally in 2021.
“It’s definitely getting slower here and it could be more of a Nike Swoosh [instead of V-shaped]”Said Yardeni.” But I don’t see a double dip. I don’t see a W. I think the economy will continue to do remarkably well, given all these challenges, until we close everything. “
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