# Yardeni QuickTakes > Daily insights, focused news, clear charts, weekly video webcasts, and much more. Posted by Dr Ed Yardeni and his research team. Public Ghost content for AI and LLM tooling. This file includes a bounded export of public pages first, then recent public posts. Append `.md` to any post or page URL to get the content in Markdown (for example, `/example-post.md`). ## Pages ### About This Site URL: https://www.yardeniquicktakes.com/about/ Last updated: 2023-06-26T05:43:54.000Z ## Welcome to Yardeni QuickTakes ## Ignite Your Investment Strategy with Expert Insights Are you seeking a competitive edge in the financial markets? Yardeni QuickTakes is designed for individuals like you, who crave timely, concise, and expert analysis to inform their investment decisions. Our service caters to a diverse range of investors, from seasoned professionals to newcomers looking to build their portfolios. By subscribing to Yardeni QuickTakes, you gain access to a wealth of benefits. Our clear and insightful commentary, supported by data-driven research, empowers you to stay ahead of market trends and make informed choices. Our independent research and thought leadership offers a unique perspective that sets us apart. --- **We serve actionable information to those who value concise, high-quality research and enjoy the variety of topics covered.** They appreciate our expert opinions, supported by charts that illustrate our analysis. They find value in the timeliness of our updates, which help them navigate market volatility with confidence. Yardeni QuickTakes is not for those seeking generic, sensationalized news. We don't offer doomsday forecasts or baseless speculation. Instead, we provide objective, well-thought-out insights and interpretations of economic indicators. We prioritize clear analysis over dramatic headlines, allowing you to focus on informed decision-making. Join our community of like-minded investors and financial advisors who appreciate the power of concise, actionable insights. Together, we navigate the markets, decode complex trends, and unlock your investment potential. Take a step towards achieving your financial goals by subscribing to Yardeni QuickTakes today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2023/06/flying-midnight-and-starlight-color-iphone-13--mockup-template-copy@2x.jpeg) #### Sign Up for a Paid Membership Now and Unleash Your Financial Potential [Sign up now](#/portal/signup) Please note: Yardeni QuickTakes requires an active interest in finance, economics, and investment. If you're seeking generic news or a purely entertainment-focused experience, our service may not be the right fit. But if you value *expert insights, data-driven analysis, and a professional approach*, we welcome you to join our community of empowered investors. --- ## Dr Ed's Bio Dr Ed Yardeni is the President of Yardeni Research, Inc., a provider of global investment strategies and asset-allocation analyses and recommendations. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2023/06/DrEdYardeni-1.jpeg) #### Dr Ed Yardeni has more than 40 years of experience on Wall Street as a top-rated economist and investment strategist. Now you have direct access to his expert experience and Wall St research team. He previously served as Chief Investment Strategist and Chief Economist for some of Wall Street's biggest names. He taught at Columbia University’s Graduate School of Business and was an economist with the Federal Reserve Bank of New York. He also held positions at the Federal Reserve Board of Governors and the US Treasury Department in Washington, D.C. Dr Ed earned his PhD in economics from Yale University in 1976, having completed his doctoral dissertation under Nobel Laureate James Tobin. Previously, he received a master’s degree in international relations from Yale. He completed his undergraduate studies magna cum laude at Cornell University. Dr Ed is frequently quoted in the financial press, including The Wall Street Journal, the Financial Times, The New York Times, The Washington Post, and Barron’s. He was dubbed “Wall Street Seer” in a Barron’s cover story. He appears frequently on CNBC, Bloomberg Television, and Fox Business. --- ## What to Expect Every new QuickTakes post is both emailed to subscribers and listed on our website. So however you choose to view and whatever device you choose to use, you can stay in the know. Here is a breakdown of our content: **(1) Markets focus.** Our QuickTakes emails analyze the key daily economic variables that move global financial markets, especially those for stocks, bonds, commodities, and forex. Fiscal and monetary developments are also examined, especially Fed policy. **(2) Week ahead.** Each weekend, you’ll receive “The Economic Week Ahead,” which briefly reviews how the next weekly batch of economic indicators might affect markets. **(3) Daily analysis.** Each weekday, QuickTakes presents concise insights and clear charts about the day’s indicators and market-moving news. **(4) Weekly webcasts.** On Mondays, we post Dr Ed's weekly webcast discussing the latest and upcoming developments that move markets. **(5) Live charts.** QuickTakes subscribers also have access to our library of automatically updated economic and financial charts. **(6) Studies.** Dr. Ed’s studies on predicting the markets are available for QuickTakes subscribers to download. **(7) Contact us.** Have comments on any of our QuickTakes emails or discussion ideas for QuickTakes themes? We’d love to hear them. --- ### Paid Subscription Successful URL: https://www.yardeniquicktakes.com/paid-subscription-successful/ Last updated: 2022-06-14T18:37:00.000Z ## Paid Membership Successful ### Thanks for signing up. We hope you enjoy our content. ## Benefits Your Paid Membership includes the following: ✅ Full access to the QuickTakes website ✅ Email delivery of all QuickTakes ✅ Occasional DeepDives from our InDepth research ✅ Early access to Dr Ed's Weekly Webinar videos ✅ Access to our Live Charts page ✅ PDF downloads of Dr Ed's six books (see below) --- ## Your Account If you would like to make edits to your account, change your email address or credit card, opt out of our email delivery, or change your membership, you can always do so from the Account button on the home page or in the website header on any page. You can try it here: [Account](#/portal/account) --- ## Instant PDF Gifts for You Included with your Paid Membership are PDF downloads of Dr Ed's six books: [ The Yield Curve: What Is It Really Predicting? 1-The Yield Curve\_Yardeni.pdf 11 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/1-The-Yield-Curve%5FYardeni.pdf "Download") [ Stock Buybacks: The True Story 2-Stock Buybacks\_Yardeni.pdf 17 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/2-Stock-Buybacks%5FYardeni.pdf "Download") [ Fed Watching for Fun & Profit: A Primer for Investors 3-Fed Watching\_Yardeni.pdf 10 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/3-Fed-Watching%5FYardeni.pdf "Download") [ S&P 500 Earnings, Valuation, and the Pandemic 4-S&P 500\_Yardeni.pdf 11 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/4-S-P-500%5FYardeni.pdf "Download") [ The Fed and The Great Virus Crisis 5-The Fed and GVC\_Yardeni.pdf 9 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/5-The-Fed-and-GVC%5FYardeni.pdf "Download") [ In Praise of Profits! 6-In Praise of Profits\_Yardeni.pdf 15 MB download-circle ](https://www.yardeniquicktakes.com/content/files/2022/06/6-In-Praise-of-Profits%5FYardeni.pdf "Download") If you want to access these in the future, they are also available on the members-only Dr Ed's Books page here: [Dr Ed's Books](https://www.yardeniquicktakes.com/launch-offerhttps://www.yardeniquicktakes.com/dr-eds-books/) --- ## Website Tips Below are some helpful tips to help you get the most from our website: ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2022/05/flying-midnight-and-starlight-color-iphone-13--mockup-template-copy@2x.jpeg) 🌗 Our website automatically detects your system's theme, however you can manually choose light or dark mode from within the slide out menu. --- ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2022/06/shadow-overlay-top-view-ipad-pro-and-iphone-13-pro-on-stone-ground-mockup-template-2@2x-1.jpeg) 📱 Our content adapts flawlessly to all of your screens. 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We hope you enjoy our content. ## Benefits Your free QuickTakes preview includes the following: ✅ Website access to Public QuickTakes ✅ Email delivery of Public QuickTakes the instant they are published ✅ Free download of Dr Ed’s latest book, *In Praise of Profits!* (see below) --- ## Your Account If you would like to make edits to your account, change your email address, upgrade your membership, or opt out of our email delivery, you can always do so from the Account button on the home page or in the website header on any page. 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[Return Home](https://www.yardeniquicktakes.com/) ### Dr Ed's Books URL: https://www.yardeniquicktakes.com/dr-eds-books/ Last updated: 2025-12-26T22:14:44.000Z ## Decades of market expertise Dr Ed Yardeni is the President of Yardeni Research, Inc., a provider of global investment strategies and asset-allocation analyses and recommendations. He has written a series of Topical Studies examining issues discussed in his book *Predicting the Markets: A Professional Autobiography (2018)*, but in greater detail and on a more current basis. Premium members get access to all of these studies and more in PDF format. Hundreds of pages of insights and lessons learned forecasting the economy and financial markets over the past 40 years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2023/04/57948.png) **Fed Watching for Fun and Profit* ## What's included Premium tier members get access to all of Dr. Ed Yardeni's books in PDF format, including the following: - *Predicting The Markets* - *The Yield Curve: What Is It Really Predicting?* - *Stock Buybacks: The True Story* - *Fed Watching for Fun & Profit: A Primer for Investors* - *S&P 500 Earnings, Valuation, and the Pandemic* - *The Fed and The Great Virus Crisis* - *In Praise of Profits!* Become a premium member to access these books by signing up below. _This page is for paying subscribers only._ ### Bull Bear Ratio URL: https://www.yardeniquicktakes.com/bull-bear-ratio/ Last updated: 2022-08-29T10:06:37.000Z The Investors Intelligence Index is a common and widely accepted means of ascertaining the balance of power between the [bulls and bears](https://www.investopedia.com/ask/answers/bull-bear-market-names/?ref=yardeniquicktakes.com). In actuality, the [index](https://www.investopedia.com/terms/i/index.asp?ref=yardeniquicktakes.com) may refer to one of several possible sentiment indicators, including an advisor sentiment review and an insider activity review. These individual indexes are grouped according to representative sectors of market participants. Keep reading to learn more about this index and how it works. ### Live Charts URL: https://www.yardeniquicktakes.com/charts/ Last updated: 2023-05-15T16:38:13.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2023/05/yardeni-charts-screens.png) Gain access to thousands of live charts for $29/mo ### Real-time insights Yardeni Research is a sell-side consulting firm providing a wide range of global investment strategy and asset allocation analysis and recommendations. Our work is firmly grounded in our in-depth research on the global economy. 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It helped me overcome an issue of being too early on my calls or being right about a particular stock but with bad timing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.33.18.png) #### Jessica R. Your commentary, coverage, and charts have made our jobs of advising and managing client portfolios easier. You clearly exceeded my already high expectations. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-13.58.23.png) #### Michael J. Ed Yardeni connects the dots beautifully, offering real insight without sensationalism. A must-read for anyone serious about the markets. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.30.43.png) #### Mark W. This is steadying information in a financial media world of noise. The publication clarifies what's happening and likely to happen based on data. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.31.29.png) #### Nathan T. Thank you Dr. Yardeni and team for your ongoing outlooks. Followed your work since your time with Prudential. Articles are the first to be opened on daily basis. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.30.12.png) #### Lisa M. I can't find anywhere else someone analyzing the economic indicators without trying to make a headline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.31.51.png) #### Chris P. So much financial news is overly dramatic and doomsaying. It's very helpful to have a more objective perspective based on data. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.29.45.png) #### Elizabeth K. Dr. Yardeni's no-nonsense, data-driven analysis has saved me from many an emotional move in the market. There is no other source that is as precise and consistent. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.33.03.png) #### Paul R. Ed seems like the kind of guy who has seen it all and doesn't need to pound his chest or voice extreme opinions just to get attention. He is level-headed and not prone to exaggeration. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.32.21.png) #### James D. Very timely and offers a level-headed angle on the economy. I've seen too many strategists lose it over the last year. I think Ed is 'crushing it.' ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.32.39.png) #### Alexander W. I love the bite-sized format. QuickTakes is perfect for getting a clear snapshot of market trends and economic indicators without any fluff. The predictions are insightful and have proven incredibly accurate for me. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.34.14.png) #### Richard B. The QuickTakes are always short, relevant, to the point. It is almost as if Dr. Ed and I have a relationship and he knows what I need to hear and when I need to hear it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.00.32.png) #### Karen D. Especially like the web chats and the short but accurate predictions and summaries. His friendly personality comes through in everything he produces as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/jpeg-optimizer_CleanShot-2025-11-19-at-14.33.57.png) #### Andrew N. New member, just want to say the content is awesome. Love it all. Just the right amount of depth. Not surface level. Not overwhelming reams of data. Thank you. ### About Yardeni QuickTakes URL: https://www.yardeniquicktakes.com/about-yardeni-quicktakes/ Last updated: 2025-12-17T23:50:54.000Z ### Smart Market Insights, Made Simple QuickTakes is a fast, no-fluff daily email designed to help you understand what truly matters in the markets. 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URL: https://www.yardeniquicktakes.com/welcome-free/ Last updated: 2025-06-16T21:40:23.000Z ****You just joined thousands of readers who rely on QuickTakes to stay sharp on markets and the economy — without the noise.** ### ✅ Here’s what you get: - **1–3 free QuickTakes** in your inbox every week - **Insightful, timely analysis** from Dr Ed Yardeni and his team - **Free sneak peeks** at premium content - **No ads.** Zero fluff. Just substance. > “After 40 years on Wall Street, I’m more convinced than ever: individual investors deserve clear, honest insights — not hype. So I created QuickTakes.” - Ed Yardeni ### 🎁 Unlock the full story — with a special offer As a new subscriber, you get **50% off two months** of Yardeni QuickTakes Premium — but this is a limited-time offer. Unlock full access to: - **5–8 full-length QuickTakes** every week - **Exclusive** chart insights - **Early access replays** of Ed’s weekly video calls - **A private archive** of past research - **Cancel anytime** — just $14.50/month to try (regularly $29) [Upgrade Now - Claim 50% Off 2 Months](https://www.yardeniquicktakes.com/brief-aboutqt-502) ### **Thousands of investors already read QuickTakes daily — and we’re thrilled to have you here**. ## Posts ### ECONOMIC WEEK AHEAD: September 7-11 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-7-11/ Last updated: 2026-09-07T21:06:13.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-28.png) August payroll employment jumped 162,000, a sharp reversal from July's decline, while the August unemployment rate held steady at 4.1%. Those numbers reinforce our view that the labor market remains solid, so the Fed has little reason to delay a rate hike. The federal funds futures market now prices a 59% chance of a hike at the September 15-16 FOMC meeting, up from roughly 50/50 before the employment report, with room to move either way once fresh data lands. This week, attention turns to inflation, with August's PPI (Thu) and CPI (Fri) coming out. Overseas, China's CPI and PPI (Wed) and the European Central Bank's (ECB) meeting (Thu) top the international agenda. We will also see earnings reports from Oracle and Adobe (Thu). Here's more: **(1) Inflation.** The Cleveland Fed [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model projects August CPI (Fri) rose 0.36% m/m and 3.38% y/y, unchanged from July's 3.4% (chart). The model's core CPI projection eases to 0.20% m/m and 2.38% y/y, down from 2.5% in July. A mild print this week could pull the odds of a September Fed rate hike back down. An upside surprise would practically guarantee a majority vote to hike at the FOMC's September 15-16 meeting. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image.png) Rising high-tech component costs continue working through the pipeline. PPI Electronic Components & Accessories is up 28.0% y/y, outpacing CPI Computer Software & Accessories, up 21.2% (chart). The gap suggests plenty of upstream pressure still has room to work through to the consumer level. Record diesel fuel prices are also putting upward pressure on inflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-4.png) Headline PPI Final Demand cooled to 4.7% y/y in July from 5.5% in June (chart). The underlying trend remains sticky, though. The measure excluding trade services was 5.2%, and the core PPI came in at 4.7%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-2.png) **(2) Unemployment Claims.** Initial claims was 206,000 for the week ending August 28, with the four-week average at 207,300 (chart). That's consistent with Friday's employment report, which showed the unemployment rate holding at 4.1% in August alongside broad-based job growth, with no signs of rising layoffs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-11.png) **(3) Global.** The ECB meets Thursday, with markets treating a hike to 2.50% from 2.25% as a virtual certainty (chart). More interesting will be what ECB President Christine Lagarde signals for October’s meeting; the odds of a follow-up hike then sit at just 31.5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-6.png) China's PPI climbed to 3.5% y/y in July, its firmest reading in years, driven by mining and raw materials prices (up 16.4% and 6.1% y/y, respectively) amid global commodity price pressures (chart). The CPI has barely moved, at 0.5%, so the reflation so far looks like a factory-gate story rather than a consumer one. August's data (Wed) are expected to show a small pickup in both measures. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-8.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US SECTORS CALL: Financials, Real Estate & Utilities URL: https://www.yardeniquicktakes.com/us-sector/ Last updated: 2026-09-07T15:19:14.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/image-27.png) Energy (OW) led the S&P 500 sectors again last week, up 2.3% as the price of Brent crude rose back above $95 a barrel. The sector is now up 41.6% ytd, the best of all sectors (chart). Information Technology (MW) rose 1.1% wtd, with Dell stealing the headlines. The performances of the rate-sensitive sectors were mixed: Utilities (OW) rose 0.7%, while Real Estate (UW) fell 1.3%. Financials (OW) was unchanged. Here's more on Real Estate, Utilities, and Financials: _This post is for paying subscribers only._ ### US MARKET CALL: More Fabulous Earnings Momentum URL: https://www.yardeniquicktakes.com/us-market-call-more-fabulous-earnings-momentum/ Last updated: 2026-09-06T13:53:17.000Z The Fed might or might not raise the federal funds rate this month. The war in the Middle East may or may not be over (and isn't even a war anymore, says VP JD Vance). A debt crisis may be imminent, or not. The Republicans will probably lose the House in the midterms, or maybe not. Putin may or may not invade NATO. Trump might embargo US trade with countries with a trade surplus with the US, or whatever. Meanwhile, there's no doubt that corporate earnings are soaring. Fabulous Earnings Momentum (FEMO) is driving the market higher despite all the uncertainties listed above. **I. Earnings** During Q2, S&P 500 earnings per share rose a whopping 50.7%, up from 19.0% during Q1 (chart). Analysts now project 23.6% for Q3 and 27.9% for Q4\. Q2 includes the mark-to-market (MTM) gains we have flagged for several weeks. Without them, the Q2 gain was about 25%. The back-half earnings estimates exclude MTM gains, and the Q3 and Q4 estimates are still rising. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-13.jpg) Forward earnings rose to a record $401.75 per share last week (chart). It is converging toward the year-end consensus estimate for 2027, which just jumped to $418.76, exceeding the $415.00 we set as our year-end target for both series. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-12.jpg) We are sticking with our 8,400 S&P 500 year-end target for now. We might have to raise our S&P 500 target, which is the highest on the Street, if the 2027 estimate continues to rise (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-97.png) _This post is for paying subscribers only._ ### GLOBAL MARKETS CALL: Still A Worldwide Bull Market URL: https://www.yardeniquicktakes.com/global-markets-call-still-a-worldwide-bull-market/ Last updated: 2026-09-06T13:52:33.000Z Stock prices continue to rise worldwide. A run of central bank meetings over the coming weeks will test whether equity composure holds. Bond yields are also rising worldwide. The question is whether that reflects better-than-expected economic growth, higher-than-expected inflation, and/or looming fiscal debt crises. Equities are voting for growth. We are too. Here's more: **I. Global Stock Markets** The US-to-Developed World ex-US MSCI ratios have gone flat since early 2025 after climbing for 15 years (chart). They've had matching gains. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-15.jpg) The US-to-EM MSCI ratios have turned up in recent weeks, though both remain well below their 2024 highs (chart). Emerging markets did the heavy lifting for Go Global through the first half of the year and gave some of it back in July. The turn suggests that gap is starting to close again. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-16.jpg) September has a ways to go. But so far, Brazil leads the country ETF rankings at 5.1% mtd in dollar terms, with South Korea at 4.4% and Taiwan at 3.8% (chart). The US is towards the bottom at 0.4%. Last week was a good one for Go Global. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-83.png) The ACWX ETF and PBUS have tracked one another closely since Liberation Day last year (chart). A global bull market running that evenly across US and overseas equities for well over a year is remarkable. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-82.png) The spreads between the major overseas equity ETFs and the US ETF have been mixed since early 2025, when Go Global started outperforming (or at least keeping up) with Stay Home. Japan and EMs have outperformed the US. The Eurozone has fizzled. The UK continues to lag (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-84.png) **II. Earnings & Valuation** The US MSCI trades at a 19.8 forward P/E against 13.1 for the All Country World ex-US (chart). Both have fallen this year, as earnings gains outpaced stock price increases. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-85.png) All Country World ex-US forward EPS keeps climbing, with the consensus stepping up from 2025 to 2026 to 2027 (chart). The stair-step from 2026 to 2027 is steep, and the forward series continues to climb to record highs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-86.png) The Developed World ex-US series shows the same pattern (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-87.png) Emerging markets are the steepest of the three (chart). South Korea and Taiwan account for most of the strength. Korea's 2026 consensus earnings growth estimate has risen to 333.9% and Taiwan's to 56.9%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-88.png) **III. Global Bonds** Yields are rising nearly everywhere. The UK’s 10-year government bond is at a 5.14% yield, the US’s at 4.78%, France’s at 4.19%, Germany’s at 3.34%, and Japan’s at 2.91% (chart). China is the exception, with its 10-year government bond yield at just 1.68% and continuing to decline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-92.png) For years after the Great Financial Crisis of 2008, government bond yields ran far below nominal GDP growth; that era is over. Yields have converged with nominal GDP growth across the major economies, and they now exceed it in France and the UK (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-93.png) **IV. Currencies** The dollar is holding up well. The DXY is at 99.2 and remains inside the uptrend channel that has contained it since 2011 (chart). The de-dollarization argument comes back every time the dollar softens. It has yet to show up in DXY. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-90.png) The yen strengthened materially over the past week as traders repriced not only the timing of Japanese tightening but its pace (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-17.jpg) The won is at its strongest in more than a year (chart). Korean exporters have been converting dollar receipts into won against a large trade surplus, with proceeds from a major US listing adding to the inflow. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-91.png) **V. Commodities** Commodity prices are turning into a source of inflation. Rising grain prices may soon show up in food inflation worldwide (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-94.png) Diesel is a key input for industrials and transport names. Spot prices have been rising sharply in recent weeks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-95.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### A Goldilocks Jobs Report Just In Time For Labor Day URL: https://www.yardeniquicktakes.com/a-goldilocks-jobs-report-just-in-time-for-labor-day/ Last updated: 2026-09-06T04:00:26.000Z The August US jobs report is among the best we have seen in some time and provided an uplifting backdrop for the Labor Day weekend. Labor demand is solid and becoming more broad-based, unemployment remains low, and labor supply improved in August. At the same time, moderate wage growth and solid productivity gains show that inflationary pressures are subdued in the labor market. In other words, the report reinforces our view that the Fed has little reason to worry about the employment side of its dual mandate. It leaves Fed policymakers free to focus on inflation. Let's take a deep dive into the report: **I. Job Growth** The US economy added 162,000 jobs in August, well above expectations, while the change in July payrolls was revised up to 21,000 from -23,000 (chart). Payrolls increased by an average of 71,300 over the past three months, while the six-month average rose to 107,000, its highest since July 2024\. So far this year, job growth has averaged about 80,000 per month, up sharply from just 10,000 per month in 2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-46.png) Leisure and hospitality led job growth, adding 62,000 jobs after losing 75,000 over the prior two months (chart). Local government education employment increased by 33,200 ahead of back-to-school season, while health care and social assistance also contributed meaningfully. The AI investment boom is boosting employment in other industries. Manufacturing payrolls increased by an average of 14,000 over the past three months, the strongest gain since December 2022\. The three-month average of construction job growth reached its highest level since January 2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-47.png) The payroll employment diffusion index confirms that job gains are spreading, with more than half of industries adding jobs in August. Both the one-month and six-month measures of hiring breadth reached their highest levels since January 2024 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-48.png) The broadening is particularly evident in manufacturing, where 59% of industries added jobs in August, the highest share since October 2022 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-11.jpg) **II. Unemployment and Labor Market Slack** The unemployment rate remained unchanged at 4.1% in August, keeping it near prior cyclical lows (chart). The broader U-6 unemployment rate, which includes discouraged workers and those working part-time for economic reasons, fell to 7.7%, its lowest reading since January 2025\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-49.png) Another sign of limited labor-market slack is the recent decline in the number of workers employed part-time for economic reasons (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-51.png) **III. Labor Supply** The unemployment rate was unchanged despite the 683,000 increase in the labor force. That was the largest gain since January 2025\. The labor force participation rate rose to 61.6% in August, its first increase in nine months (chart). Nevertheless, it remains historically low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-52.png) The outlook for labor force growth remains anemic. Structural headwinds from the wave of retiring Baby Boomers and a shrinking foreign-born labor force remain. August's uptick in the labor force isn't the start of a new trend. Indeed, on a y/y basis, it is still declining at a historically rapid pace (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-61.png) **IV. Earned Income Proxy** Our Earned Income Proxy (EIP) for private-sector wages and salaries in personal income rose sharply in August. Average weekly hours worked rose 0.3% m/m to 34.4, the highest level since March 2024 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-55.png) That gain, combined with the 0.1% m/m increase in private payrolls, drove a 0.4% m/m rise in aggregate weekly hours worked to a record high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-63.png) Adding the 0.3% increase in average hourly earnings resulted in a robust 0.7% increase in our EIP, its best gain since January 2026 (chart). The Cleveland Fed’s [Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model estimates that the headline PCED rose 0.4% m/m in August, implying that our inflation-adjusted EIP rose by around 0.3% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-57.png) **V. Wage Inflation** On a y/y basis, average hourly earnings growth eased to 3.1% in August, the slowest pace since May 2021 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-58.png) Slowing wage growth and subdued unit labor costs confirm that the labor market is not currently a source of inflationary pressure (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-62.png) 💡 Join the discussion with Dr. Ed below! Paid members can now leave comments or questions at the end of our QuickTakes, and it may be featured in the next "Just Ask Dr. Ed!" ### Boom Lifts Bond Yields URL: https://www.yardeniquicktakes.com/boom-lifts-bond-yields/ Last updated: 2026-09-04T02:24:18.000Z I**. Stocks, Bonds & Waller** Today, the S&P 500 had its best day in a month as Treasury yields edged lower and the dollar dropped to its lowest level since May. The policy-sensitive 2-year Treasury yield retreated to 4.34% after briefly rising to 4.41% on Tuesday. These moves reflect a decline in the probability of a September rate hike to about 50%, down from 70% earlier this week. The catalyst was [comments](https://www.reuters.com/business/feds-waller-open-leaving-rates-unchanged-september-meeting-if-inflation-cools-2026-09-03/?ref=yardeniquicktakes.com) from Fed Governor Christopher Waller. While he said he's willing to hold the policy rate steady if progress toward the Fed's 2% inflation target continues, he also stressed that it would not take much evidence of persistent inflation pressures to support a hike. With recent data showing "some signs of disinflation," the burden of proof is now on the inflation data to justify a hike. The financial markets concluded that Waller is an owl, i.e., an FOMC voter watching incoming inflation data before deciding whether to vote for a hike at the Committee's September 15-16 meeting. We reckon that of the 12 voters on the FOMC, five are hawks (i.e., ready to hike), while six are owls. That's why bonds and stocks rallied today when Waller joined the latter birdies. They also rallied today because the yen rebounded, without any intervention by the Bank of Japan, on expectations that the central bank will soon raise its policy rate and on second thoughts about a Fed rate hike (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-10.jpg) The good news is that stocks should do well, as Fabulous Earnings Momentum (FEMO) reported by Broadcom, Dell, and Snowflake continues to support the bull market. Our two favorite bull-bear ratios remain relatively neutral, providing neither a strong buy nor sell signal (chart). FEMO, however, is sending a loud buy signal! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-39.png) _This post is for paying subscribers only._ ### Dell Results Suggest AI Productivity Boom Is Here URL: https://www.yardeniquicktakes.com/dell-results-suggest-ai-productivity-boom-is-here/ Last updated: 2026-09-03T02:47:14.000Z **I. Dell** Dell Technologies' stock price is soaring (chart). The company delivered a major beat across the board for its fiscal 2027 second quarter (ended July 31), driven by massive, accelerating demand for AI infrastructure and strong legacy hardware performance. Revenues and earnings rose 58% y/y and 203%, respectively. AI server revenue rose 100%, while traditional servers and networking revenues rose 122%. The results confirm that the AI infrastructure buildout remains in full swing. Strong demand for AI compute capacity points to accelerating AI adoption across the economy, which we think will drive a productivity boom. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-29.png) **II. Productivity** We are already seeing signs of this productivity boom in the economic data. The Atlanta Fed's GDPNow model currently estimates that real GDP is increasing by 4.8% (saar) in Q3, led by a whopping 21.5% increase in AI-supercharged fixed business equipment investment (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-22.png) Output is booming, while labor input is rising at an anemic pace, a clear sign of robust productivity growth (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Warsh World URL: https://www.yardeniquicktakes.com/weekly-webcast-warsh-world/ Last updated: 2026-09-02T13:00:00.000Z Fed Chair Kevin Warsh isn’t one to give the markets a heads-up. Investors are trying to translate what he says into what he would like the Fed to do. To that end, Ed and Elias parse Warsh’s remarks last week at the Jackson Hole symposium. While Warsh’s assessment of economic conditions is hawkish, is it just hawkish squawk or indicative of his vote at September’s FOMC meeting? Whether he backs raising or maintaining the current federal funds rate may hinge on whether August inflation data suggest persistent weakness. But Warsh’s Jackson Hole comments did give the FOMC’s hawks some support and did shed some light on his policy approach. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Beware: September Is Back Again URL: https://www.yardeniquicktakes.com/beware-september-is-back-again/ Last updated: 2026-09-02T03:08:37.000Z **I. A Month of Opportunities** "The Waste Land" is a poem by T.S. Eliot. It opens with the line, "April is the cruelest month." Apparently, Eliot never managed a stock portfolio. Everyone in the stock market knows that September is the cruelest month for stocks (chart). But when it is a bad month, it tends to create buying opportunities for a year-end rally that often starts in October. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-18.png) What could possibly go wrong in September? Investors are already freaking out about rising bond yields worldwide (chart). The fear is that the Bond Vigilantes are on the loose and driving yields higher in protest over large government deficits, mounting government debt, and rapidly rising government interest costs. In addition, oil prices remain elevated and are fueling inflation. This is all putting pressure on the major central banks to raise their official policy rates. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-5.png) We share the Bond Vigilantes' concerns, but we aren't convinced bond yields are, or will soon be, prohibitively high. True, they are back to levels seen before the Great Financial Crisis (GFC). But that's because they are normalizing after a long period of abnormally low bond yields following the GFC, when central banks were rigging bond markets. Since the lows of the Great Virus Crisis, yields in the major overseas government bond markets have mostly recovered and converged to their respective national nominal GDP growth rates (chart). As we've recently observed, in the US, nominal GDP rose 6.6% y/y during Q2-2026, while the 10-year Treasury yield is 4.80% this evening. If it hits 5.00%, we expect strong demand for the bond, including from Treasury Secretary Scott Bessent. He'll issue more Treasury bills to buy back bonds if necessary to avert a selling panic. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/09/gateway-19.png) **II. JOLTS** _This post is for paying subscribers only._ ### Is A Debt Crisis Imminent? URL: https://www.yardeniquicktakes.com/is-a-debt-crisis-imminent/ Last updated: 2026-09-01T02:43:18.000Z "You are going to see a crack in the bond market, OK?" JPMorgan CEO Jamie Dimon said in a May 30 speech at the Reagan National Economic Forum. The US government debt situation is "nearing the point of no return" and approaching a "death spiral" that could threaten the stability of the world's largest economy, Ray Dalio writes in his new book "How Countries Go Broke: The Big Cycle," published June 3. Dimon and Dalio are smart and influential. We share their concerns. However, anyone who has followed their consistently pessimistic outlook over the past few years has missed a huge rally in the stock market. As for us, we'll worry about the government's debt when the Bond Vigilantes do. If a debt crisis is coming, we should make as much money as we can in stocks and sell just before the crisis hits. The question is whether the crisis is imminent. Even more important is whether a policy response could stop the crisis from turning into a death spiral. If so, the crisis will be a buying opportunity. The Bond Vigilantes have been stirring lately, but the 10-year Treasury bond yield remains between 4.00% and 5.00%. We've contended that this range is the "old normal," i.e., the same range as in the years from before the Great Financial Crisis to the Great Virus Crisis (chart). This suggests the economy is back to normal and growing at a solid pace. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-415.png) As we explained in our [Bond Vigilantes Primer](https://bu2teaoyba4t7viw.public.blob.vercel-storage.com/mb-figures/1787500713172-Bond%5FVigilantes%5FExcerpt%5FSC%5Fedits%5FLEY%5Fedits%5Fv3-H4nx0fMDwXiRwiWJH4KXsIitl9TTs5.pdf?ref=yardeniquicktakes.com), the Bond Vigilantes tend to be on the loose when the 10-year US Treasury bond yield exceeds nominal GDP (chart). The yield is currently well below nominal GDP. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-416.png) US debt levels are undoubtedly concerning. Total public debt surpassed $40 trillion in August, roughly double what it was a decade ago (chart). However, about $7.7 trillion consists of intragovernmental debt, or money the government owes to itself. Because it is not traded in public markets, it does not directly affect the supply of Treasuries. _This post is for paying subscribers only._ ### US SECTORS CALL: Information Technology, Energy & Consumer Discretionary URL: https://www.yardeniquicktakes.com/us-sectors-call-information-technology-energy-consumer-discretionary/ Last updated: 2026-08-31T00:01:26.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/IMG_2026.jpeg) Information Technology (MW) led the S&P 500 sectors last week, up 1.8%. The sector rose 3.4% on Thursday following Nvidia’s results the previous evening. Nvidia guided to 70% revenue growth next fiscal year against a 45% consensus. Energy (OW) was among the weakest, down 2.0%, while Consumer Discretionary (UW) rose 0.1%. The rate-sensitive sectors sold off on Friday after Warsh’s Jackson Hole speech, with Real Estate (UW) down 1.3% on the week and Utilities (OW) down 4.0% on the month (chart). Here's more on Software, Energy, and Consumer Discretionary: **(1) Software: Cyber and SaaS soar.** Dr. Ed said on [CNBC](https://www.cnbc.com/video/2026/02/26/ais-impact-on-software-stock-prices-is-overdone-says-yardeni-researchs-ed-yardeni.html?&qsearchterm=Ed%20Yardeni&ref=yardeniquicktakes.com) on February 26 that the market had overdone AI's potential negative impact on software stocks. The iShares Expanded Tech-Software ETF closed at $82.60 that day. It closed Friday at $109.50, up 32.6% since then (chart). Markets initially priced software as a sector vulnerable to AI disruption, yet it is proving to be the essential distribution layer for AI integration. _This post is for paying subscribers only._ ### GLOBAL MARKETS CALL: Bull Market In Stocks Despite Bear Market In Bonds URL: https://www.yardeniquicktakes.com/global-markets-call-bull-market-in-stocks-despite-bear-market-in-bonds/ Last updated: 2026-08-30T19:04:12.000Z Bond yields are rising worldwide, but that's not stopping the global bull market in stocks. For now, investors are reading higher yields as a sign of economic growth rather than a threat to it, so the "Go Global" trade is still working. South Korea and Taiwan are back at the top of August's leaderboard after July's shakeout. The AI-linked markets that led all year are leading again. The laggards are markets with domestic problems, not those exposed to the global business cycle. Here's more: **I. Global Interest Rates** Government bond yields continue to grab headlines. The UK and Australia are both above 5.00%, at 5.15% and 5.09% (chart). The US at 4.73% is toward the upper end of the 4.00%-5.00% range we call the "old normal." Japan and Germany continue to rise, at 2.92% and 3.27%, both up steadily since February. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-411.png) The long end is pricing a policy turn. Official rates are well below market yields across the major economies, with the RBA at 4.35%, the Fed and BoE both at 3.75%, and the ECB deposit rate at 2.25% (chart). Markets have shifted from pricing central bank rate cuts to pricing hikes in the coming months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-406.png) **II. Foreign Exchange** _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 31 - September 4 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-31-september-4/ Last updated: 2026-08-29T17:49:57.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/economic_calendar_September_2026_week1.png) Fed Chair Kevin Warsh's speech at Jackson Hole on Friday was hawkish. He declined to offer forward guidance, saying he's "committed to a discipline, not a decision." He said this summer's better-than-expected inflation prints don't yet show that underlying trends have meaningfully improved, and that he'd be "hard pressed to describe broad financial conditions as 'restrictive.'" Federal funds rate futures now imply 2.4 rate increases over the next 12 months, up from 1.8 a week earlier, with odds of a September hike rising to about 60% from 35% (chart). Fedspeak continues this week, with Governor Barr (Tue) and Governor Waller (Thu) likely to weigh in on the issues discussed by Warsh. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-399.png) This week's economic calendar is jam-packed with labor market data, capped off by August's employment report (Fri), along with ISM's manufacturing and services PMIs, revised Q2 productivity, and the Fed's Beige Book. The Bank of Canada meets Wednesday and is expected to hold. Palo Alto Networks, Broadcom, MongoDB, Credo, and Snowflake report earnings this week, following the strong reception given to Nvidia, Salesforce, and CrowdStrike last week. Here's more: **(1) Employment.** July's nonfarm payrolls fell 23,000, dragging the three-month average down to 20,000 (chart). We expect a figure above 50,000 for August, which would be a solid outcome and a clear sign of firming after July's weak print. Last month's odd declines in leisure & hospitality and local education likely were reversed this month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-181.png) Challenger's July layoff announcements totaled 33,400, still low by historical standards (chart). Layoffs probably remained light last month, according to initial unemployment claims, which held at a four-week average of 204,500\. Fed Chair Kevin Warsh noted at Jackson Hole that claims are near their lowest level in decades, calling them "an empirically robust real-time indicator." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-197.png) July's ADP private payrolls rose 44,000, down sharply from June's 98,000\. August's ADP report (Wed) may show some stabilization, with ADP's weekly readings picking up for the past two weeks to a four-week average of 11,750 by August 8, up from a mid-July bottom of 8,250 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-180.png) June JOLTS data showed job openings at 7.4 million, with the "jobs plentiful" share of consumers at 27.0% in August, both consistent with a stable labor market (chart). We expect more of the same in July's JOLTS report (Tue). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-185.png) Employment-related stocks (ADP, Paychex, ManpowerGroup) have all rebounded from their yearly lows in spring, each up more than 45%, suggesting that the labor market is improving (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-184.png) **(2) Purchasing managers' indexes.** S&P Global's flash PMIs for August suggest that the comparable ISM indexes remained strong that month for manufacturing and especially for services (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-395.png) August's four available regional manufacturing surveys show more strength in this sector than shown by the S&P Global flash estimate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-396.png) S&P 500 forward earnings rose 32.1% y/y during July, suggesting more upside in the ISM's M-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-186.png) **(3) Productivity.** Q2's revised nonfarm business productivity (Thu) is likely to match the preliminary increase of 2.2% y/y (chart), in line with its long-run average of 2.1%; output rose 2.5%, below its 3.4% average. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-190.png) On a seven-year annualized basis, we expect that the current productivity rebound will turn into a productivity boom over the remainder of the Roaring 2020s and through the Roaring 2030s (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-398.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: Warsh Proof URL: https://www.yardeniquicktakes.com/us-market-call-warsh-proof/ Last updated: 2026-08-30T04:00:33.000Z Last Wednesday, Nvidia's earnings report came in much stronger than expected, confirming that the AI boom is still going strong. On Friday, Fed Chair Kevin Warsh was much more hawkish than expected in his Jackson Hole speech. He acknowledged that inflation remains above the Fed's 2.0% target. Overall, as we expected, these two events didn't move the markets much. The S&P 500 was up just 0.5% for the week. The 10-year Treasury bond yield fell 0.2bps last week, while the 2-year Treasury yield rose 11bps. **I. Bonds** In the federal funds futures market, the number of expected 25bps rate hikes over the next 6 and 12 months rose slightly to 1.5 and 2.0 (chart). The CME Fed Tool showed that the odds of a September rate hike jumped from roughly 35%-40% to 55%-60% after Warsh spoke on Friday. Warsh still has a credibility problem. He has talked the talk about the need for the Fed to bring inflation down to its 2.0% target, but he has yet to walk the walk. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-387.png) As noted above, the 10-year Treasury bond yield fell 0.2bps last week, while the 2-year Treasury yield rose 11bps (chart). So the yield curve flattened a bit. Despite all the commotion in the bond market since US Treasury Secretary Scott Bessent intervened with Japanese authorities to support the yen on July 31, the 10-year yield remains in our "normal-for-longer" range of 4.00%-5.00%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-388.png) Despite concerns about the surge in bond supply from hypersalers, spreads between corporate bond yields and the 10-year Treasury yield remain low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-389.png) **II. Stocks** The S&P 500 has been volatile this year (chart). The war in the Middle East during March depressed stock prices as oil prices soared (chart). Since then, the conflict's de-escalation has lifted stock prices this spring. During the summer, stock prices have been relatively flat. The S&P 500 is back on track compared with its average performance from 2016 to 2025\. If it remains on that track, it would end the year at 8,146\. We are still targeting 8,400 for year-end 2026\. We doubt that one or two Fed rate hikes will derail our target. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-87.jpg) Despite the recent rally in the Magnificent-7 ETF, it still lags the Impressive-493 ETF since the start of this year (chart). Investors are suffering from AI fatigue and are moving into the stocks of companies they understand and that might benefit from AI ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-385.png) **III. Earnings** S&P 500 forward earnings per share rose to yet another record high last week at $396.05 (chart). By definition, it will converge to match the analysts' consensus 2027 earnings estimate by the end of this year, which is currently at a record high of $412.46\. We think both will hit $415 by year-end, taking the S&P up to 8,400 (with a 20.2 forward P/E). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-85.jpg) Forward earnings for the S&P 400 and S&P 600 also have been rising to record highs still (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-392.png) **IV. Valuation & Sentiment** This year, the forward P/Es of the major stock market indexes have declined as actual and expected earnings rose faster than stock prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-391.png) Our two favorite bull-bear ratios remain relatively neutral (chart). These contrarian indicators aren't providing strong buy or sell signals. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-386.png) **V. Commodities** In his speech on Friday, Warsh noted that commodity prices may be putting some upward pressure on inflation. Grain prices jumped last week on mounting concerns that Russia is disrupting grain exports from Ukraine (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-394.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-397.png) The gold price fell $160 per ounce on Friday after Warsh's hawkish speech that morning (chart). It is back down slightly below its 200-day moving average. We are still targeting $5,000 by the end of this year, reflecting our expectation that any price dips will be short-lived. That’s because we think several central banks would view dips as buying opportunities in their attempts to rebalance their international reserves away from the dollar and toward gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-390.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### AI Buildout Is Stimulating The Economy URL: https://www.yardeniquicktakes.com/ai-buildout-is-stimulating-the-economy/ Last updated: 2026-08-28T01:58:00.000Z Nvidia's Q2 earnings report suggests that the AI spending boom is broadening. The company forecast 70% revenue growth next fiscal year, far above Wall Street's 45% expectation, and said growth would be even stronger if supply constraints were less severe. Significantly, non-hyperscaler revenue grew 138% y/y, outpacing hyperscaler revenue growth of 102% y/y, as demand broadened beyond mega-cap tech into AI-native startups, sovereign cloud builds, and traditional enterprise IT. Such a strong outlook from the company at the center of the AI ecosystem is a powerful vote of confidence in the AI spending boom. As CEO Jensen Huang put it, the "AI infrastructure buildout is at full steam." That suggests AI-related investment should remain a significant tailwind for both economic and earnings growth: **(1) Earnings.** AI spending is already showing up broadly in the economy and in earnings. S&P 500 Information Technology forward earnings is up 81.9% y/y, more than double the 36.0% gain for the S&P 500 as a whole. Other sectors tied to the AI buildout (including Industrials, Materials, and Communication Services) are showing robust growth too (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-381.png) Industry analysts expect the strength to persist, with Information Technology's long-term earnings growth (LTEG) forecast at 41.7%, well ahead of the S&P 500's 25.0% (chart). The other AI-related sectors are also expected to show double-digit LTEG in the mid- to high teens. _This post is for paying subscribers only._ ### Bessent Twist Is Also Bessent Put URL: https://www.yardeniquicktakes.com/bessent-twist-is-also-bessent-put/ Last updated: 2026-08-27T01:25:28.000Z **I. Bessent Put For Bonds** Over the past few weeks, Treasury Secretary Scott Bessent took three actions to deter the Bond Vigilantes by showing them the Treasury's ample toolbox for stabilizing bond yields. First, the Treasury joined Japan in supporting the yen, reducing the risk that Tokyo would need to sell Treasuries to defend its currency. Second, it announced that it was doubling buybacks of 10- to 30-year securities to $4 billion per operation. Third, the Treasury signaled it could draw down its nearly $1 trillion Treasury General Account (TGA) to help finance the additional long-bond purchases. Of course, the TGA would need to be replenished with additional T-bill issuance. Bessent is counting on growing demand from dollar-pegged stablecoins to help absorb that supply, as stablecoin issuers increasingly hold T-bill reserves as required by law. Of course, the Fed might also have to buy some of those bills to offset any upward pressure on the pegged federal funds rate. Taken together, these moves amount to a Bessent Twist: supporting the long end of the yield curve by relying more heavily on short-term financing in the T-bill market. They also amount to a Bessent Put for the bond market. Bessent is signaling that policymakers have options should long-term yields rise beyond levels justified by economic fundamentals. **II. Bond Yields Are Alright Here** Most of the recent rise in the nominal 10-year Treasury yield has reflected higher real yields, with the 10-year TIPS yield climbing alongside the Weekly Economic Index, a proxy for real GDP growth (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-83.jpg) Additionally, the 10-year Treasury yield is not unusually high relative to nominal GDP growth (chart). The bond yield is where it should be relative to the fundamentals. There is no need to panic that the Bond Vigilantes are on the loose. We will worry about them if the bond yield jumps toward nominal GDP growth. The Bessent Put makes that a less likely outcome. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/5c9074436fa821d10e77ff3f90e681e7d0eb963b-1920x1080.png) **III. Inflation & The Fed** Headline PCED inflation rose 0.2% m/m and 3.7% y/y in July, while core PCED increased 0.2% m/m and 3.3% y/y (chart). Both annual rates were unchanged from June levels and have remained well above the Fed's 2.0% y/y target for more than five years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-358.png) The PCED for goods rose 3.7% y/y in July, also unchanged from the June level (chart). A 2.7% m/m decline in energy goods prices offset a 1.4% increase in information processing equipment prices. We expect goods inflation to remain sticky in the months ahead as AI-related prices rise, energy disinflation fades, and tariffs continue to boost prices. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-360.png) The PCED for services held steady at 3.7% y/y in July (chart). "Supercore" services PCED, which excludes housing and energy, was also unchanged, at 3.8% y/y. Both measures point to persistently sticky service-sector inflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-361.png) The good news is that the labor market is an important source of disinflation, as productivity gains have been offsetting hourly compensation increases (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-363.png) The hawks who dissented at the July FOMC meeting will likely push again for a September rate hike, arguing that inflation has remained above the Fed's 2.0% target for too long and that monetary policy isn't restrictive enough. The owlish majority, meanwhile, appears to be following New York Fed President John Williams' framework, under which core PCED readings above 0.2% m/m could warrant a policy response, while readings at or below 0.2% would support a hold. July's core PCED reading technically met that threshold, at 0.246% m/m, while annual inflation rates continued to show no progress toward the Fed's inflation target. On balance, we think the inflation data strengthen the case for a September rate hike. **IV. Consumer Spending & Income** The July spending data confirmed that consumer spending slowed as boosts from the World Cup, Amazon Prime Day, and OBBBA tax refunds faded. Real consumer spending was unchanged in July following a 0.4% m/m increase in June (chart). Meanwhile, real disposable personal income (DPI) rose 0.4% m/m, its strongest increase since January (chart). Nevertheless, real DPI has been essentially flat for more than a year and is likely to remain so as Baby Boomers continue to retire. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-364.png) July's saving rate rose to 3.0%, a four-month high, as income growth outpaced spending growth (chart). We expect the saving rate to trend lower over time as more Baby Boomers retire and draw down their considerable wealth to support spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-365.png) A closer look at the flat July spending reading shows that most of the weakness was concentrated in goods spending, likely reflecting a slowdown following June's Amazon Prime Day boost. By contrast, spending at food services and restaurants, a key discretionary category, rose a solid 0.4% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-366.png) We expect consumer spending to remain resilient through the second half of the year. Supporting that view, Redbook's same-store sales index was up 8.4% y/y in the week of August 21, well above its 2025 average of 5.8% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-367.png) 💡 Join the discussion with Dr. Ed below! Paid members can now leave comments or questions at the end of our QuickTakes, and it may be featured in the next "Just Ask Dr. Ed!" ### WEEKLY WEBCAST: Trump Threatens Military Action Against The Bond Vigilantes URL: https://www.yardeniquicktakes.com/weekly-webcast-trump-threatens-military-action-against-the-bond-vigilantes/ Last updated: 2026-08-26T13:00:00.000Z The Bond Vigilantes have driven up Treasury bond yields recently, thundering onto the scene in alarm over the government’s huge borrowing needs, record corporate bond issuance, three inflationary supply shocks, a cloudy Fed path, resilient nominal GDP growth, a higher neutral interest rate, and a fragile yen. On the flip side, the Trump administration is determined to keep yields tethered—one way or another. Also holding yields in check are slightly cooler economic momentum, moderating labor costs, and the prospect of less policy uncertainty. Ed and Elias expect those counterweights to keep the 10-year yield mostly within our 4.00%-5.00% expectation range, the “old normal.” … Also: Ed reviews “Tuner” (+ + +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Peak Fear? Peak Yields? Peak Earnings? Peak AI? URL: https://www.yardeniquicktakes.com/peak-fear-peak-yields-peak-earnings-peak-ai/ Last updated: 2026-08-26T01:53:22.000Z The answers are: Yes, Maybe, No, and No. We have nothing to fear but nothing to fear. The stock market likes to climb a wall of worry. So too much optimism tends to be bearish, while too much pessimism tends to be bullish. Fortunately, there is plenty to fear these days. Indeed, in a recent LinkedIn [post](https://www.linkedin.com/posts/raydalio%5Fin-my-book-how-countries-go-broke-the-big-activity-7496558824745644032-X1Hr?utm%5Fsource=share&utm%5Fmedium=member%5Fdesktop&rcm=ACoAAALrHVMBHlwPSSowUQnQXNc-S2CZ5LYInwI), billionaire Ray Dalio reiterated that recent events confirm that the US is on course for a debt crisis. Jeremy Grantham shares Dalio's deep pessimism, but his primary thesis focuses on an equity valuation "super-bubble" rather than an explicit sovereign debt crisis. Grantham believes the stock market is in the late stages of a historic bubble driven by AI exuberance, which he compares to the 1929 crash, the 2000 dot-com bubble, and the 1840s railroad mania. Let’s examine the markets’ latest fears: **I. Fearing The Bond Vigilantes**. In recent days, plenty of panic has focused on the Bond Vigilantes' role in pushing long-term Treasury yields higher. But panics often trigger a policy response. Sure enough: Treasury Secretary Scott Bessent recently responded with yen-buying so the Japanese government wouldn't be forced to sell its US Treasuries, announced larger Treasury bond buybacks, and suggested making those purchases through the Treasury General Account, which currently has close to $1 trillion in cash. These measures may be gimmicks, but they show the Treasury is intent on calming the Bond Vigilantes. So far, so good. The 10-year Treasury yield is back down to 4.64% this evening from a recent high of 4.74% last Friday. It remains in what we call the "old normal" range of 4.00%-5.00%, which reflects a healthy economy (chart). Falling oil prices helped lower yields too today, reflecting mounting evidence that Iran no longer has the military means to effectively close the Strait of Hormuz. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-346.png) _This post is for paying subscribers only._ ### The Latest Pitch of America's Top Bond Salesman URL: https://www.yardeniquicktakes.com/the-latest-pitch-of-americas-top-bond-salesman/ Last updated: 2026-08-25T03:23:47.000Z Because of the recent commotion in the bond market, Dr. Ed has received many inquiries about the “Bond Vigilantes,” a term he coined in 1983\. In response, please see his [Bond Vigilantes Primer](https://bu2teaoyba4t7viw.public.blob.vercel-storage.com/mb-figures/1787500713172-Bond%5FVigilantes%5FExcerpt%5FSC%5Fedits%5FLEY%5Fedits%5Fv3-H4nx0fMDwXiRwiWJH4KXsIitl9TTs5.pdf?ref=yardeniquicktakes.com), which includes a few of his most pertinent excerpts on the topic over the years. **I. The New Treasury-Fed Accord** In November 2025, Treasury Secretary Scott Bessent said, "My job is to be the nation's top bond salesman. And Treasury yields are a strong barometer for measuring success in this endeavor." Recently, however, the Bond Vigilantes are demanding lower prices (higher yields) for what Bessent is selling. The 10-year Treasury yield reached its highest level of the year, while the 30-year climbed to its highest level since 2007 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-336.png) That has prompted Bessent to make three sales pitches to the Bond Vigilantes recently: *Pitch I* came when the Treasury [joined](https://www.reuters.com/world/asia-pacific/us-treasury-undertakes-intervention-yen-market-ft-reports-2026-08-01/?ref=yardeniquicktakes.com) Japan in a rare intervention to support the yen after it fell to multi-decade lows, reducing the risk that Tokyo would have to sell its US Treasury securities to prop up its currency. That support actually unnerved bond investors by reminding them that the US depends heavily on the kindness of strangers. *Pitch II* came last Wednesday, when the Treasury [doubled](https://home.treasury.gov/news/press-releases/sb0607?ref=yardeniquicktakes.com) buybacks of 10- to 30-year securities to $4 billion per operation. During Janet Yellen's term as US Treasury Secretary, the buyback program was designed to support secondary market liquidity by regularly buying back less liquid, "off-the-run" nominal coupons and TIPS. *Pitch III* came today, when CNBC [reported](https://www.cnbc.com/2026/08/24/bessent-1-trillion-treasury-general-account-bond-buybacks.html?ref=yardeniquicktakes.com) that the Treasury could use its nearly $1 trillion Treasury General Account (TGA) to help fund expanded long-bond purchases. TGA is the Treasury's checking account at the Fed. This may be the start of the Treasury's own version of Operation Twist. In the [original](https://www.investopedia.com/terms/o/operation-twist.asp?ref=yardeniquicktakes.com) Operation Twist, the Fed sought to lower long-term interest rates by selling short-term Treasuries and buying long-term ones. The strategy was first used in 1961 with modest success and revived in 2011, when it is estimated to have lowered 10-year Treasury yields by 15-25 basis points. _This post is for paying subscribers only._ ### GLOBAL MARKETS CALL: China Dumping Its Excess Production On The World URL: https://www.yardeniquicktakes.com/global-markets-call-china-dumping-its-excess-production-on-the-world/ Last updated: 2026-08-24T00:07:06.000Z The Go Global trade continues to work; August has not interrupted it. Asia's AI-linked stock markets are back in the performance-derby lead after July's shakeout, and the other emerging markets that led this year are leading again. Last week's action was in bonds. Treasury Secretary Scott Bessent doubled the Treasury's buyback program for longer-dated debt, lifting repurchases to at least $4 billion per operation from September through November and telling [CNBC](https://www.cnbc.com/video/2026/08/20/watch-cnbcs-full-interview-with-treasury-secretary-scott-bessent.html?ref=yardeniquicktakes.com) that the size could go higher if liquidity stays poor. So far, the global equity rally has absorbed the rout in the bond market, which suggests that investors read higher yields as evidence of economic growth rather than a threat to it. Here's more: **I. Stay Home vs Go Global.** South Africa leads the mtd rankings at 14.0% in US dollar terms, with South Korea at 13.5% and Taiwan at 8.0% (chart). EM ex-China is up 6.2%, ahead of the ACWX at 3.6%, the ACWI at 2.8%, and the US at 2.5%. Brazil brings up the rear at -4.3%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-311.png) The US-to-ROW (rest of world) MSCI ratios (in dollars and in local currencies) remain in intermediate downtrends that started in early 2025 (chart). _This post is for paying subscribers only._ ### US SECTORS CALL: Health Care, Semiconductors, Consumer Staples & Materials URL: https://www.yardeniquicktakes.com/us-sectors-call-health-care-semiconductors-consumer-staples-materials/ Last updated: 2026-08-23T21:15:34.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-164.png) Health Care (OW) led the S&P 500 sectors this week, rising 4.3%. Energy (OW) was next at 2.5% and is up 41.2% ytd, the best of the 11 sectors (chart). Materials (OW) also finished higher, up 2.3%. The other eight sectors fell. Utilities (OW) was the weakest at -3.6%, followed by Industrials (OW) at -3.4% and Information Technology (MW) at -3.2%. Here's more on Health Care, Information Technology, Consumer Staples (UW), and Materials: **(1) Health Care: Biotech leads the way.** The biotech rally has been running on M&A, hope, and hype. Last week, the sector delivered great news.Moderna and Merck announced on Wednesday that their personalized cancer vaccine met its primary endpoints in a Phase 3 trial, the first individualized mRNA therapy ever to do so. Moderna rose 177%, the largest one-day gain by any S&P 500 stock this century, then gave back 22% on Thursday. Biotechnology gained 8.5% for the week (chart) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-168.png) Analysts have been marking up the sector. Two weeks ago, they expected earnings to grow 0.1% in 2026\. They now expect 2.0% growth this year, with 22.2% penciled in for 2027\. Biotechnology is the leading swing factor, forecast to shrink 6.4% this year and grow 47.1% next year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-169.png) The sector's forward earnings is up 6.6% ytd, and the forward P/E is up 6.3% ytd, pushing the price index up 12.6% (chart). At 19.1 times forward earnings, the sector trades slightly below the S&P 500's 19.8. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 24-28 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-24-28/ Last updated: 2026-08-23T16:10:20.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-140.png) Global bond markets stole the spotlight last week. The US 10-year yield closed at 4.74% and the 30-year at 5.27%, up 6bps and 2bps, respectively, for the week (chart). Treasury Secretary Scott Bessent surprised the markets on Wednesday by announcing that the US Treasury would double its long-term debt purchases to at least $4 billion per operation; that was the same day that the US national debt crossed above $40 trillion. He [appeared](https://www.cnbc.com/video/2026/08/20/watch-cnbcs-full-interview-with-treasury-secretary-scott-bessent.html?ref=yardeniquicktakes.com) on CNBC Thursday to defend the move and signaled that even larger buybacks are possible, but yields rebounded anyway, erasing most of Wednesday's relief rally. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-163.png) The episode underscores how contested the yield move remains heading into Friday's Jackson Hole remarks from Fed Chair Kevin Warsh. We will also see earnings reports from Nvidia and Marvell this week. Regional business surveys and Thursday's jobless claims round out the week's domestic calendar. Here's more: **(1) Fed policy and Jackson Hole.** Last week's FOMC minutes revealed a Committee split between hawks who favor another rate hike in September and owls who want more evidence on inflation's persistence before deciding. Hammack, Kashkari, and Logan dissented in favor of an immediate July hike. No one on the Committee is arguing for rate cuts. Warsh headlines Friday's Jackson Hole Symposium, giving him a venue to weigh in now that July's CPI and PPI prints both are in hand. Federal funds rate futures implied 1.8 rate hikes over the next 12 months, up from 1.5 a week earlier (chart). We aren't expecting much new information from Warsh's speech, which we expect will be short. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-162.png) **(2) Earnings.** Nvidia reports earnings Wednesday, and Marvell reports Thursday, as Q2 earnings season nears its close. Nvidia is expected to report revenue upwards of $90 billion, up from $46.7 billion in Q2 last year. The stock's forward P/E is down to 19.0 from a peak of 84.3 during the week of June 14, 2025 (chart). We aren't expecting a big reaction to Nvidia's earnings report. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-305.png) **(3) GDP.** The second estimate of Q2 GDP (Wed) follows a final Q1 reading of 2.1% saar. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model estimated Q2 growth at 4.0% as of August 18, with business investment leading the way (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-144.png) **(4) PCED.** July's core PCED (Wed) follows June's 3.3% y/y, well below the 4.4% pace for core PPI final demand for personal consumption in July (chart). Last week's CPI showed a similar gap, with core CPI cooling to 2.5% y/y even as the core PPI for consumption ran much hotter. The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model projects July's comparable PCED inflation rates at 3.65% headline and 3.29% core y/y. (The m/m rates are 0.34% and 0.27%.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-146.png) **(5) Business surveys.** Richmond's manufacturing index (Tue) follows an improving regional outlook in August, a sharp pickup from July. The NY and Philadelphia Fed surveys, good barometers for the other regional banks, jumped to an average of 34.0 in August, their strongest reading since 2021, with Philly's own six-month business conditions outlook jumping to its highest level since August 1983 (chart). The Chicago PMI (Fri) will round out the month's regional reads, offering additional context on Midwest business activity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-166.png) **(6) Unemployment claims.** Initial jobless claims stood at 206,000 for the week ended August 14, with the four-week average rising back above 200,000 (chart). The unemployment rate held at 4.1% in July, and jobless claims suggest that it probably remained there in August. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-167.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: Stocks Getting Cheaper As Earnings Outpace Prices URL: https://www.yardeniquicktakes.com/us-market-call-stocks-getting-cheaper-as-earnings-outpace-prices/ Last updated: 2026-08-23T04:00:24.000Z Stocks are cheaper than they were in January. S&P 500 forward earnings has risen twice as fast as the S&P 500 stock price index so far this year. So the forward P/E has declined as the index rose to record highs. The impetus was FEMO (fabulous earnings momentum) as opposed to FOMO (fear of missing out). Investors are getting more earnings for their money than they were eight months ago. Here's more: **I. Performance.** The S&P 500's forward earnings is up 24.9% ytd versus a 12.1% gain in the index, which has pushed the forward P/E down 9.9% (chart). Forward earnings has risen almost uninterrupted this year, while the price index has stalled and pulled back repeatedly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-303.png) One would expect earnings momentum this strong to be showing up in the price action of the S&P 500’s biggest earnings producers. It isn't. The Magnificent-7 is up 2.0% ytd versus 16.3% for the S&P 500 ex-Mag-7 and 12.1% for the index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-295.png) **II. Earnings.** The 2027 analysts' consensus earnings estimate may be leveling off around $410 after climbing all year (chart). We expect it to finish this year near $415.00\. The latest forward earnings of $393.28 should converge to our estimate as the year progresses. The S&P 500 should hit 8,400 by year-end if the forward P/E edges back up above 20.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-71.jpg) Analysts’ quarterly earnings expectations are still rising (chart). Projected y/y EPS growth rates are up to 23.2% for Q3 and 27.4% for Q4\. Q2's 47.4% is inflated by the mark-to-market (MTM) gains at Alphabet and Amazon that we have flagged for several weeks. Excluding these MTM gains, Q2 earnings rose 25.7%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-72.jpg) S&P 500 forward earnings is growing at 35.9% y/y, while forward revenues is up 13.1% (chart). That gap reflects widening profit margins. A margin gap this wide has appeared in the past only after recessions and bear markets. This pattern shows up early in bull markets rather than late. This time, the difference is that the margin expansion is not the usual cyclical bounce off a trough. In our view, it reflects structural productivity gains. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-293.png) Consensus long-term earnings growth (analysts' expected five-year annual growth rate) is currently 25.0%, nearly double the historical average of 12.8% (chart). This signals irrational exuberance in analysts' earnings expectations. However, stronger-than-expected actual earnings have driven it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-294.png) **III. Earnings Breadth.** Forward earnings are at a record high for the S&P 500, the S&P 400, and the S&P 600 (chart). FEMO is not just a LargeCap story. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-299.png) The breadth of earnings has improved. The dispersion in forward revenue and earnings increases is very high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-304.png) **IV. Valuation.** Earnings and expected earnings keep rising faster than prices, so multiples keep falling. The Magnificent-7's forward P/E is down to 23.7, the narrowest premium to the S&P 500's 19.7 since April 2025 (chart). The S&P 400 MidCaps at 16.5 and the S&P 600 SmallCaps at 15.7 are cheaper still, and they continue to outperform. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-290.png) Information Technology has had an excellent earnings season, and its multiple barely reflects it. The sector's forward P/E is 21.1 against 19.8 for the index (chart). This is not 1999, when tech stock price gains reflected overly inflated valuations (FOMO) that soon after deflated. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-301.png) The 10-year Treasury yield is moving toward the top of our 4.00%-5.00% "old normal" range and toward the S&P 500's forward earnings yield of 5.08% (chart). Convergence here does not mean that the forward P/E has to fall. Earnings are rising fast enough to keep the earnings yield ahead of the bond yield. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-297.png) **V. Sentiment.** The Investors Intelligence bull/bear ratio is 3.62 against its 2.60 average, while the AAII ratio is 0.89 against its 1.18 average (chart). Institutional investors are bullish, while retail investors—scared out of the stock market earlier this year—haven’t ventured back. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-296.png) **VI. Nvidia.** We asked our colleague Joe Abbott to look at what effects Mag-7 stock Nvidia has on Q2 S&P 500 earnings ahead of its report this week. Excluding mark-to-market (MTM) accounting effects, S&P 500 Q2 earnings growth is 28.3% y/y including Nvidia and 22.4% without it. Nvidia accounts for 15.1% of the ex-MTM y/y change in total Q2 earnings, a close second to Micron's 16.3%. Nvidia's share of annual S&P 500 earnings rose from 0.3% in 2019 to 4.9% last year, and analysts expect it to be 7.2% this year. How much Nvidia’s earnings beat analysts’ expectations is likely to determine the stock market’s reaction to the report. Across a sample of 21 AI-exposed companies we track, those beating earnings estimates by more than 10% rose 4.2% on average on the day of the earnings report and rose 7.2% over five days. Those beating by less than 10% fell 1.2% and 3.0%, respectively. The bar companies need to clear to earn big share price reactions has been raised from simply beating the consensus forecast to beating it by a wide margin. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Freaking Out Over The Bond Market URL: https://www.yardeniquicktakes.com/freaking-out-over-the-bond-market/ Last updated: 2026-08-21T02:59:30.000Z **I. Bonds** On Wednesday, the Treasury Department announced that it was doubling the size of its effort to buy back Treasury securities with maturities between 10 and 30 years, ‌to $4 billion per operation. Long-dated Treasury borrowing costs had been rising sharply amid competition for capital from AI data-center builders, and on worries about government deficits. US sovereign debt hit a record $40 trillion on Wednesday. Bond yields fell slightly on yesterday's news. Today, they edged back up (chart). So, has Treasury Secretary Scott Bessent's attempt to stabilize the bond market already failed? Does this mean that a government debt crisis is imminent? That seems to be the reaction of a few commentators, especially those who have been predicting such a crisis for many years. As we noted yesterday, Treasury buybacks are structured to repurchase older, less liquid ("off-the-run") government bonds from primary dealers, freeing up dealer balance sheets and improving secondary market functioning. Bessent isn't trying to lower bond yields. Rather, he is trying to stabilize them so Treasury auctions go smoothly, particularly yesterday's 20-year auction. So we are sticking with our base-case scenario for the bond market. We expect that the 10-year Treasury yield will remain in a 4.00%-5.00% range through the end of this year and next year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-284.png) Our relatively constructive view reflects that Bessent's Treasury is following former Treasury Secretary Janet Yellen's 2023 playbook by financing more of the deficit in the Treasury bill market (chart). In effect, the Treasury is forcing the Fed to buy Treasury bills to keep the federal funds rate from rising. _This post is for paying subscribers only._ ### Bessent's Put For The Bond Vigilantes & More On Fed's Hawks vs Owls Debate URL: https://www.yardeniquicktakes.com/bessents-put-for-the-bond-vigilantes-more-on-feds-hawks-vs-owls-debate/ Last updated: 2026-08-20T02:36:50.000Z **I. The US Treasury** Today, the US Treasury announced it is at least doubling its liquidity-support buyback operations for longer-dated government debt. Long-end yields fell sharply after this morning's release (chart). Treasury Secretary Scott Bessent is signaling that he will do whatever it takes to keep a lid on bond yields. His message to the Bond Vigilantes: "You folks aren't the only players in the bond market." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-273.png) On November 1, 2023, Treasury Secretary Janet Yellen sent the same message to the Bond Vigilantes when the Treasury announced plans to finance more of the swelling federal government deficit with Treasury bills (chart). That reversed the yield spike that saw the 10-year Treasury yield soar from 4.00% in early August to 5.00% at the end of October that year. Apparently, Bessent is relying on Yellen's playbook given that marketable Treasury bills held by the public rose $1.0 trillion over the 12 months through July. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-275.png) Treasury buybacks are structured to repurchase older, less liquid ("off-the-run") government bonds from primary dealers, freeing up dealer balance sheets and improving secondary market functioning. Here are the details of today's announcement: - The Treasury is increasing its scheduled buyback operations for longer-dated nominal coupon securities from the prior cap of $2 billion to at least $4 billion per operation. - The enlarged operations cover securities in the 10-year to 30-year sectors. - The higher buyback limits will take effect starting September 9, 2026, and remain in place through the rest of the refunding quarter ending November 4, 2026. The Treasury has the tools to influence the shape and level of the yield curve to some degree. Bessent intends to use them to counter any serious attempt by the Bond Vigilantes to push yields higher. **II. Financial Markets** _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Hawks Versus Owls At The Fed URL: https://www.yardeniquicktakes.com/weekly-webcast-hawks-versus-owls-at-the-fed/ Last updated: 2026-08-19T13:00:00.000Z Today, Ed and Elias share bird’s eye views of the economy from the perches of the hawks and owls on the Fed. The hawks may favor tightening at the FOMC’s September meeting, unconvinced that inflation is on a steady flight path down to the Fed’s 2.0% target. The owls are more confident of inflation’s downward course. July’s subdued inflation readings support their case for holding rates steady in September. But recent labor demand and consumer spending data suggest that the economy is healthy enough for a rate hike, supporting the hawks. August’s data should help clarify whether inflation needs a nudge to return to target or can get there on its own. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### AI-Led Economic Boom Driving Yields Higher In US As Japanese Yields Continue To Normalize URL: https://www.yardeniquicktakes.com/ai-led-economic-boom-driving-yields-higher-in-us-as-japanese-yields-continue-to-normalize/ Last updated: 2026-08-19T02:42:32.000Z Several factors are driving bond yields higher worldwide (chart). The war in the Middle East in March boosted yields amid concerns that soaring oil prices would revive inflation. The war, along with other geopolitical crises, is bound to increase defense spending and widen already bloated government deficits. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-263.png) Central banks are increasingly pivoting from easing to tightening their monetary policies (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-265.png) As a result, 10-year government bond yields have increased almost everywhere since the start of this year (chart). Japan's bond yield has risen the fastest among developed economies, as the Bank of Japan has raised its official interest rate to stop a free-falling yen from boosting inflation. This is forcing carry traders to cover long bond positions worldwide, which they financed with cheap credit raised in Japan. Some fear that this could be the start of a major global financial crisis. We doubt it, but we aren't ignoring this possibility. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-268.png) In the US, new corporate bond issuance rose to a record high of $2.8 trillion over the past 12 months through May (chart). US investment-grade bond issuance [reached](https://www.sifma.org/research/statistics/us-corporate-bonds-statistics?ref=yardeniquicktakes.com) a record $1.7 trillion over the past 12 months through July, as hyperscalers tapped debt markets to finance the AI buildout. At the same time, governments continue to run large fiscal deficits, with the IMF projecting global public debt will [reach](https://www.imf.org/en/publications/fm?ref=yardeniquicktakes.com) 100% of GDP by 2029\. The result is growing competition for capital. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-262.png) In our view, some of the recent rise in US bond yields reflects the economy's strength. We are sticking with our view that the 10-year US Treasury yield should range between 4.00% and 5.00%, which is, in effect, a vote of confidence in the US economy! We reject the popular notion that interest rates will stay "higher for longer." We think they will remain "normal for longer." Current interest rates reflect a healthy economy. Now consider the following related developments: _This post is for paying subscribers only._ ### Is The Fed's Stock Valuation Model Working Again? URL: https://www.yardeniquicktakes.com/is-the-feds-stock-valuation-model-working-again/ Last updated: 2026-08-18T03:27:56.000Z **I. The Fed's Stock Valuation Model** In his famous December 5, 1996 speech, Fed Chair Alan Greenspan asked, "How can we judge whether stocks are overvalued or undervalued?" His staff apparently scrambled to examine various stock valuation models to help him gauge the market’s exuberance. One such model was made public, albeit buried in the Fed’s Monetary Policy Report to Congress that accompanied Greenspan’s congressional testimony on July 22, 1997\. I dubbed it "The Fed's Stock Valuation Model" (FSVM). The name stuck, though Fed officials never publicly endorsed it. The model quite simply compares the S&P 500 forward earnings yield to the 10-year US Treasury bond yield (chart). The forward earnings yield is the reciprocal of the forward P/E. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-233.png) When the forward earnings yield is above (below) the bond yield, the S&P 500 is deemed to be undervalued (overvalued) (chart). The FSVM worked well during the 1980s and 1990s. Then it stopped working because it always showed that stocks were undervalued relative to bonds. That was a good long-term call, but it didn't work as a market-timing tool and missed the bear market during the Great Financial Crisis (GFC). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-230.png) The FSVM may be starting to work again now that the bond market is no longer rigged by the Fed with quantitative easing programs designed to keep the 10-year bond yield close to zero. As a result, the spread between the reciprocal of the bond yield (currently at 21.4) and the S&P 500's forward P/E (currently at 19.9) has narrowed dramatically (chart). Interestingly, despite the recent rise of the 10-year Treasury bond yield, the S&P 500 remains slightly undervalued. If the yield rises to 5.00%, the "fair-value" P/E would be 20.0 (i.e., the reciprocal of the bond yield). That’s roughly where it is now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-234.png) With the bond yield at 4.68% last week, the fair-value price of the S&P 500 was 8,300 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-236.png) **II. Bond Yield** _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: Momentum Is Back URL: https://www.yardeniquicktakes.com/global-market-call-momentum-is-back/ Last updated: 2026-08-17T03:00:08.000Z Momentum is back in the Go Global trade. The rotation that hit the AI-linked stock markets in July has reversed, and the leadership that held for most of 2026 is back in play. South Korea is the clearest sign of this development. The KOSPI is up more than 20% from its July 30 closing low. That ends a brutal stretch. The index fell almost 40% from its June peak as leveraged single-stock ETFs unwound, margin calls cascaded through retail accounts, and regulators halted new listings of the equity products that had fueled the run. Korea’s forward earnings has quintupled in a year, and its forward profit margin now leads the emerging markets'. Here's more: **(1) Stay Home vs Go Global.** The price ratios of the US stock market to the rest of the world remain below their long-term uptrends from 2010 through early 2025, in both dollar and local currency terms (chart). Since then, they have been in short-term downtrends that remain intact despite recent increases in the ratios. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-225.png) South Korea and Taiwan lead all country ETFs month to date in dollar terms, up 14.4% and 10.9%, with Japan third at 6.3% (chart). Japanese equities have held up despite the joint US-Japan intervention to boost the yen earlier this month, which normally would be a headwind for the stock market of a major exporter. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-128.png) The ytd rankings show the same order with far greater divergence. Korea is up 84.9% and Taiwan 68.5%, with EM ex-China third at 33.9% (chart). The US is up 13.8%, in the middle of the pack. Indonesia is at the bottom, down 32.6%. _This post is for paying subscribers only._ ### US SECTORS CALL: Stories About Earnings, Margins & Multiples URL: https://www.yardeniquicktakes.com/us-sectors-call-stories-about-earnings-margins-multiples/ Last updated: 2026-08-17T02:10:27.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-105.png) Energy (OW) led the S&P 500 sectors last week, rising 7.3%. It is up 37.8% ytd, the best of all the sectors. Financials (OW) rose 0.9% and is on an 11-week winning streak. Health Care (OW) and Utilities (OW) also gained last week. Consumer Discretionary (UW) and Materials (OW) fell. Communication Services (MW) was down 1.0% for the week and is up just 1.2% ytd, the second worst of the 11 sectors. Now, let's look at recent developments in the Information Technology, Financials, Energy, and Communication Services sectors: **(1) Information Technology.** The semiconductors trade rebounded this month. SanDisk is up 35.1% mtd, along with Marvell (18.4%) and Micron (18.1%), all well ahead of the Mag-7 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-115.png) The y/y growth rates of the sector's forward revenues and forward earnings continue to soar in record-high territory (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-220.png) So far this year, the sector's gains have been driven by forward earnings, while the valuation multiple fell (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-224.png) _This post is for paying subscribers only._ ### US MARKET CALL: Roaring Decades URL: https://www.yardeniquicktakes.com/us-market-call-roaring-decades/ Last updated: 2026-08-16T04:00:27.000Z Last week, we raised our year-end S&P 500 target from 8,250 to 8,400\. We are sticking with our 10,000 target by the end of the decade, though we might raise it. Our Roaring 2020s scenario is delivering even better S&P 500 earnings than we expected. FEMO (fabulous earnings momentum) is driving the stock market higher! The S&P 500 is up 141.0% so far this decade, making it the sixth-best decade since the Roaring 1920s already (chart). If it rises to 10,000 by the end of the decade, it will be up 209.5%, the fifth-best decade. In other words, roaring decades are not exceptional for the stock market. (The S&P 500 fell during the 1930s and 2000s, and edged up slightly during the 1940s, 1960s, and 2000s.) To reach 10,000 by the end of the decade requires an additional 28.5% (or 2,201 points) gain in the S&P 500\. That's roughly 7.5%-8.0% annualized price growth over the remaining 3.4 years of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-210.png) If the S&P 500 hits 8,400 by the end of this year, that would make 2026 the fourth consecutive year of 15% or more annual gains (chart). The only previous streak of five consecutive gains occurred during the second half of the 1990s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-211.png) Let’s look a bit deeper: **(1) Performance.** Both the market-weight and equal-weight S&P 500 are at record highs (chart). The latter has been rising to new highs with less volatility than the former after both bottomed at the end of March. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-203.png) We expected the bull market to broaden this year. So far, so good. The Impressive-493 continues to outperform the Magnificent-7, up 17.6% ytd versus 3.8% (chart). The S&P 500 as a whole is up 13.9%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-205.png) The Russell 2000 is also at a record high (chart). SmallCaps, which are the most economically sensitive corner of the stock market, suggest that investors are bullish on the economic outlook. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-204.png) **(2) Earnings.** S&P 500 forward earnings always converges to the coming year's consensus analysts' earnings estimate by definition (forward earnings is the time-weighted average of the consensus estimates for this year and next). The 2027 consensus estimate is still rising. It is up to $410.25 (chart). We estimate that both forward earnings and the 2027 estimate will rise to $415.00 by year-end. That should take the S&P 500 up to 8,400, implying a forward P/E of about 20.2. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-55.jpg) Q2 earnings rose 47.3% y/y, up from 19.0% for Q1\. Industry analysts’ consensus earnings estimates imply that they expect 23.1% growth in Q3 and 27.3% in Q4 (chart). The Q2 number was inflated by the mark-to-market gains at Alphabet and Amazon that we have flagged. Without them, Q2 earnings growth slips to 25.7%. The Q3 and Q4 estimates carry no such distortion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-53.jpg) The forward profit margin is 16.5%, and the 2027 margin estimate is 16.6% (chart). This is unprecedented. (We impute margin estimates from analysts’ estimates for earnings and revenues.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-208.png) During the week of August 13, S&P 500 companies had positive 12-month percent changes in forward revenues and forward earnings of 88.5% and 86.1% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-207.png) Forward earnings are rising to record highs across the S&P 500 LargeCaps, S&P 400 MidCaps, and S&P 600 SmallCaps (chart). FEMO is broad-based. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-209.png) **(3) Sentiment.** The Investors Intelligence bull/bear ratio has climbed to 3.88 against its 2.60 average, while the AAII bull/bear ratio is at 0.92 versus its average of 1.18 (chart).Institutional bullishness is getting extended. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-206.png) **(4) Bonds.** The Citigroup Economic Surprise Index has dropped sharply to 15.0, with the 10-year Treasury yield up just 7bps over 13 weeks (chart). Weaker retail sales and employment data drove the CESI down. Bond yields may ease from here, according to the CESI, even though most investors expect them to go higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-54.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: August 17-21 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-17-21/ Last updated: 2026-08-16T00:14:43.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-75.png) Last week brought mixed inflation news in the US: July’s core CPI inflation rate cooled to 2.5% y/y, its lowest since March 2021 (chart). However, July's comparable PPI rose 4.4%. Wednesday’s release of the July 28-29 FOMC meeting minutes should provide some insights on how Fed officials were assessing the outlook for inflation before these numbers were available. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-212.png) Weekly unemployment claims (Thu), industrial production (Tue), and regional business surveys round out this week’s docket of domestic economic news, with flash PMIs closing out the week on Friday. Earnings season is quiet, with Walmart and Alibaba the only notable June-quarter reports scheduled for this week. We will also get some key economic data from overseas. Here’s more: **(1) FOMC meeting minutes.** July's FOMC minutes (Wed) should reveal how split the committee was heading into last week’s inflation releases. The financial markets’ expectations for the committee’s next moves have shifted. The odds of a September hike in the federal funds rate has dropped to roughly a third from over 50% before the latest CPI and PPI prints. Federal funds rate futures as of August 14 implied 1.5 rate hikes over the next 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-91.png) **(2) Unemployment insurance claims.** Initial jobless claims climbed to 209,000 in the week ended August 7, snapping the streak of sub-200,000 readings, though the four-week average of 199,000 still points to a tight labor market (chart). Continuing claims for the week ending July 31 eased to 1,777,000, with the four-week average at 1,790,000\. This week's report should show that layoffs remain low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-85.png) **(3) Business surveys.** July's regional business surveys from the NY and Philly Federal Reserve banks showed a sharp pickup in activity. The August surveys should confirm that business activity has picked up. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-83.png) **(4) Industrial production.** Aggregate weekly hours in manufacturing edged up in July, suggesting that manufacturing output did the same (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-213.png) July's industrial production (Tue) follows June's report showing total output up just 1.1% y/y, even as real GDP goods growth ran much hotter at 4.8% in Q2 (chart). The two measures have diverged repeatedly since 2010, with GDP goods consistently outpacing industrial output. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-80.png) **(5) Global data dump.** Overseas economic growth data lead the week ahead, with Japan's preliminary Q2 GDP and China's latest retail sales and industrial production both due Monday. Inflation readings follow, with Canada's CPI Monday and the UK's CPI/PPI and euro area CPI both Wednesday. Global 10-year government yields have climbed broadly this year, with Australia’s and the UK’s near 5.00% and the US at 4.69%, against Germany’s 3.20% and Japan’s 2.88% (chart). This week's data will test how much further that repricing has to run. The Bank of Japan and the European Central Bank are expected to raise their respective policy rates in September. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-93.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### The Fed's Divide: Will Core PCED Settle The Debate? URL: https://www.yardeniquicktakes.com/the-feds-divide-will-core-pced-settle-the-debate/ Last updated: 2026-08-14T02:55:28.000Z The FOMC is divided between a hawkish and an owlish camp. The hawks include Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neel Kashkari, all of whom dissented at the July FOMC meeting in favor of a rate hike. Logan [argues](https://www.dallasfed.org/news/speeches/logan/2026/lkl260716?ref=yardeniquicktakes.com) that policy is no longer restraining the economy. Hammack recently [said](https://www.reuters.com/business/finance/fed-should-raise-rates-restrain-growth-inflation-hammack-says-2026-08-13/?ref=yardeniquicktakes.com) that "now is the time to act" and that the latest inflation data are "not enough to convince me the tide has turned." Kashkari has [warned](https://www.foxbusiness.com/economy/feds-kashkari-says-central-bank-should-raise-interest-rates-now-avoid-entrenched-inflation-problem?ref=yardeniquicktakes.com) that delaying action could eventually require more aggressive rate hikes. The owlish camp includes the likes of New York Fed President John Williams and Richmond Fed President Tom Barkin. Barkin recently [argued](https://www.reuters.com/business/feds-barkin-still-an-open-question-if-rate-hike-will-be-needed-meet-inflation-2026-08-13/?ref=yardeniquicktakes.com) that much of today's inflation reflects tariffs, higher oil prices, and AI-related demand shocks. He believes that current interest rates may still be restrictive enough to bring inflation down. Williams's [framework](https://www.bloomberg.com/news/articles/2026-07-09/fed-s-williams-says-ai-is-now-his-main-inflation-concern?ref=yardeniquicktakes.com) contends that core PCED inflation near 0.2% m/m would be consistent with continued disinflation over the rest of the year. Readings closer to 0.3% would suggest more persistent inflation and could warrant a policy response, in his view. Following this week's July CPI and PPI reports, which camp has gained the upper hand? Consider the following: _This post is for paying subscribers only._ ### July CPI: The Fed Is Still In The Woods URL: https://www.yardeniquicktakes.com/july-cpi-the-fed-is-still-in-the-woods/ Last updated: 2026-08-13T02:27:29.000Z The July CPI report was good news for Fed officials and the rest of us. Inflation is moving closer to the Fed's 2.0% target. However, the inflation picture may not be as bright as the CPI report suggests. New York Fed President John Williams recently [said](https://www.tradingview.com/news/forexlive:4e5c1c85e094b:0-fed-s-williams-will-support-rate-hikes-if-monthly-core-inflation-runs-above-0-2-on-average/?ref=yardeniquicktakes.com#:~:text=Williams%20stated%20that%20a%20rate%20of%20Core,time%20to%20vote%20for%20a%20rate%20hike.) that if core PCED inflation readings remain above 0.2% m/m during the second half of this year, then the Fed should tighten monetary policy. The Cleveland Fed's Inflation Nowcasting model continues to [estimate](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) a 0.25% m/m increase in core PCED inflation for July and 0.27% for August. The Fed gives more weight to the core PCED than the core CPI in setting monetary policy. That helps explain why the 2-year US Treasury yield remains roughly 75 basis points above the federal funds rate, suggesting that fixed-income markets continue to expect a Fed rate hike in the coming months (chart). The 10-year Treasury yield also remained elevated, at 4.68%, after the CPI report. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-186.png) Nevertheless, the July CPI report was broadly a good one. So the odds of a Fed rate hike at the September meeting declined on the news. Consider the following: _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Does The Jobs Report Change Anything? URL: https://www.yardeniquicktakes.com/weekly-webcast-does-the-jobs-report-change-anything/ Last updated: 2026-08-12T13:00:00.000Z The Fed’s monetary policy mandate requires consideration of both inflation and labor market conditions. If the former compels a rate hike next month, would the latter stand in the way? That’s the question of the hour after last week’s jobs report, with a headline that telegraphed “weakness.” Elias and Ed argue that the headline numbers looked deceptively weak because of calendar effects and World Cup related distortions. Indeed, most industries posted job gains. In short, the labor market is well balanced. So, no, it shouldn’t stand in the way of the Fed’s tightening in September. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Raising Our S&P 500 Earnings & Price Targets Outlook Due To FEMO (Fabulous Earnings Momentum) URL: https://www.yardeniquicktakes.com/raising-our-s-p-500-earnings-price-targets-outlook-due-to-femo-fabulous-earnings-momentum/ Last updated: 2026-08-17T18:29:29.000Z **I. Quarterly Earnings Per Share** What a fabulous Q2-2026 earnings season it has been! So far, 90% of S&P 500 companies have reported. They broadly crushed industry analysts' forecasts for earnings and profit margins, both of which saw a boost from mark-to-market (MTM) gains from Alphabet and Amazon for a second straight quarter. These MTM gains (along with Meta’s little-mentioned gain from a tax reversal) boosted earnings by $5.88 to $75.03 during Q1 and by $14.00 to $97.83 in Q2 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-39.jpg) As a result, S&P 500 EPS rose 19.0% y/y in Q1 and 46.7% y/y in Q2\. Without the MTM gains, earnings rose 9.5% and 25.7% during those two quarters (chart) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-40.jpg) **II. Annual & Forward Earnings Per Share** Those 2026 MTM gains have boosted the S&P 500 forward EPS to a record high (chart). The 2027 estimate, which doesn't include any projections of future MTM gains, has also been rising to new highs. Forward earnings is converging toward the 2027 estimate, which is currently $408.83\. The two series will be identical at the end of this year. We estimate that the MTM gains lowered the S&P 500's forward P/E by 0.4ppts as of August 10. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-41.jpg) Joe and I have been bullish on earnings but not nearly as bullish as the recent consensus of industry analysts. We've never seen consensus earnings expectations rise so quickly for the current and coming years as they have since mid-2025\. The result has been an earnings-led meltup in the stock market to record highs. Our 2026 and 2027 S&P 500 EPS estimates have been $330 and $375, respectively, since early May, when we raised them in response to Q1's strong results. Those were bullish estimates back then. Analysts' consensus EPS estimates for both years have continued to rocket higher since then. They are currently $359.60 (up 32.6% from $271.29 last year!) and $408.83 (up 13.4% from the current 2026 consensus estimate) (chart). We are raising our S&P 500 EPS estimates to $375 for 2026 and $415 next year, up from $330 and $375\. The 2026 estimate increase of $45 includes nearly $20 of the MTM gains that were recognized during Q1 and Q2 by Alphabet and Amazon, as well as Meta’s tax reversal gain. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-173.png) **III. Revenues Per Share & Profit Margin** We are also raising our S&P 500 RPS for both 2026 and 2027 to $2,250 and $2,450 from $2,200 and $2,300 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-168.png) Our outlooks for EPS and RPS imply that the S&P 500 forward profit margin will rise to 16.7% this year (including MTM gains) and 16.9% next year (chart). Absent the MTM gains, 2026’s profit margin would be around 15.8%. Our forecasts are higher than the current consensus of 15.4% and 16.6%. Keep in mind that prices for semiconductors and other AI-related hardware are soaring, thus accounting for some of the surge in the S&P 500 profit margin. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-169.png) **IV. Roaring 2020s Scenario** We’re now assuming that S&P 500 forward earnings per share (currently at $389.90) will be $415 at the end of this year. We expect a steady progression to $550 by the end of 2029\. We aren't anticipating a recession. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-44.jpg) We are sticking with our forward P/E range of 18.0-22.0 through the end of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-170.png) Our forecasted target ranges for the S&P 500 have increased for 2026 through 2029 (chart). We are raising our year-end 2026 point estimate to 8,400 from 8,250\. We are maintaining our 10,000 target for the end of 2029, though we are likely to raise it if the Roaring 2020s continue to go our way. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-176.png) Our key assumption is that the economy will remain resilient, and so will earnings. That's been our mantra since we first started writing about the Roaring 2020s during the summer of 2020\. We could certainly have another recession scare along the way, as we did in early 2025 and 2026. We’re leaving our May 10 call of the subjective probability of a continuation of the Roaring 2020s at 80%, up from 60% before merging it with our meltup scenario (previously at 20%). We think any pullback (and even a meltdown) will be a buying opportunity and won't trigger a recession or bear market similar to the 1999-2000 Tech Bubble and Tech Wreck. We are sticking with 20% odds of a recession that causes a bear market. Joe and I have never seen anything like this. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Updating The Worry List URL: https://www.yardeniquicktakes.com/what-could-possibly-go-wrong-2/ Last updated: 2026-08-17T20:58:04.000Z The S&P 500 hit yet another record high yesterday, led by fabulous earnings momentum (FEMO). That puts the index closer to our year-end target of 8,250 and 10,000 by the end of the decade. The economy has been growing without a recession since the Great Financial Crisis, except for the two-month lockdown recession in 2020\. Our Roaring 2020s scenario is in its seventh year. Lots has gone wrong since the start of the decade, yet here we are with real GDP and the S&P 500 at record highs. What could possibly go wrong as we look toward the end of the decade and the beginning of the new one? Lots could go wrong, yet the economy and stock market are likely to continue to pass future stress tests over the remainder of the decade as they have since the start of the decade. So, we continue to assign a subjective probability of 80% to our Roaring 2020s scenario. The remaining 20% includes events that could derail this happy scenario. To discipline our research, we update this worry list from time to time. Here is the latest: **(1) Geopolitics.** The Middle East has been a geopolitical maelstrom at least since Biblical times. The latest conflict started on February 28, when the US and Israel attacked Iran. Most observers expected a short war. However, Iran is under the control of the Iranian Revolutionary Guard Corps, a terrorist organization that is hard to defeat with just an air bombing campaign. The combatants on both sides have de-escalated the conflict in recent months. However, navigation through the Strait of Hormuz remains challenging, and Iran still has a nuclear program. The US continues to blockade Iran's crude oil exports. A flare-up in the war could push oil prices to this year's high or higher since oil inventories are running low around the world (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-151.png) **(2) Bond Vigilantes. T**he 2-year US Treasury yield remains about 75bps above the federal funds rate, signaling that the Fed should raise the federal funds rate soon (chart). Friday's weak jobs report hasn't altered the scenario embedded in the yield, suggesting that financial markets continue to believe that the labor market is at full employment, while inflation remains above the Fed's 2.0% target. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-145.png) The risk is that the Bond Vigilantes will push bond yields higher if the Fed's credibility as an inflation fighter is diminished by monetary tightening deemed too little, too late (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-146.png) **(3) Credit.** Indicators of credit quality are not signaling much distress in the corporate bond market (chart). However, the recent deluge of bonds issued by hyperscalers has widened their spreads with comparable Treasury yields. The risk is that the supply of the former pushes yields broadly higher. Default risk seems low, so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-147.png) Private credit quality and defaults remain concerns (chart). However, the cracks related to private loans to software companies have stopped widening. The risk of systemic risk seems relatively small for now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-148.png) **(4) Currencies.** The recent joint intervention by the US and Japan to prop up the yen has raised concerns about the unwinding of the yen carry trade (charts). It does the same for the vulnerability of the US dollar should other central banks have to sell their US Treasury reserves to support their currencies. In this scenario, there would be upward pressure on US bond yields (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-149.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-150.png) **(5) AI. T**he AI trade has been volatile. The big winners so far have been the semiconductor companies. The hyperscalers have had mixed results recently (chart). The risk is that their free cash flow has turned negative because they are overbuilding AI capacity and doing it increasingly with debt financing. Circular financing is reminiscent of the seller financing excesses of the dotcom bubble. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-34.jpg) **(6) Stock market.** The stock market rally since October 2022 has boosted the net worth of many households, especially older ones. During Q1-2026, 45.8% of households' financial assets were in equities (chart). Many older Americans can retire comfortably and afford to keep spending. If the bull market turns into a bear market for some reason, it would be exacerbated if many consumers are forced to retrench. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-154.png) The S&P 500 forward P/E is reasonable at 19.8 currently, though it has been lowered a bit recently by large capital gains included in corporate earnings (chart). More troubling is that the weekly version of the Buffett Ratio is in record-high territory. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-153.png) Another warning sign from a contrarian perspective is that too many respondents (52.4%) in the Consumer Confidence Index survey expect that stock prices will be higher in 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-35.jpg) **(7) Prediction markets.** On the other hand, pessimism about a recession in 2027 is fairly high at 32%, according to Kalshi (chart). If any subset of the above risks comes to the fore, then the odds of a recession will rise (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-38.jpg) Polymarket is strongly predicting that the Democrats will win a majority in the House in November. The stock market often does well during periods of political gridlock. However, an extremely hostile political divide could have serious adverse consequences if Washington can't get its act together to respond quickly to grave domestic and geopolitical challenges. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-36.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US SECTORS CALL: What's Up, What's Down In The S&P 500? URL: https://www.yardeniquicktakes.com/us-sectors-call-whats-up-whats-down-in-the-s-p-500/ Last updated: 2026-08-10T02:35:25.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-63.png) Information Technology (MW) led the S&P 500 sectors last week, up 7.2%. Investors bought back the tech stocks they sold in July. Tech remains below its June peak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-130.png) Software stocks were especially strong last week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-143.png) The Financials, Health Care, and Industrials sectors all rose to record highs last week. We have been rating all three overweight (table above). Materials (OW) had a good week too. Energy (OW), Real Estate (UW), and Utilities (OW) were down last week. Let's have a closer look at Health Care, Materials, and Utilities: _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: Will Yen Yin Or Yang Financial Markets? URL: https://www.yardeniquicktakes.com/global-market-call-will-yen-yin-or-yang-financial-markets/ Last updated: 2026-08-09T17:34:15.000Z The Go Global investment strategy has outperformed Stay Home this year, and August has not changed that. Korea and Taiwan are back at the front of the performance rankings to start the month, with China lagging again. Last week, Japan and the US jointly bought yen for the first time since 1998, following its fall to a near 40-year low of around 164 yen per dollar. US Treasury officials feared that the Japanese would be forced to sell US Treasuries to support their currency. The yen recovered to 157.94\. Treasury Secretary Scott Bessent told CNBC on August 4 that "you can give market signals with intervention, but it's policy that turns it." Despite the noise, global financial markets didn't flinch on fears that the yen carry trade might unwind, as discussed further below. Here's more: **(1) Performance.** Korea and Taiwan lead the mtd rankings in dollar terms, up 5.7% and 6.8%, with South Africa the only market ahead of them (chart). China and Hong Kong are negative, and Brazil is at the bottom at -3.6%. The US is up 3.5%, ahead of both the ACWI and ACWX. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-141.png) The ytd table shows similar performance rankings, with much greater divergence among the results. Korea is up 70.8% and Taiwan 62.3%, with EM ex-China third at 30.3% (chart). The US has been grinding higher at 13.4%. _This post is for paying subscribers only._ ### US MARKET CALL: History Lesson URL: https://www.yardeniquicktakes.com/us-market-call-history-lesson/ Last updated: 2026-08-09T04:00:29.000Z The S&P 500 broke out of its summer range this week to yet another record high. The index closed at 7,757.64 on Friday, clearing the 7,500 level it had circled since May 14\. The index is 3.5% above its 50-day moving average and 9.8% above its 200-day moving average. Those are not extreme readings. The breakout is a good moment to ask where this bull market fits in the historical record. The answer is that it's in the middle. That is a more bullish finding than it sounds. Bull markets do not die of old age or of accumulated gains. They usually die when earnings roll over. The current bull market has been compared to the dot-com era's meltup/meltdown scenario. If the late 1990s ended with a stock-market meltup, will the late 2020s do the same? Back then, it was a FOMO-driven meltup; everyone feared being left out. This time, FEMO, or fabulous earnings momentum, is the driving force. Here's more: **(1) History.** In the current bull market, the S&P 500 is up 116.9% since it began on October 12, 2022 (chart). That ranks fifth of the eight bull markets since 1966\. Investors who believe this market has run too far should look at what running too far can actually look like. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-106.png) Overlay the current period starting in 2015 on 1985-2005, and the two paths track each other closely, with the current run at 276.8% since 2015 (chart). If the analog continues to hold, the market keeps climbing, and the interesting years are ahead rather than behind. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-107.png) That brings us to the meltup question. Valuation multiples are higher today than they were heading into the Tech Wreck of the late 1990s (chart). So a meltup from here would more likely be an earnings-led meltup than a valuation-led meltup. It would be a FEMO one rather than a FOMO one. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-125.png) **(2) Performance.** The S&P 500 equal-weight and market-weight indexes both rose to record highs last week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-105.png) The Impressive 493 is up 16.0% ytd, compared with 13.3% for the S&P 500 and 4.8% for the Mag-7 (chart). The Mag-7 has recovered ground since the hyperscalers reported, closing part of a performance gap that was much wider in June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-118.png) The Russell 2000 also rose to a record high last week (chart). SmallCaps do not lead when investors are positioning for a recession. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-101.png) **(3) Growth vs Value.** The S&P 500 Growth and S&P 500 Value indexes both rose to new record highs last week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-135.png) The forward P/E of S&P 500 Growth has fallen to 20.2, against 18.3 for Value (chart). Investors who worry about a replay of the dot-com episode should note that Growth traded above 40.0 in 2000\. The valuation case for that comparison has diminished considerably. Note that Growth's forward earnings recently has been boosted by mark-to-market (MTM) capital gains, thus lowering the forward P/E. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-124.png) **(4) Earnings.** FEMO continues to drive the bull market. Forward earnings, currently at $389.90 per share, is converging toward the analysts' 2027 EPS consensus (currently at $408.83) as this year progresses (they’ll match by the end of the year) (chart). The latter has been continuing to rise, and so has the 2026 consensus EPS estimate, which has been boosted over the past few weeks by MTM gains. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-25.jpg) The 2026 quarterly picture is strong across the board starting with Q1's 19.0% y/y (chart). The actual/estimated blended growth rate for Q2-2026 is a whopping 46.7%, up sharply in recent weeks. The current estimates for Q3 and Q4 are 22.6% and 27.0%. The Q2 spike reflects the MTM gains we have flagged for two weeks running. Q3 and Q4 carry no such distortion and continue to rise. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-27.jpg) The sectors tell the same story, with the same caveat. On a pro forma basis, Q2 growth for the S&P 500 is 51.1%, with Communication Services and Consumer Discretionary both making big upside moves (chart). Alphabet's MTM gains drive the former, and Amazon's MTM gains drive the latter. Information Technology continues to climb firmly at 72.9% without the benefit of MTM gains. Energy and Health Care are the outliers at 142.7% and -6.8%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-120.png) **(5) Sentiment.** The Investors Intelligence bull-bear ratio spiked this week to 3.63, well above its 2.60 average (chart). The AAII bull-bear ratio has not followed, at 0.98 against its own average of 1.19\. Institutional investors are bullish; retail investors not so much. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-104.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: August 10-14 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-10-14/ Last updated: 2026-08-08T20:46:43.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-69.png) Last week, July payrolls fell 23,000, missing the 85,000 consensus, even as the unemployment rate edged down to 4.1%. The 2-year Treasury yield fell 7 bps on the release before recovering to close little changed near 4.21%. This week, attention turns to inflation. July CPI (Wed) and PPI (Thu) will be the first hard inflation data since the Fed's meeting two weeks ago. Retail sales close out the week on Friday. “FedSpeak” resumes Thursday with Cleveland Fed President Beth Hammack (a dissenter at the July FOMC meeting) and Richmond Fed President Tom Barkin speaking. The Q2 earnings season still has two weeks to go, with lots of reports from retailers ahead. Overseas, Japan's latest PPI (Wed night EST) will be released amid acute yen stress, the Reserve Bank of Australia (RBA) meets Tuesday, and the UK posts its first Q2 GDP estimate. Here are the key economic releases most likely to influence the financial markets this week: **(1) Inflation.** This week's inflation prints carry outsized weight heading into the September 16 FOMC meeting, where futures markets currently price roughly a 43% chance of a 25 bps hike, down from 55% before Friday's weak jobs report. The Cleveland Fed [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model has July's headline CPI (Wed) rising 0.1% m/m and 3.4% y/y, down from 3.5% in June (chart). The model’s projection for core CPI looks similarly benign, rising 0.2% m/m and 2.5% y/y from 2.6% in June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-40.png) June's PPI Final Demand rose 5.5% y/y, while the measure excluding trade services ran hotter at 6.1%, and the core measure (also stripping food and energy) firmed to 5.1% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-45.png) **(2) Retail Sales.** The release of July retail sales (Fri) follows a June increase of 6.7% y/y (chart). The weekly Redbook same-store sales index has slipped a bit but remains high, easing to 8.2% y/y for the week of July 31 from 10.1% in early July. That pace is still well above trend, confirming that consumer spending has stayed healthy despite slower headline jobs growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-129.png) **(3) Unemployment Claims.** Initial jobless claims for the week ending July 31 rose slightly to 199,000, still below 200,000 for a third straight week, with the four-week average at 198,800, near the lowest since 2022 (chart). Continuing claims held at 1,801,000, with its four-week average at 1,795,000\. Both point to a labor market that remains resilient at the margin, even after Friday's weak payrolls print. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-42.png) **(4) Global.** Japan's July PPI (Wed) follows a rare joint US-Japan intervention to defend the yen, which hit 40-year lows in late July, with the Bank of Japan signaling its most explicit openness yet to an early rate hike. June's PPI jumped to 7.1% y/y, its fastest pace since March 2023 (chart). A hot July print would add pressure on the BOJ to tighten rather than to lean on currency intervention alone to rein in inflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-44.png) Elsewhere, the RBA (meeting Tue) is widely expected to hold its key interest rate at 4.35% after the June-quarter trimmed mean inflation rate cooled to 3.6%. Also: The UK posts its first Q2 GDP estimate on Thursday, following Q1 GDP growth of 0.6%. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### People Close To Warsh Are Talking About Him URL: https://www.yardeniquicktakes.com/people-close-to-warsh-are-talking-about-him/ Last updated: 2026-08-07T02:47:59.000Z **I. The Fed** Today's *Financial Times* ran an exclusive [story](https://www.ft.com/content/debe096f-ec89-424f-a8ca-d3843ef53549?syn-25a6b1a6=1&ref=yardeniquicktakes.com) about Fed Chair Kevin Warsh. It is based on insights provided by unidentified people close to him. They say that he admits that he has made some mistakes, "including failing to reinforce his key messages on price stability." In our opinion, he has been unequivocal about his commitment to restore price stability. He just hasn't done anything about it so far. Nor has he provided any information about the Fed's reaction function under his leadership. The *FT* article suggests he is watching "market-based measures of inflation," which remain low. Furthermore, the article states, "\[b\]y breaking the feedback loop between the Fed and investors, the new chair has said that he hopes markets will spend less time scrutinising officials’ clues and focus more on economic data." We've been monitoring the 2-year Treasury yield, which is unambiguously calling for rate hikes. Warsh is refusing to provide any forward guidance, but his people are providing some, saying that he is "prepared to raise interest rates at September’s meeting if inflation readings released in coming weeks are hot." We thought that the Q2-2026 core GDP deflators for total GDP and for personal consumption expenditures were hot at 3.8% y/y and 3.3% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-22.jpg) Will Warsh provide any more clarity in his Jackson Hole speech on Friday, August 28\. We doubt it. II. Macro The September FOMC rate decision will ultimately hinge on the economic data. The latest reports point to a resilient economy, a tight labor market, and persistent inflation pressures. Consider the following: _This post is for paying subscribers only._ ### US Economy Is Fine & The Fed Should Be Turning More Hawkish URL: https://www.yardeniquicktakes.com/us-economy-is-fine-the-fed-should-be-turning-more-hawkish/ Last updated: 2026-08-06T02:48:39.000Z **I. Macro** The economy's two most important engines of economic growth, consumer spending and business investment, are booming. In Q2-2026 real GDP, consumption expenditures increased 3.3% (saar) and nonresidential fixed investments jumped 8.4%. The headline and core GDP deflators, the most comprehensive measures of economy-wide inflation, rose 4.3% y/y and 3.8% (chart). Fed officials should be turning hawkish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-87.png) Recent Q2 earnings reports were upbeat on consumers. Booking Holdings [maintained](https://www.bloomberg.com/news/articles/2026-08-04/booking-holdings-keeps-full-year-outlook-on-resilient-travel?srnd=homepage-americas&ref=yardeniquicktakes.com) its full-year outlook and reported solid travel demand despite higher airfares and geopolitical turmoil. Disney also [delivered](https://finance.yahoo.com/markets/stocks/article/disneys-q3-earnings-top-estimates-on-demand-for-experiences-company-exits-ae-media-stake-103619379.html?ref=yardeniquicktakes.com) better-than-expected results, with strong performance at its parks and experiences business. Bank of America [expects](https://x.com/SemiconductorsX/status/2084162609486680388?ref=yardeniquicktakes.com) hyperscaler capital expenditures to reach $860 billion this year and approach $1.2 trillion in 2027\. The AI buildout has turned into its own stimulus program for the economy. And, of course, the government deficit remains very stimulative. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: GDP Growth Is AI-Powered & G-Shaped (Not K-Shaped) URL: https://www.yardeniquicktakes.com/weekly-webcast-gdp-growth-is-ai-powered-g-shaped-not-k-shaped/ Last updated: 2026-08-05T13:00:00.000Z Looking solely at Q2’s GDP growth rate, one would think the economy is weakening. Not so, say Ed and Elias. In fact, demand of all types strengthened last quarter, buoyed by brisk consumer spending, thanks to the Baby Boomers, and brisk business investment, thanks to the AI boom. The lower GDP growth rate was a function of surging imports, which aren’t bad news. Imports often rise in response to a strong domestic economy. … Also: As the economic engine heated up last quarter, so did inflation. The same consumer spending and AI capex trends keeping the economy vibrant are also boosting inflation, along with higher energy prices. … And: Ed reviews “Shipwrecked: Nightmare at Sea” (+ + +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Stock Market's Summer Stall Is Over Thanks To The ‘OK Economy’ & FEMO URL: https://www.yardeniquicktakes.com/stock-markets-summer-stall-is-over-thanks-to-the-ok-economy-femo/ Last updated: 2026-08-05T02:43:10.000Z In an interview with CNBC, US Treasury Secretary Scott Bessent said the US and Iran could reach an agreement to open the Strait of Hormuz to "freedom of movement" as soon as "today or tomorrow." Following his remarks—alongside reports of ongoing regional mediation via Qatar and Oman—crude oil prices dropped significantly. Brent crude fell below $80/barrel. The US Treasury yield curve edged lower across the board. US equity markets rallied sharply on hopes of a diplomatic breakthrough. Sunday's *QT* was titled "Information Technology Is On Sale." The S&P 500 Information Technology sector rose 6.6% over the past two days. It is up 12.2% since last Wednesday's close. The summer stall in the S&P 500 ended decisively today as the S&P 500 broke out to a new record high of 7,736.52. Bessent also said he's tired of hearing about the "K-shaped economy" and argued that it is over. We agree. In fact, given the broadening strength across the economy, we'd say it is an "OK economy." The economy is doing very well, and earnings are reflecting that. S&P 500 forward earnings is up more than 30% y/y, while the ISM M-PMI climbed to a four-year high in July (chart). Historically, stronger manufacturing activity has been associated with stronger earnings growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-16.jpg) The stock market is doing well because of FEMO, Fabulous Earnings Momentum. Stocks have generally performed best when the ISM Manufacturing PMI is above 50.0\. The correlation isn't perfect, but expansion in manufacturing has usually provided a tailwind for equities (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-70.png) Here's more: _This post is for paying subscribers only._ ### Missions Impossible: The War, The Fed & The Yen URL: https://www.yardeniquicktakes.com/missions-impossible-the-war-the-fed-the-yen/ Last updated: 2026-08-04T03:12:36.000Z In *Mission: Impossible*, Ethan Hunt is always given a nearly impossible mission to accomplish. The objective is crystal clear, the deadline is urgent, and a plan is quickly formulated to achieve the mission. Like Hunt, President Donald Trump, Fed Chair Kevin Warsh, and Treasury Secretary Scott Bessent have clear missions. Their plans for accomplishing these missions are less clear. Despite these uncertainties, the S&P 500 rose today to 7,600.50, nearly matching its June 2 record high. It's been a tug-of-war this summer between FEMO (fabulous earnings momentum) and these uncertainties. The S&P 500 has been fluctuating around 7,500 since May 14\. We aren't convinced that the summer stall is over, but it might be. **I. Trump's Mission** It's Tehran's "last chance." So said President Donald Trump today about his latest decision to pause a massive military strike on Iran scheduled for this past weekend. Presumably, bombs will drop again if the latest round of negotiations doesn't deliver a peace deal quickly that opens the Strait of Hormuz and denuclearizes Iran. Oil prices fell, and stocks rallied impressively on the news today (chart). However, Iranian Foreign Ministry spokesperson Esmaeil Baqaei explicitly stated that no direct negotiations with the United States are underway or scheduled. Tehran maintains that it has not sent negotiators abroad nor hosted foreign delegations for peace talks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-45.png) In an effort to keep oil prices from moving higher, the Trump administration is continuing to tap the Strategic Petroleum Reserves, which were already down sharply when they were tapped in 2022 in response to the Russian invasion of Ukraine. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-46.png) **II. Warsh's Mission** Fed Chair Kevin Warsh is like a secret agent with a clear mission to "deliver price stability." However, he is very secretive about his plan for doing so. He hasn't set a deadline for accomplishing his mission because his five special task forces are working on plans to reform the Fed. These plans won't be released until the end of this year. _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: Damage From AI & War Shocks Has Been Minimal URL: https://www.yardeniquicktakes.com/global-market-call-damage-from-ai-war-shocks-has-been-minimal/ Last updated: 2026-08-03T02:21:50.000Z The global economy has been hit by two shocks this year and absorbed them well. The war that started in March pushed oil prices higher and disrupted global supply chains. The AI trade then took a dive in July, with Asian semiconductor stocks hit the hardest. Neither the initial shocks nor the aftershocks seem to have damaged the global economy so far. President Donald Trump said on Saturday that he will hold off on a fresh attack on Iran if a deal can be reached quickly to reopen the Strait of Hormuz and end Iran's nuclear program. The price of a barrel of Brent crude oil is down $4 this evening to $84\. Last week on Thursday, Samsung reported a 19-fold increase in Q2 operating profit to 89.5 trillion won, telling investors the memory shortage is set to run into 2028\. AI-related stocks rebounded. Here's more: _This post is for paying subscribers only._ ### US SECTORS CALL: Information Technology Is On Sale URL: https://www.yardeniquicktakes.com/us-sectors-call-information-technology-is-on-sale/ Last updated: 2026-08-03T01:37:34.000Z The S&P 500 closed Friday at 7,489.72\. It has been stuck around 7,500 in a summer stall that actually started May 14\. Below the calm surface of the market, there has been plenty of turbulence. Adding to last week's volatility was the forced liquidation of Leopold Aschenbrenner's Situational Awareness hedge fund. Apparently, Leo was unaware of the risks of leverage bets in the stock market. His fund grew from $225 million to $45 billion in under two years. It was also levered roughly four times, and the same concentration that produced those gains worked in reverse in July. His largest positions included Nebius, SanDisk, Micron, and CoreWeave, all down more than 15% last month, while his shorts in software moved against him. July was a good month to be long software and short semiconductors (chart). Leo was on the wrong side of both trades. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-10.jpg) We continue to recommend market-weighting the S&P 500 Information Technology sector (table). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image.jpeg) The recent selloff in the AI trade represents a buying opportunity, in our opinion. Citadel thought so when it snapped up Leo's distressed fund. Goldman Sachs, JPMorgan, and Bank of America issued margin calls. Citadel bought the entire public book in one trade on Thursday morning. Nebius, CoreWeave, and IREN rallied hard once the overhang cleared, though all remain well off their cycle highs (chart). _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 3-7 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-3-7/ Last updated: 2026-08-02T15:25:44.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/IMG_1715.jpeg) After a week dominated by the Fed news, Q2's GDP release, and four Mag-7 earnings reports, the week ahead is jam-packed with labor market data, capped by Friday's employment report. Fedspeak resumes as well, with Governor Lisa Cook and SF Fed Bank President Mary Daly both speaking on Wednesday. They were not among the three hawkish dissenters at last week's FOMC meeting. So it will be interesting to see which way they lean. That might give the financial markets some forward guidance, which Fed Chair Kevin Warsh refuses to do! There will also be some highly anticipated earnings reports this week. Palantir, AMD, Eli Lilly, and SanDisk will headline the tape. SpaceX will make its first earnings announcement as a public company on Tuesday. Here are the key economic releases most likely to shape investors' thinking this week: **(1) Employment.** July's employment report (Fri) is the headliner. Payrolls rose just 57,000 in June, roughly half the consensus of 115,000, dragging the three-month average down to 111,300 (chart). We expect July's figure to rebound. June's shortfall came almost entirely from leisure and hospitality, which shed 61,000 jobs, a seasonal quirk unlikely to be repeated in July. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-143.png) Challenger's July layoff announcements (Thu) follow June's 45,800, which is low by historical standards (chart). Layoffs remained light last month according to initial unemployment claims. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-144.png) June's ADP private payrolls rose 98,000, down from May's 122,000 and below the 110,000 consensus, with services jobs accounting for 96,000 of the gain. July's ADP report (Wed) may be weaker, with ADP's weekly readings slowing for five straight weeks to a four-week average of 15,000 (chart). That would still be about 60,000 for July, around the breakeven pace needed to keep the unemployment rate from rising. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-145.png) June's JOLTS report (Tue) should show some weakening in job openings, according to the "jobs plentiful" series from the Consumer Confidence Index survey for the month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-16.png) **(2) PMIs.** July's S&P Global PMIs showed a strong rebound in the nonmanufacturing index to 53.6 from 51.2 in June (chart). The manufacturing index remained strong at 53.8\. Both suggest solid readings for July's M-PMI (Mon) and NM-PMI (Wed) compiled by the Institute for Supply Management. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-17.png) The regional business surveys conducted by five of the 12 Federal Reserve district banks confirm that a strong reading for the ISM M-PMI (Mon) is likely (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-18.png) While the growth rate of S&P 500 forward earnings has been distorted by significant mark-to-market gains on investments by Alphabet and Amazon, this series is yet another reason to expect a strong reading in the M-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-147.png) **(3) Productivity & labor costs.** Q2 productivity growth (Thu) might be on the weak side given that aggregate weekly hours worked rose at a faster pace that quarter than during Q1 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-19.png) Furthermore, the growth rate of GDP was weakened during Q2 by a surge in AI-related imports. However, real nonfarm business output, which is used to calculate productivity, tends to grow a bit faster than real GDP (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-20.png) **(4) Earnings.** Some 71% of S&P 500 companies have now reported Q2 results, with another 15% of the index due this week. The consensus of analysts' estimates implied Q2-2026 operating EPS growth of 37.0% y/y as of July 30, up from 35.8% last week (charts). That figure includes the mark-to-market investment gains booked by a few of the Mag-7 companies. Nevertheless, estimates for Q3 and Q4 continue to trend higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-3.jpg) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-4.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: Situational (Un)Awareness Hedge Fund Blows Up Without Blowing Up The Market URL: https://www.yardeniquicktakes.com/us-market-call-situational-un-awareness-hedge-fund-blows-up-without-blowing-up-the-market/ Last updated: 2026-08-02T04:00:11.000Z So far, so good. We predicted a summer stall in the stock market, with bouts of volatility rather than a correction, and that is how June and July played out. The S&P 500 has gone nowhere since May 14, fluctuating around 7,500, while the market has churned underneath. The rotation of leadership among sectors that we expected has continued. Breadth has improved. Nothing in the past month has changed our view that the index should reach 8,250 by year-end. The summer stall could last until the start of the fall. On the plus side for investors is Fabulous Earnings Momentum (FEMO). On the negative side for them are ongoing uncertainties about the AI business model, the Middle East war, the persistence of inflation, and the Fed's reaction function under Fed Chair Kevin Warsh. The net result so far has been a flat market with lots of volatility. Such volatility combined with leverage can be fatal. Leopold Aschenbrenner's $45 billion hedge fund, Situational Awareness, blew up last week. He was forced to sell his entire book of public equities to Citadel after losses on his long positions in the AI trade triggered margin calls. This event undoubtedly contributed to last week's volatility, as did Warsh's lame first press conference; yet the S&P 500 rose 1.0% for the week! S&P 500 Semiconductors contributed to the week's downside volatility, falling 3.4% (chart). On July 19, we wrote that the S&P 500 Semiconductors stock price index was likely to fall to its 200-day moving average. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-10.png) Now let's take a deeper dive below the market's calm surface: **(1) Breadth.** The S&P 500 equal-weight index continues to outpace the market-weight index, with the former up 12.1% ytd versus 9.4% for the latter (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-15.png) The Impressive 493 has beaten both the Magnificent-7 and the S&P 500 by wide margins ytd (chart). The Mag-7 closed the gap a bit in recent days, driven by strong results from Microsoft and Amazon. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-14.png) The Russell 2000 is trading near a record high, up 18.1% ytd (chart). SmallCaps wouldn't be leading if investors thought that a recession is likely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-17.png) **(2) Sentiment.** The bull-bear stock market sentiment ratios (BBRs) are mixed. The Investors Intelligence BBR is modestly above its historical average, while the AAII ratio is well below its own (chart). Retail investors are more bearish than institutional investors on balance. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-18.png) On the other hand, according to the Consumer Confidence Index (CCI) survey, the percentage of respondents expecting higher stock prices over the next 12 months, at 52.4% in July, is well above its long-run average of 35.6% (chart). This series reflects a longer forecasting horizon than the BBRs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-68.jpg) **(3) Valuation.** The forward P/E of the S&P 500 is well correlated with the CCI stock market bullishness series (chart). The former is relatively elevated because most investors don't expect a recession anytime soon so do expect stock prices to move higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-70.jpg) The Magnificent-7’s collective forward P/E is down to 22.8\. That's partly because Alphabet and Amazon earnings were boosted by mark-to-market (MTM) investment gains (chart). This development also lowered the S&P 500 forward P/E to 19.4\. Such gains were not relevant to the S&P 400 and S&P 600, which remain relatively cheap. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-15.png) Comparisons to the 1999 Tech Bubble are looking less and less credible. The S&P 500 Information Technology sector's forward P/E is 20.0, just 0.6 points above the S&P 500's 19.4 (chart). At the 2000 peak, the gap was as wide as 30 points. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/image-19.png) **(4) Earnings.** Earnings continue to deliver**.** Q2 earnings growth of 37.0% y/y was inflated by the MTM gains we flagged last week, but Q3 and Q4 are rising on their own merits, to 22.1% and 26.8% respectively (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-1.jpg) We are increasingly focused on analysts' consensus earnings-per-share expectations for 2027\. It continues to set new highs without any MTM distortion, at $407.72 last week (chart). That estimate is a clean read on FEMO. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway.jpg) Forward earnings for the S&P 400 MidCaps and S&P 600 SmallCaps are rising along with the LargeCap forward earnings series (chart). The MidCaps and SmallCaps are not distorted by MTM. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-11.png) **(5) Bonds.** The Bond Vigilantes are not happy. The 10-year Treasury yield has climbed to its highest level since January 2025 and is near the top of our 4.00%-5.00% "old normal" range, and the inflation-adjusted TIPS yield has risen with it (chart). Expected inflation has stayed contained. Stocks are absorbing higher yields well so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway.png) **(6) Commodities.** The stock market continues to tune out volatility in crude oil prices (chart). The price of a barrel of Brent crude is currently in the middle of its wide (and wild) range since the war started (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-6.png) Copper is signaling that the global economy is growing and that AI infrastructure demand for the metal remains strong. It is currently pressing the top of its multi-year upward trending channel (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-1.png) The gold price has broken below its channel and is holding just above $4,000 per ounce (chart). We see support at $4,000 and think it will stay above that level. If it does, then $5,000 is still possible by the end of the year. If it does not, then $3,500 is the next level of support. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-8.png) Rare earths have taken a dive on no obvious news (chart). They've fallen faster than precious metals, while base metals remain on an uptrend. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/08/gateway-10.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US Economy Is Still Flying URL: https://www.yardeniquicktakes.com/us-economy-is-still-flying/ Last updated: 2026-07-31T02:43:09.000Z The latest batch of economic data suggests that the US economy remains in remarkably good shape. Domestic demand is strong, and the labor market continues to show resilience. Inflation isn't as picture-perfect. While June's PCED report provided some welcome relief, recent inflation shocks may spread in coming months. They include another round of tariffs, the AI building boom, high energy prices, and supply-chain disruptions. They will likely keep inflation above the Fed's 2% y/y target. Let's review the recent batch of economic indicators: **(1) GDP.** The US economy expanded at a 1.5% annualized rate in Q2-2026, down from 2.1% in Q1 (chart). At first glance, the slower growth rate suggests that the economy lost some momentum during the quarter. A closer look suggests otherwise. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-387.png) _This post is for paying subscribers only._ ### Warsh Fails First Credibility Test: Bond Vigilantes Want More Than Hawkish Squawks URL: https://www.yardeniquicktakes.com/warsh-fails-first-credibility-test-bond-vigilantes-want-more-than-hawkish-squawks/ Last updated: 2026-07-30T03:38:54.000Z Fed officials just won't listen to us! We warned them that the economy didn't need the four cuts in the federal funds rate (FFR) at the end of 2024\. The Bond Vigilantes agreed with us and pushed the 10-year Treasury bond yield up by 100bps at the time (chart). The same happened late last year. The Fed lowered the FFR three times. The bond yield drifted higher and continued to do so this year. We correctly anticipated that the FOMC would pivot from its dovish stance in April to a hawkish stance in June. Then we predicted that the committee would follow up with a rate hike in July. They didn't listen to us. Once again, the Bond Vigilantes are pushing bond yields higher. In effect, they are saying that if the Fed won't be vigilant about inflation, then they will have to maintain law and order in the economy. Under the circumstances, we conclude that the Fed has to raise short-term rates to lower long-term rates. Talking hawkish but not acting so reduces the Fed's credibility. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-385.png) At the FOMC meeting today, the committee voted 9-3 to leave the federal funds rate (FFR) unchanged at 3.50%-3.75%. Beth Hammack, Neel Kashkari, and Lorie Logan dissented, each preferring a 25bp hike. Fed Chair Kevin Warsh struck an unambiguously hawkish tone at today's press conference. He emphasized (again) that the economy remains resilient and inflation is still above target. He reiterated that restoring price stability is the Fed's top priority. Indeed, the FOMC statement closed with the same reassuring pledge as last month: "The Committee will deliver price stability." Delivering price stability is exactly what the Bond Vigilantes want the Fed to do. Ahead of the meeting, the 2-year Treasury yield traded roughly 75bps above the federal funds rate, indicating that the Fed should reverse last year's FFR cuts that were billed as insurance policies to protect the labor market from weakening. At the time, inflation seemed to be heading closer to the Fed's 2.0% target. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-381.png) _This post is for paying subscribers only._ ### Inflation Risks Still Outweigh Labor Market Risks URL: https://www.yardeniquicktakes.com/inflation-risks-still-outweigh-labor-market-risks/ Last updated: 2026-07-29T02:23:58.000Z All eyes are on Wednesday’s FOMC meeting. Markets expect the Fed's monetary policy committee to leave the federal funds rate (FFR) unchanged at 3.50%-3.75%, with the CME FedWatch assigning roughly a 70% probability to no change and a 30% probability to a 25bps rate hike. Investors will be closely watching the FOMC statement, Fed Chair Kevin Warsh's press conference, and the degree of any dissent for clues about the policy outlook. Given the economy’s continued resilience and persistent inflation pressures, there is a reasonable chance that two hawkish regional Fed bank presidents, Lorie Logan and Beth Hammack, dissent in favor of a rate hike. Recent data continue to suggest that inflation risks outweigh labor market risks. Consumer spending remains robust, the labor market is balanced, and manufacturing activity is rebounding, boosted by the AI investment boom and onshoring. As a result, the FFR futures market continues to price roughly two 25bps rate hikes over the next 6-12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-379.png) _This post is for paying subscribers only._ ### AI Capex Boom Continues to Boost US Economic Growth URL: https://www.yardeniquicktakes.com/ai-capex-boom-continues-to-boost-us-economic-growth/ Last updated: 2026-07-28T02:49:21.000Z **I. On Industrials** Investors are suffering from AI fatigue. They've concluded that there is no way to estimate whether all the capital spending on AI infrastructure will generate good ROIs in the coming years. What they do know is that hundreds of billions of dollars are being spent on AI capex in the here and now. That explains why S&P 500 Industrials is the second-best-performing of the 11 S&P 500 sectors with a gain of 17.7% ytd (chart). That's ahead of the 15.4% gain for the S&P 500 Information Technology sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-361.png) Within the S&P 500 Industrials sector, several of the industries have benefited from the AI capex boom, especially Construction Machinery, Electric Equipment, and Industrial Conglomerates (chart). They should continue to do so, and we continue to recommend overweighting the sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-360.png) The latest manufacturing data support our recommendation: **(1) Durable goods.** June durable goods orders rose by 0.3% m/m, but the details were much stronger. Orders excluding transportation increased 0.6%, while core capital goods orders (nondefense ex-aircraft), a key gauge of business investment, rose 0.9% and 12.5% y/y, the strongest annual increase since November 2021 (charts)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-362.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-363.png) The major components of durable goods orders are at record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-349.png) Orders for machinery necessary to operate data centers are especially strong (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-364.png) Unfilled orders for computers and electronic products rose to a record $157.4 billion in June (chart). The increase highlights robust demand for AI-related infrastructure, including servers, semiconductors, networking equipment, and other technology hardware. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-358.png) _This post is for subscribers on the Premium Member tier only._ ### GLOBAL MARKET CALL: Getting Yin-Yanged By The Latest Gulf War URL: https://www.yardeniquicktakes.com/global-marke/ Last updated: 2026-07-27T02:27:59.000Z The re-escalation of the latest Gulf War pushed the price of Brent crude oil back up to $101.06 on Thursday. It was back down this evening as low as $86.58 after Iran reportedly said it would suspend attacks as long as the US does the same. Last week, rising oil prices were a headwind for the Go Global trade relative to Stay Home, because they fall harder on the oil-importing economies abroad than on the US, which exports oil. Hopefully, oil prices will be lower this week, providing a tailwind to Go Global. In any event, it seems that the plunge in China's June oil imports helps explain the rapid plunge in oil prices that month, when there was also a ceasefire (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-343.png) Global stock market leadership rotated sharply this month. The 2026 AI-related leaders, South Korea and Taiwan, are among the worst performers mtd, down 19.3% and 9.8% respectively (chart). China tops the leaderboard, up 9.5%, with Indonesia, Hong Kong, and Singapore close behind. Yet both Korea and Taiwan steadied this past week, up 0.3% and 0.7%, an early sign the sharp selloff is easing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-341.png) The structural case for Go Global remains intact underneath the rotation. Foreign stock valuations remain cheaper than the US, and forward revenues and earnings abroad are climbing to new records. Most importantly, Stay Home worked well for us from 2010 through 2024, and now accounts for 64.2% of global stock market capitalization (chart). Diversifying globally makes more sense to us now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-344.png) Here's more: **(1) Stay Home vs Go Global.** The price ratios of the US stock market to the rest of the world remain on downtrends below their early 2025 peaks in both dollar and local currency terms (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-345.png) The ratios of the US MSCI to the emerging markets (EMs) MSCI have remained in decline since early 2025, when EMs began outperforming after underperforming since 2010 (chart). South Korea and Taiwan's outperformance clearly dominated the recent downtrends in the ratios. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-140.png) Year to date, South Korea and Taiwan still lead every country, up 67.6% and 54.3% in US dollar terms (chart). The month's pullback is a correction within a powerful run, not a reversal of it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-342.png) **(2) Global** r**evenues and earnings.** The All Country World MSCI's forward revenues per share continues to hit record highs (chart). The world's top line has never been greater. The global economy is growing despite the recent oil shock. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-133.png) The All Country World MSCI's forward earnings per share is also rising to new record highs (chart). _This post is for subscribers on the Premium Member tier only._ ### US SECTORS CALL: Follow The Money URL: https://www.yardeniquicktakes.com/us-sectors-call-follow-the-money/ Last updated: 2026-07-26T16:40:48.000Z The S&P 500 has been holding up around 7,500 as the war in the Middle East escalates. It closed at $7411.98 on Friday, just below its 50-day moving average (chart). Alphabet and Tesla both reported great Q2 revenues on Thursday. Yet both stocks were crushed, down 6.9% and 14.5%, as free cash flow turned negative for both. Investors have decided that AI capital spending is a high, known cost with an unknown ROI. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-120.png) However, the hyperscalers' negative free cash flow has boosted the positive free cash flow of semiconductor companies. Nevertheless, semiconductor stocks gave back more ground this week. Even so, the iShares Semiconductor ETF (SOXX) closed Friday at $527.01, still 32% above its rising 200-day moving average (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-65.jpg) We downgraded the S&P 500 Information Technology sector to market weight on December 7, 2025\. We continue our overweight ratings on the Energy, Financials, Health Care, Industrials, Materials, and Utilities sectors (table). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/Screenshot-2026-07-25-at-10.59.26---AM.png) Here's what has gotten our attention recently among some of the sector trades: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: JULY 27 - 31 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-27-31/ Last updated: 2026-07-26T15:11:54.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/IMG_1649.jpeg) The S&P 500 closed Friday at 7,411.98, down 0.6% on the week, while the Nasdaq fell 2.1%. Oil was the dominant story: The price of Brent crude jumped 7% Thursday to settle at $100.69 a barrel, its first close above $100 since May 26, after Yemen's Houthi militants claimed strikes on two Saudi oil tankers in the Red Sea (chart). President Trump said the US would hold Iran responsible for any further attacks on shipping, threatening "major military punishment" against Tehran. Big Tech's earnings kickoff was depressing. Both Alphabet and Tesla fell sharply after reporting negative free cash flow. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-330.png) Looking ahead, the calendar is jam-packed this week with lots of earnings reports. The monetary policy committees of the Fed, the Bank of Japan, and the Bank of England will be meeting. Four more Magnificent-7 companies are set to report. Q2 GDP and June PCED inflation readings both are due Thursday. Here are the key economic releases most likely to shape investors’ thinking this week: **(1) Fed Policy & Global Central Banks.** The FOMC's two-day meeting concludes Wednesday with Chair Kevin Warsh's press conference to follow. The federal funds rate futures market is signaling two rate hikes over the next 6-12 months (chart). The June meeting’s Summary of Economic Projections showed nine of 19 officials penciling in a hike this year. This split raises the degree of dissention we might see at the July meeting whether the committee votes to hike or to hold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-125.png) The Bank of England (Thu) and the Bank of Japan (Fri) both are expected to hold their respective policy rates steady (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-104.png) **(2) Earnings.** Four Magnificient-7 companies report earnings this week: Microsoft and Meta report after the close on Wednesday, followed by Apple and Amazon on Thursday. Collectively, the four companies account for about 17% of the S&P 500’s market capitalization. The consensus of analysts’ estimates now implies aggregate Q2-2026 operating EPS growth for S&P 500 companies of 35.8% y/y, up from 22.9% a week earlier (chart). But 35.8% is a misleading figure due to the distortive effects of mark-to-market investment gains in some Mag-7 companies. Given how the market punished Alphabet and Tesla for reporting negative free cash flow, all eyes are on this week's Mag-7 reporters. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-64.jpg) **(3) GDP & PCED Inflation.** The advance estimate of Q2 GDP (Thu) follows a final Q1 reading of 2.1% annualized growth. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model had Q2 tracking at just 1.7% as of July 17, with its next update due Monday (chart). We expect the preliminary estimate to come in closer to 2.0%. Business investment continues to lead. Final sales to private domestic purchasers should be strong. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-106.png) June's PCED (Thu) follows May's hot readings of 4.1% y/y headline and 3.4% core, the highest since 2023 (chart). The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model projects June's comparable rates easing to 3.65% and 3.33% y/y, with headline PCED falling 0.12% m/m. This week's Houthi attacks and Brent's move back above $100 a barrel threaten the recent disinflation trend. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-107.png) **(4) Employment.** The next initial claims report (Thu), covering the week ended July 25, follows last week's 187,000 print, the lowest since 1969\. That represented a four-week average of 207,500 (chart). Layoffs remain low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-108.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: MTM & Chips' Profit Margin Distorting S&P 500 Earnings, But FEMO Lives On! URL: https://www.yardeniquicktakes.com/us-market-call-mtm-chips-profit-margin-distorting-s-p-500-earnings-but-femo-lives-on/ Last updated: 2026-07-26T13:29:40.000Z **I. Stocks** Stop the music! S&P 500 earnings per share (EPS) have been significantly distorted by huge capital gains on investments by Alphabet and Amazon and a tax-related gain from Meta. Because GAAP accounting rules force companies to record unrealized equity gains and losses directly on the income statement, a small group of tech and venture-heavy mega-caps can create significant noise in the S&P 500's aggregate earnings growth numbers, masking the underlying operating trends of the broader market. We asked our colleague, Joe Abbott, to have a closer look. He reports: "S&P 500 Q1-2026 EPS was finalized at $75.03 (chart). It was boosted by a total of $5.22 per share in mark-to-market (MTM) investment and tax gains recognized by three companies reporting on a GAAP accounting basis: $3.14 in MTM gains for Alphabet, $1.42 in MTM gains for Amazon, and a $0.66 tax reversal gain for Meta. "For Q2-2026, the S&P 500’s earnings per share of $90.55 (so far in the earnings reporting season) was boosted by Alphabet’s astonishing MTM gain, particularly on SpaceX. It added $8.96 to the S&P 500’s EPS." While GAAP reporting is mandatory, over 95% of S&P 500 companies also present non-GAAP (or "adjusted") metrics in their earnings releases, investor presentations, and conference calls. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-62.jpg) Removing the MTM gains reduces the S&P 500's Q1 and Q2 y/y earnings growth rates from 19.0% and 35.8% to 10.6% and 22.3% (chart). Those are still very solid growth rates. _This post is for paying subscribers only._ ### Apocalypse Now! Or, TACO Now? URL: https://www.yardeniquicktakes.com/apocalypse-now-or-taco-now/ Last updated: 2026-07-24T03:54:39.000Z **(1) Geopolitics.** President Donald Trump said he is weighing a “massive attack” on Iran. The Pentagon is flooding the Middle East with elite troops, fighter jets, and combat medics. “I am considering a massive attack. Bigger than anything we have ever had before. I am close to making a decision. We are fully prepared for it,” the president told Israel’s Channel 12 on Thursday. The US military on Tuesday deployed a powerful B-1 long-range bomber, officials told Axios. It was the first time the US conducted a B-1 mission since fighting with Iran resumed 12 days ago, signaling a major escalation in the war. The moves come as Trump is demanding “a head for an eye” when it comes to attacking Iran, Secretary of State Marco Rubio told reporters Thursday, updating the Old Testament formula of reciprocal justice. Today's WSJ reported: "The president in recent days has grown skeptical that negotiations with Iran can produce a lasting peace, according to people familiar with the matter. A senior administration official said Trump believes that the only thing Iran understands is military force, adding that he was in 'revenge mode' against Tehran. The president, the official said, sees few good options besides continuing strikes." The price of a barrel of Brent crude oil soared today (charts). It was boosted by news that the Houthis targeted two Saudi oil tankers with ballistic missiles, cruise missiles, and drones in the Red Sea on Wednesday. Trump's "Apocalypse Now!" warning today sent the price back above $100. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-290.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-311.png) The S&P 500 fell only 1.2% to 7,408.30 as the war escalated today (chart). It has been fluctuating around 7,500 since May 14\. It is now slightly below its 50-day moving average. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-297.png) The relative calm in the S&P 500 suggests that investors have learned that geopolitical crises have usually been good buying opportunities (chart). It should be so again. This time, dip buyers are likely to bet that either Iran caves or Trump does. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-289.png) **(2) Sentiment.** Our favorite bull-bear ratios are mixed (chart). They are consistent with our summer stall scenario and the sideways trend of the S&P 500 since mid-May. _This post is for paying subscribers only._ ### Choke Points & Other Concerns Causing The Stock Market's Summer Stall URL: https://www.yardeniquicktakes.com/choke-points-other-concerns-causing-the-stock-markets-summer-stall/ Last updated: 2026-07-23T02:56:49.000Z At the start of last month, we predicted a June swoon in the S&P 500\. Now it's looking more like a summer stall as the index has been marking time around 7,500 since May 14\. We still expect the index to reach 8,250 by year-end. A resilient economy and strong earnings remain powerful tailwinds, but these bullish factors are widely recognized. On the other hand, numerous risks remain. So more choppiness this summer is likely before the rally resumes. Currently topping the worry list is the Middle East conflict. The resumption of the war following a short ceasefire has [boosted](https://finance.yahoo.com/economy/articles/renewed-us-iran-strikes-stoke-115032341.html?ref=yardeniquicktakes.com) oil prices again and revived inflation fears. Houthi [threats](https://sg.finance.yahoo.com/news/oil-jumps-nearly-4-houthis-111000835.html?ref=yardeniquicktakes.com) to shipping through the Bab el-Mandeb Strait pushed oil prices higher again today. Bond yields have been rising on increasing odds that the next Fed rate hike will occur sooner rather than later as a result of the inflationary consequences of rising energy prices. AI is another concern. Moonshot's Kimi K3 has [revived](https://finance.yahoo.com/technology/ai/articles/china-kimi-k3-hits-us-225728395.html?ref=yardeniquicktakes.com) "DeepSeek 2.0" fears about whether hyperscalers' massive AI capital spending will deliver sufficient returns. Adding to AI jitters, OpenAI [disclosed](https://openai.com/index/hugging-face-model-evaluation-security-incident/?ref=yardeniquicktakes.com) that two of its models escaped a sandbox and hacked AI startup Hugging Face in what it called an "unprecedented cyber incident." Tariffs are back on the worry list. The administration [plans](https://www.reuters.com/business/us-imposes-new-50-tariffs-canadian-products-2026-07-20/?ref=yardeniquicktakes.com) 50% tariffs on various Canadian goods and aims to [replace](https://www.cnbc.com/2026/07/21/trump-trade-tariffs-greer-section-301.html?ref=yardeniquicktakes.com) the expiring Section 122 tariffs with new duties of roughly 10.0%-12.5% on about 60 countries. The risk is that another round of tariff increases will put more upward pressure on goods prices. These concerns are already showing up across financial markets and key economic indicators: **(1) Energy commodities.** Brent crude oil has rebounded sharply from its June lows near $72 per barrel to roughly $95 this evening (chart). The futures curve is in backwardation, with future contracts priced progressively lower. In other words, the market expects prices to ease over the next 12 months but remain elevated. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-263.png) Meanwhile, the SPR is near a multi-decade low (chart). Earlier in the conflict, the reduction in crude oil reserves helped cap the oil price spike and speed its reversal once the MOU between the US and Iran was signed. Strategic reserves have been reduced significantly around the world. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Fed Rate Hike Still On The Table URL: https://www.yardeniquicktakes.com/weekly-webcast-fed-rate-hike-still-on-the-table/ Last updated: 2026-07-22T13:00:00.000Z Neither the Fed’s dual mandate nor its official 2% inflation target have changed. But from what Kevin Warsh has said since assuming the role of Fed chief in May, his priority appears to be the inflation side of the dual mandate and his target may be underlying inflation rather the PCED inflation rate. Today, Ed and Elias look at the ramifications of such a potential shift in the Fed’s focus and discuss the best measure of underlying inflation. They also assess the latest economic data and explain why they think a rate hike this year is still likely. … Also: Dr Ed reviews “I Swear” (+ +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### US Economy Powers On As FIFA Spending & IRS Tax Rebates Fade URL: https://www.yardeniquicktakes.com/us-economy-powers-on-as-fifa-spending-irs-tax-rebates-fade/ Last updated: 2026-07-22T01:12:26.000Z As confetti and red-and-yellow streamers rained down on the roaring crowd, the final whistle blew, and Spain lifted the World Cup trophy after a thrilling 1:0 victory over Argentina. The games are over. The fans are heading home, and an important economic tailwind is beginning to fade. According to Bank of America, the FIFA World Cup [generated](https://finance.yahoo.com/economy/articles/world-cup-hands-us-economy-211133510.html?ref=yardeniquicktakes.com) roughly $20 billion in economic activity across the United States, boosting spending in host cities and helping fuel the strongest surge in consumer spending in more than four years. The stimulus from tax refunds is also fading. Thanks to the One Big Beautiful Bill Act, the total amount refunded to households rose 18.1% y/y to $324.8 billion, putting nearly $50 billion of additional cash into consumers' pockets. With both tailwinds now fading, the economic data are reflecting the slowdown. We aren't concerned. Seven years into our Roaring 2020s scenario, the underlying pulse of the US economy and American consumer remains strong. Consider the following: **(1) Consumer spending.** Redbook same-store retail sales growth cooled to 8.0% y/y in the week ending July 17, extending a pullback from exceptionally strong gains during the World Cup (chart). Sales growth remains robust by historical standards. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-251.png) _This post is for paying subscribers only._ ### DEEP DIVE: We Still Expect a 2026 Rate Hike URL: https://www.yardeniquicktakes.com/deep-dive-we-still-expect-a-2026-rate-hike/ Last updated: 2026-07-21T01:16:47.000Z **This is an excerpt from our July 20, 2026 Morning Briefing for institutional investors.* Right before the release of the June CPI report, Fed Governor Christopher Waller [used](https://www.reuters.com/markets/us/feds-waller-says-higher-rates-possibly-needed-near-term-2026-07-13/?ref=yardeniquicktakes.com) notably hawkish rhetoric in his latest public address. He stated that if June’s core CPI was hot, the FOMC would need to consider tightening monetary policy in the near term. That prompted traders to increase their bets that the FOMC might vote to raise interest rates at the Committee’s July 28-29 meeting. June’s CPI report was surprisingly cool. Headline CPI fell 0.4% m/m, marking the first monthly decline in six years ([Fig. 4](https://cdn.sanity.io/images/m74go295/production/6dd637b03bb5793963dd7a9f90a385c775b7a2d4-1920x1080.png?w=1920&ref=yardeniquicktakes.com) below). The drop was driven primarily by a 9.7% m/m decline in gasoline prices ([Fig. 5](https://cdn.sanity.io/images/m74go295/production/c579a8efbc7cbfb51a807a66d8c26be5dc6cdbbb-1920x1080.png?w=1920&ref=yardeniquicktakes.com)). However, the moderation in inflation was broad-based. Core inflation was unchanged m/m, core goods inflation fell 0.1%, and core services inflation was also unchanged ([Fig. 6](https://cdn.sanity.io/images/m74go295/production/2ff48ad409f2f2d6c443a644f43a19ebea9f6850-1920x1080.png?w=1920&ref=yardeniquicktakes.com) and [Fig. 7](https://cdn.sanity.io/images/m74go295/production/f7c4fafd4b5df86e98686827be42ed2c73fd1df4-1920x1080.png?w=1920&ref=yardeniquicktakes.com)). The CPI measure of supercore inflation edged down to 3.1% in June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-95.png) Figure 4 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-96.png) Figure 5 While the June CPI report reduced the urgency for the Fed to raise interest rates, an assessment of the broader inflation picture suggests that at least one rate hike remains the base case for this year. Here’s why: _This post is for paying subscribers only._ ### US SECTORS: Rotations and Corrections URL: https://www.yardeniquicktakes.com/us-sectors-rotations-and-corrections/ Last updated: 2026-07-20T12:58:45.000Z The S&P 500 is 2.0% below its June 2 all-time high. It has been hovering around 7,500 since May 14\. Beneath that calm, momentum stocks have been hard hit. The semiconductor index (SOXX) is down 20.3% from its June 22 peak. The Roundhill Memory ETF (DRAM), which started trading on April 2 around $28 and soared 208% to $80.7 on June 22, is down 35% since then. These developments have all weighed on the S&P 500 Information Technology sector, which we downgraded to market weight on December 7, 2025\. Meanwhile, Financials and Health Care, which we are overweight, have held up well. Investment banking is booming. Biotech is performing very well. Here's what has gotten our attention recently: **(1) Technology: Semiconductors and Memory Correct.** Margin calls on Samsung and SK Hynix in South Korea weighed on US semiconductor and memory chip stocks in recent days. Chinese AI lab Moonshot added to the pressure on Friday, launching Kimi K3, a 2.8-trillion-parameter open-weight model it says rivals the best from OpenAI and Anthropic, reviving DeepSeek-era fears and pushing the SOXX lower. The S&P 500 Semiconductors stock price index is likely to fall another 12% to its 200-day moving average (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-48.jpg) _This post is for subscribers on the Premium Member tier only._ ### GLOBAL MARKET CALL: Downgrading Emerging Markets To Market Weight URL: https://www.yardeniquicktakes.com/global-market-call-downgrading-emerging-markets-to-market-weight/ Last updated: 2026-07-19T17:28:44.000Z We are downgrading emerging markets to market weight, not because the Go Global thesis is broken but because four separate short-term headwinds are converging at once: (1) The price of oil is back above $80 a barrel as the IRGC keeps the Strait of Hormuz contested. (2) The FOMC is hawkish. With inflation still sticky and a solid labor market, financial markets are currently pricing in one rate hike before the end of this year. (3) That's boosting the dollar. (4) AI fatigue is showing up in South Korea and Taiwan. None of these reverse the multi-year case for international equities. Valuations abroad are cheaper than in the US, and the structural rotation away from decades of US stock market leadership is intact. Let's look further: **(1) Stay Home vs Go Global.** The price ratios between these two long-run investment styles representing the US stock market (Stay Home) and the rest of the world’s stock markets (Go Global) remain below their early 2025 peaks in both dollar and local currency terms (chart). They are also still below their long-term uptrends from 2010 through early 2025, and on short-term downtrends since then. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-248.png) Since early 2025, stock markets in the US and other developed economies have kept pace with each other (chart). From 2010 through early 2025, the US market outperformed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-45.jpg) The ratios of the US versus emerging markets show the latter outperforming the former since early 2025 after underperforming since 2010 (chart). The downturn in the ratios since early 2025 was largely attributable to the AI-fueled booms in South Korea and Taiwan. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-46.jpg) There has been quite a bit of rotation in leadership so far in July. The countries that led the broader 2026 rally, South Korea and Taiwan, are the worst performers this month to date, down 19.5% and 10.4% respectively (chart). China and Indonesia are at the top of the leaderboard this month, with gains of 8.0% and 9.8%, respectively. The US is in the middle of the pack. _This post is for paying subscribers only._ ### US MARKET CALL: Hanging Out At 7,500 And 4.50% URL: https://www.yardeniquicktakes.com/us-market-call-hanging-out-at-7-500-and-4-50/ Last updated: 2026-07-19T04:00:45.000Z The S&P 500 first hit 7,500 on May 14 and has remained stuck around that level. The index continues to cruise along its 50-day moving average. A 6.0% drop would send it back to its 200-day moving average (chart). We have seen this movie before, recently, during late 2024 into early 2025 and again during late 2025 into early 2026\. Both saw similar bouts of sideways consolidation, followed by pullbacks that attracted dip buyers. That's a plausible scenario through September, in our opinion. We are still aiming for 8,250 by the end of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-234.png) Consider the following: **(1) Stock Market Performance.** So far this year, the S&P 500's bull market leadership has rotated from the Magnificent-7 to the Impressive 493 (chart). The Mag-7 had a June swoon and has recovered somewhat so far in July. However, the S&P 493 collectively has outperformed the S&P 500's Mag-7 so far this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-233.png) Recently, S&P 500 Value has been outperforming S&P 500 Growth (chart). Fabulous earnings momentum (FEMO) has bolstered Growth's earnings expectations to such a high level that simply meeting them this earnings season could read as a letdown. Value carries no such burden. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-42.jpg) The rotation in market leadership shows up clearly across the S&P 1500 sectors. Cheaper, more defensive corners of the market have outperformed since May 14, led by the S&P 600 Health Care, up 18.7%, and the S&P 600 Consumer Discretionary, up 14.4% (chart). The S&P 500 itself is down just 0.6% over that span, a modest headline number that masks a wide spread between winners and losers. The Magnificent-7 is at the other end of that dispersion, down 5.7%. Information Technology looks tired. New catalysts are scarce, and a bit of AI fatigue has set in. Semiconductor momentum has faded as one of the market's most crowded trades corrects. SOXX is down 20.3% since it peaked at a record high on June 22. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-43.jpg) **(2) Current Earnings Season.** The analysts' consensus Q2 EPS growth estimate rose to 22.9% y/y on an apples-to-oranges basis, up 1.3% on the week (chart). Great expectations are held for Q3 and Q4, as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-41.jpg) On a pro forma basis (apples-to-apples), Q2 earnings growth is running at 26.0% (chart). Energy accounts for a large share of that figure given the war's impact on energy prices. Technology earnings growth has held steady. Health Care continues to lag on an earnings basis despite decent sector stock performance. Financials drove much of last week's improvement. Goldman Sachs beat EPS estimates by 46%, and JPMorgan beat by about 10%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-239.png) **(3) Revenues, Earnings, And Profit Margin.** Analysts' consensus EPS estimate for S&P 500 companies this year has flattened recently, while the 2027 estimate has continued to climb above $400 (chart). Forward earnings, the time-weighted average of the two, rose to a record high last week, buoyed by the fact it converges toward the 2027 estimate as 2026 wears on. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-40.jpg) S&P 500 forward revenues per share also reached a new all-time high, climbing even faster recently (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-231.png) The forward earnings series has been a reliable predictor of actual earnings during economic expansions but fails during recessions. Given the economy's resilience, the current run of record forward estimates is a realistic read on where earnings are headed over the next 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-230.png) If a bubble exists anywhere in this market, it is not in valuation and not in revenues. It is in profit margins. The forward profit margin rose to a record 16.1% last week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-232.png) The percentage of S&P 500 companies with positive three-month forward earnings growth is at 89.4%, a level associated with past cyclical earnings peaks (chart). That's a harbinger of more rotation in a broadening bull market, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-236.png) **(4) Credit.** The 10-year Treasury yield is consolidating around 4.50%, squarely within the 4.00%-5.00% range we consider to be the "old normal" (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-235.png) Corporate high-yield credit spreads remain tight despite ongoing worries about private credit (chart). That's helped to keep a lid on the S&P 500 VIX. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-237.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: July 20-24 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-20-24/ Last updated: 2026-07-18T21:49:50.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/IMG_1514.jpeg) The week ahead is light on economic data. The entire week falls inside the Fed's blackout period ahead of the July 28-29 FOMC meeting, so there's no Fedspeak to parse before the committee revisits the current 3.50%-3.75% funds rate range. Odds are that the committee's statement will remain hawkish but postpone any rate hiking. On the other hand, the earnings reporting season is jam-packed this week. And of course, the fireworks show has resumed in the latest Middle East conflict. One major downside of earnings is that they might only meet analysts' already high expectations. Another is that hyperscalers might scale back their guidance for capital spending (and/or returns from such spending), or announce unforeseen delays in building data centers. Wednesday stacks up as the busiest day of the earnings reporting week. GE Vernova, Texas Instruments, Alphabet, IBM, and Tesla all report that day. Intel reports on Thursday. The consensus of analysts’ estimates now implies Q2-2026 operating EPS growth for S&P 500 companies of 22.9% y/y, up from 21.6% a week earlier (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-90.png) The risk in the oil market is excessive complacency about the impact of a reescalation of the Gulf War on oil prices. US forces carried out a fifth consecutive night of strikes against Iran this week, according to US Central Command, keeping oil prices elevated and pressuring borrowing costs. The price of West Texas Intermediate crude oil settled Friday at $82.49 a barrel and Brent ended last week at $88.10, both up over 10% for the week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-242.png) Here are the key economic releases most likely to shape investors' thinking this week: **(1) Employment.** ADP's weekly National Employment Report Pulse (Tue) has shown hiring slowing for three straight readings, with private employers adding just 19,750 jobs per week on average in the four weeks through June 27 (chart). Still, this remains comfortably above early 2026 levels. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-70.png) Initial unemployment insurance claims (Thu) fell 8,000 to 208,000 for the week ended July 11, a 10-week low, with the four-week average down to 214,250 and continuing claims at 1.805 million (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-71.png) **(2) Composite Economic Indicators.** June's Index of Composite Economic Indicators probably remained flat (chart). It may be misleadingly weak given the recent surge in S&P 500 forward earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-243.png) **(3) ECB Policy.** The European Central Bank meets Thursday and is widely expected to hold its deposit rate at 2.25% following June's hike, the first since 2023 (chart). The more interesting question is guidance. Financial markets currently price roughly 70%-80% odds of a September hike, given the oil-driven inflation risk from the Iran conflict, so Lagarde's press conference tone matters more than the decision itself. It's a heavy week for global data more broadly, with Canada's CPI (Mon), UK jobs and CPI (Tue/Wed), and Japan's CPI and flash PMIs across the Eurozone, Japan, and the UK (Fri) all on the calendar. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-73.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US Consumers Singing, "Ain't No Stoppin' Us Now! URL: https://www.yardeniquicktakes.com/born-to-shop-2/ Last updated: 2026-07-17T02:41:32.000Z "Ain't No Stoppin' Us Now" is a 1979 [disco song ](https://www.google.com/search?q=aint+now+stopping&sca%5Fesv=dd11972937bd8ee9&sxsrf=APpeQntpDc44Rv-KSju3y8nnJ9j%5F5wnWTg%3A1784250036006&source=hp&ei=s35ZauWOO-aA5OMPu%5FfC4QU&iflsig=ABILxe8AAAAAalmMxCr0VBEy2mOctF8h5%5FpLP1p4Z2xT&ved=0ahUKEwiltNaswdiVAxVmAHkGHbu7MFwQ4dUDCBs&uact=5&oq=aint+now+stopping&gs%5Flp=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&sclient=gws-wiz#fpstate=ive&vld=cid:498844e5,vid:i2FW1WJc0lg,st:0)performed by R&B duo McFadden & Whitehead. American consumers agree. For a long time now, their doubters warned that a low savings rate, flatlining real disposable income, rising consumer debt, and mounting affordability challenges would force households to retrench. Instead, they continue to do what they do best, namely shop! A well-balanced labor market and the wealthiest retiring generation ever continue to power consumer spending. Let's review the latest upbeat developments: **(1) Retail Sales.** Retail sales (including food services) rose 0.2% m/m in June after a 1.0% gain in May (chart). The slowdown largely reflected a 5.3% drop in gasoline station sales as pump prices fell by roughly 50 cents per gallon. Excluding gasoline but including food services, sales increased a solid 0.7%, with gains across the board. Nonstore retail sales jumped 1.9%, the largest monthly increase in a year, likely boosted by Amazon's Prime Day. Encouragingly, control group sales, a key input into GDP goods spending, rose by 0.5%. For Q2 as a whole, control-group sales advanced at a remarkable 9.2% annualized rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-38.jpg) _This post is for paying subscribers only._ ### Too Much Complacency? URL: https://www.yardeniquicktakes.com/too-much-complacency/ Last updated: 2026-07-16T02:37:27.000Z Our Roaring 2020s thesis holds that the demand side of real GDP remains supported by resilient consumer spending and robust business investment. On the supply side, tech-led productivity is boosting real GDP, while keeping a lid on inflation. Now that the economy has proven its mettle over the first seven years of the decade, it should continue to do so over the remaining three years of the Roaring 2020s. While our Roaring 2020s thesis has been a contrarian view for much of this decade, it is increasingly accepted. We are in good company. Both US Treasury Secretary Scott Bessent and Fed Chair Kevin Warsh are vocal proponents of the productivity-led economy story. Investors have been increasingly betting on it, as evidenced by record-high stock prices and stable bond yields. We are comfortable with the financial markets embracing the Roaring 2020s narrative. However, as optimism becomes consensus, rising complacency can leave markets vulnerable if overlooked risks become more visible. One example of such complacency may be in the crude oil market. Despite renewed attacks on shipping by Iran and the resumption of the shooting war between the US and Iran, the price of a barrel of Brent crude remains relatively subdued at around $85 currently (chart). Alternative routes for exporting oil that avoid the Strait of Hormuz have helped keep prices relatively contained. So has weak Chinese demand. However, the oil market may be underestimating the risk of a prolonged war, especially if it continues into the winter months with depleted oil inventories. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-206.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Warsh’s Tasks URL: https://www.yardeniquicktakes.com/weekly-webcast-warshs-tasks/ Last updated: 2026-07-15T13:00:00.000Z The AI boom is fueling the Fed’s hawkishness, as Ed and Elias agree it should, since it’s also fueling inflation currently. Yet Fed Chair Warsh asserted at his confirmation hearing that AI is a disinflationary force. They agree with that as well: It is disinflationary over the long term, which is the crux of our Roaring 2020s economic thesis; but paradoxically, AI is escalating inflation now as rapid demand spurs rapid infrastructure buildout. Once AI adoption is widespread, however, the productivity growth it sparks will propagate disinflationary economic growth. … Also: A look at who will lead Warsh’s five new task forces. … And: Consumers continue to do what they do best. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### A Refreshingly Cool CPI Inflation Report Must Please Warsh URL: https://www.yardeniquicktakes.com/a-refreshingly-cool-cpi-inflation-report-must-please-warsh/ Last updated: 2026-07-15T03:04:48.000Z Will the FOMC raise the federal funds rate (FFR) at its July 28-29 meeting? Foggetaboutit! Today's CPI inflation report was surprisingly subdued across the board. Inflation remains above the Fed's 2.0% target, so the FOMC is likely to maintain its tightening stance, which was adopted in June. However, after the latest inflation report, there is no rush for the FOMC to act, contrary to our earlier expectations. Our Roaring 2020s scenario may be working its magic as productivity growth has reduced unit labor cost (ULC) inflation to 0.5% y/y during Q1-2026 (chart). During the previous inflation surge, ULC inflation soared due to a significant wage-price spiral, which isn't happening this time. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-189.png) Let's review today's important Fed-related developments:[ ](https://en.wiktionary.org/wiki/foggetaboutit?ref=yardeniquicktakes.com) **(1) Warsh's Spin.** The topic of inflation dominated Kevin Warsh’s first congressional testimony as Fed chair today. He stressed that the Fed has “no tolerance for persistently elevated inflation” and remains committed to returning inflation to 2%, arguing that inflation is ultimately the responsibility of monetary policymakers. Warsh cautioned against viewing June’s lower-than-expected CPI inflation report today as “mission accomplished,” emphasizing that the Fed’s credibility depends on restoring price stability. At the same time, he was enthusiastic about the AI boom, which he saw as a reason to be optimistic about the outlook for the economy and inflation. He said that the spending on data centers, software, and infrastructure should boost productivity, raise the economy’s non-inflationary growth rate, and help ease inflation pressures over time. His core message was that the Fed must stay focused on inflation while recognizing AI’s potential to support stronger, less inflationary growth. In other words, the new Fed chair endorsed our Roaring 2020s narrative! _This post is for paying subscribers only._ ### Captain America: Guardian Of The Strait! URL: https://www.yardeniquicktakes.com/captain-america-guardian-of-the-strait/ Last updated: 2026-07-14T02:49:11.000Z MOU is DOA. The memorandum of (mis)understanding between the US and Iran is dead on arrival. Act II of the latest Gulf War is underway after a brief interlude. President Donald Trump declared today that the United States will be known as "THE GUARDIAN OF THE HORMUZ STRAIT." He announced that the US is reinstating its naval blockade on Iran and plans to enforce a 20% fee on all cargo passing through the strategic waterway to reimburse the US military for security and safety costs. As a result, the price of oil is rebounding, and so are concerns that inflation will persist as long as the war continues (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-165.png) This pushed the 2-year Treasury note yield up to 4.26% and the 10-year Treasury bond yield to 4.62% (charts). Our out-of-consensus view that the FOMC might raise the federal funds rate at the July meeting received some support from these geopolitical developments and from comments by Fed Governor Christopher Waller today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-166.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-168.png) S&P 500 momentum stocks, particularly semiconductors, are pulling back because they are overextended and vulnerable to developments that might slow economic growth, such as higher oil prices and higher interest rates (chart). The SOXX ETF is down 15.5% since it peaked on June 22\. Some of the money from that ETF went into software and Mag-7 ETFs, which had been lagging. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-32.jpg) Let's have a closer look at recent developments that might keep bond and stock investors on edge over the rest of the summer: _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: War & Peace & War URL: https://www.yardeniquicktakes.com/global-market-call-war-peace-war/ Last updated: 2026-07-13T02:22:56.000Z In our March 4, 2026 [QuickTakes](https://www.yardeni.com/research/quicktakes/2026/03/03/on-the-fog-of-war-having-second-thoughts?ref=yardeniquicktakes.com), we wrote that the war between the US and Iran might last longer than widely expected. We suggested that any peace deal with Iran's government would effectively be vetoed by the Islamic Revolutionary Guard Corps simply by their threatening to attack ships sailing through the Strait of Hormuz. "These terrorists are likely to be hard to eradicate with just air power," we wrote. The IRGC remains in control of the war. They fired at ships in the Strait in recent days, violating the interim US-Iran agreement signed last month that aimed to reopen the Strait and end the ​war after a further 60 days of negotiations. So the war has re-escalated. Here’s what’s been going on in the global financial markets as a new week of war begins: **(1) Commodities.** The price of a barrel of Brent crude oil rose 2.75% to $78.75 this evening. President Donald Trump said today ​that the Strait is open to commercial traffic, although Iran ​declared earlier that it had closed the Strait. The sharp drop in oil prices during June confirms that the war might have interrupted, but only briefly, a bear market in crude oil that started after Russia invaded Ukraine in 2022 (chart). That would explain why the disruption of oil supplies transiting the Strait hasn't had a much bigger impact on the oil price. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-124.png) The FIBER industrial materials price index, which includes West Texas Intermediate crude oil, remains elevated, suggesting that the global economy is handling the latest oil crisis remarkably well (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-150.png) **(2) Go Global vs Stay Home.** It was a good week for Stay Home. The Stay Home/Go Global ratio rose last week but remains below its multi-year uptrend (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-125.png) Go Global leadership rotated again last week. The exchange-traded funds of China and Singapore led all the country ETF markets, up 4.9% each, while Germany and France lagged, down 1.9% each (chart). South Korea bounced 1.9% last week after recent profit-taking, a sign that the sharp sell-off in Korea over prior weeks may be stabilizing. Vietnam brought up the rear, down 2.8%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/IMG_1208.jpeg) **(3) Revenues & Earnings.** All Country World (ACW) MSCI’s forward revenues per share rose to a record high last week, confirming that the global economy is performing remarkably well (chart). _This post is for paying subscribers only._ ### US MARKET CALL: Great Expectations URL: https://www.yardeniquicktakes.com/us-market-call-great-expectations/ Last updated: 2026-07-12T15:45:44.000Z The S&P 500 has been meandering around 7,500 since mid-May. Earnings should continue to drive the stock market higher. However, investors may be fretting that expectations for the upcoming earnings reporting season are so high that if they aren't *exceeded*, the market might swoon again in July as it did in June. If so, dip buyers are likely to limit the downside. We still expect the S&P 500 to hit 8,250 by year-end. Consider the following: **(1) Earnings.** Fabulous earnings momentum (FEMO) moderated a bit heading into the Q2-2026 earnings season. S&P 500 companies’ aggregate forward earnings per share rose to yet another record high last week as the consensus 2027 EPS estimate edged higher, while the 2026 estimate dipped (chart). Forward earnings will converge with the 2027 estimate by the end of this year. That estimate is likely to continue to rise. If it reaches $412.50 by the end of this year, a 20.0 forward P/E would imply an S&P 500 level of 8,250\. It could also get there with $400 earnings and a 20.6 multiple. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-24.jpg) Analysts trimmed their aggregate Q2 earnings expectations slightly last week, but the estimate remains very strong, representing 21.6% y/y growth on an apples-to-oranges basis (chart). Q3 and Q4 are currently expected to be just as strong. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-25.jpg) On a pro forma basis, which compares current S&P 500 index members to themselves a year earlier (apples-to-apples), expected Q2 earnings growth is even higher at 23.7% (chart). The Energy and Information Technology sectors are leading the way higher, while Health Care continues to sputter. It's hard to imagine any upside surprises from here. That could be an issue for the stock market over the rest of this month and early August. But we would expect dip buyers to step in if Q2 earnings merely match rather than exceed expectations. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-120.png) **(2) Breadth.** Breadth remains healthy, as revenue growth is broadening into earnings gains beyond the S&P 500\. S&P 400 and S&P 600 forward earnings are climbing to new record highs along with the S&P 500 forward earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-112.png) The S&P 500 companies' collective forward profit margin rose to a record 16.1% last week (chart). The forward profit margins of the S&P 400 and S&P 600 are lower, but also closing in on their previous record highs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-114.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: July 13-17 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-13-17/ Last updated: 2026-07-12T01:38:40.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/Screenshot-2026-07-11-200123.png) The S&P 500 closed Friday at 7,575.39, up 1.2% on the week, while the Nasdaq rose 1.7% last week. The dominant story was a sharp re-escalation of the war between the US and Iran. Trump declared the ceasefire "over" on Wednesday after Iranian strikes on commercial vessels in the Strait of Hormuz, and the US carried out fresh airstrikes Wednesday night and again on Thursday, with Iran retaliating against US-allied Gulf states. The price of Brent crude oil spiked as high as $78.19 per barrel before easing back toward $76.01 by Friday (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-146.png) Semiconductor stocks whipsawed all week. Samsung's record 19-fold y/y profit jump last quarter, reported on Tuesday, still missed elevated Wall Street expectations. Micron's $250 billion US investment pledge sparked a sharp Thursday rebound. SK Hynix made a $26.5 billion Nasdaq debut on Friday**,** the largest-ever US listing by a foreign company; its stock rose 13% that day. The calendar is unusually crowded this week. Q2 bank earnings kick off Tuesday with JPMorgan, Bank of America, Citigroup, and Wells Fargo. Fedspeak is constant: Waller (Mon), Goolsbee (Tue), Williams and Musalem (Wed), Logan and Jefferson (Thu) all appear, while new Fed Chair Kevin Warsh delivers his first Humphrey-Hawkins testimony on Tuesday and Wednesday. All this happens against the backdrop of June's FOMC minutes, which showed nine of 18 officials now penciling in at least one Fed rate hike this year. Internationally, Tuesday brings a full slate out of Beijing (Q2 GDP, industrial production, retail sales, and the urban unemployment rate), with the consensus looking for GDP growth to slow to around 4.4%-4.7% y/y from Q1's 5.0%, while the Bank of Canada meets Wednesday and is widely expected to hold at 2.25% for a sixth straight meeting. With that said, here are the key economic releases most likely to shape investors' thinking this week: **(1) Inflation.** June's CPI (Tue) follows a hot May print, with headline and core inflation rates at 4.2% y/y and 2.9% (chart). The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/en/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) projects June's comparable rates at 3.9% and 2.9%. The projected m/m rates are 0.0% and 0.2%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-35.png) June's PPI (Wed) follows an elevated May reading of 6.5% y/y, the fastest pace since November 2022 (chart). The rapid drop in oil prices last month should show up in lower PPI inflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-36.png) **(2) Retail Sales.** June's report (Thu) follows a strong May, when advance sales rose 0.9% m/m and 6.9% y/y (chart). The weekly Redbook same-store sales index has been running even hotter, rising to 10.1% y/y for the week of July 3, a multi-year high, confirming that consumer spending has stayed robust even as headline jobs growth has slowed recently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-147.png) **(3) Employment.** Initial unemployment insurance claims for the week of July 4 fell to 215,000, with the 4-week average trending down to 218,750, both still consistent with low layoffs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-39.png) **(4) Manufacturing.** July's regional business surveys conducted by the NY (Wed) and Philly (Thu) Feds should confirm that business activity is still expanding (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-148.png) **(5) Industrial Production.** June's industrial production (Fri) should show a modest uptick, though manufacturing aggregate weekly hours edged down during the month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-30.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### June FOMC Minutes Confirm Fed's Hawkish Pivot URL: https://www.yardeniquicktakes.com/june-fomc-minutes-confirm-feds-hawkish-pivot/ Last updated: 2026-07-12T04:00:53.000Z **I. Sentiment** The S&P 500 first rose above 7,500 on May 14\. It has continued to fluctuate around there since then. This may be a sign that investors are a bit fatigued from all the commotion about the Strait of Hormuz, AI, earnings, Warsh, the Magnificent-7, semiconductors, FOMO, and FEMO so far this year. The market might continue to fluctuate around 7,500 over the rest of the summer as more market participants head off to the beach for a rest. The bull-bear ratios we track show that sentiment is neither too bullish (which would be bearish) nor too bearish (which would be bullish) (chart). Ho-hum. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-108.png) By the way, the 10-year Treasury bond yield has been range-bound since mid-2023 between roughly 4.00% and 5.00%, as we've been projecting (chart). For now, we expect more of the same through next year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-110.png) **II. The Fed** Back in May, we anticipated that the FOMC would pivot from April's easing bias to a tightening bias at the June meeting of the Fed's policy-setting committee. Sure enough, June's Dot Plot reflected that shift, with the median participant projecting no federal funds rate (FFR) cuts this year and nine officials penciling in one or two hikes (chart). Even Fed Chair Kevin Warsh was hawkish at his press conference after the latest meeting, though he chose to be dotless. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-2-1.jpg) The June FOMC meeting minutes, released yesterday, underscore just how hawkish that meeting was, and the recent economic data confirm that the Fed has no reason to remove its tightening bias. Here's more: **(1) The Pivot.** The committee shifted from debating eventual easing to whether additional tightening might be necessary. Indeed, a few FOMC participants explicitly argued for raising rates in June, while many others indicated the appropriate FFR by year-end would be above the current 3.50%-3.75% target range. **(2) Labor market.** Most importantly, policymakers concluded that downside risks to maximum employment had moderated, allowing greater focus on inflation risks. **(3) Economic growth.** The minutes describe an economy expanding at a solid pace, with real final sales to private domestic purchasers likely to accelerate in Q2-2026 and to grow faster than GDP. Participants expected solid consumer spending and strong business investment (led by the AI buildout) to support growth through year-end. **(4) Inflation.** Headline and core PCED inflation rates rose to 4.1% and 3.4% in May, well above the Fed's 2.0% target (chart). Participants attributed persistent inflation to tariffs, AI-driven demand, and Middle East-related supply disruptions, noting that price pressures had become increasingly broad-based. After more than five years of above-target inflation, further overshoots remained "a salient risk," and risks to the inflation outlook "were still tilted to the upside." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-111.png) **(5) Policy stance.** Several participants did not view the current policy stance as restrictive, which helps explain why a few already saw a case for raising rates at the June meeting. **(6) AI assessment.** AI was mentioned 21 times in the minutes, up from eight in April, and the context was overwhelmingly hawkish. Participants noted AI continues to drive investment in data centers and high-tech equipment with no sign of slowing. Many also noted that strong AI-related demand will keep upward pressure on technology and electricity prices. In short, the minutes suggest the Fed shares our view that AI is boosting economic growth, bolstering labor market conditions, adding to inflationary pressures, and raising the neutral rate of interest. **(7) Bottom line.** Upside risks to inflation continue to outweigh downside risks to employment, and inflation risks extend well beyond oil prices. That explains why, despite a sharp decline in oil prices, FFR futures continue to signal one to two FFR hikes over the next 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-12-1.png) **III. Consumer Credit** Total consumer credit rose 2.1% y/y in May to a record $5.2 trillion (chart). Revolving credit rose 3.4% y/y and nonrevolving credit rose 1.6% y/y. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-10-1.png) The New York Fed’s Household Debt and Credit Report shows 90-plus-day credit card delinquencies at 13.1% in Q1-2026, near the 13.7% peak during Q2-2010, when the Great Financial Crisis (GFC) was still weighing on consumers (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/4493bbeca6768cbfe8b87a875afaea5872755612-1920x1080.png) That isn't as alarming as it seems, according to our colleague Jackie Doherty. The NY Fed measure includes balances banks have already charged off, inflating the the delinquency rate. The 90-day delinquency transition rate for credit cards, which captures balances newly entering serious delinquency, has been stable around 7.0% since 2023 and well below GFC levels (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/9854e5e7b45bc4e73f65211be25159f08a794509-1920x1080.jpg) Relative to disposable personal income, credit usage remains measured and broadly in a downward trend (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-11-1.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### War! What Is It Good For? URL: https://www.yardeniquicktakes.com/war-what-is-it-good-for/ Last updated: 2026-07-08T15:57:48.000Z The 1970 song "War! What Is It Good For?" was performed by the [Temptations](https://www.google.com/search?q=war+the+temptations&rlz=1C1HKFL%5FenUS1208US1208&oq=war+the+temptations&gs%5Flcrp=EgZjaHJvbWUqEAgAEAAYkQIY4wIYgAQYigUyEAgAEAAYkQIY4wIYgAQYigUyDQgBEC4YkQIYgAQYigUyBwgCEAAYgAQyCAgDEAAYFhgeMggIBBAAGBYYHjIICAUQABgWGB4yCAgGEAAYFhgeMggIBxAAGBYYHjIICAgQABgWGB4yCAgJEAAYFhge0gEJNTM5MWowajE1qAIMsAIB8QW7-y%5FRhy0mVQ&sourceid=chrome&source=chrome.rb&ie=UTF-8#fpstate=ive&vld=cid:a915f9e8,vid:b0e6Ymjajn8,st:0) on an album and by [Edwin Starr](https://www.google.com/search?q=edward+Starr+song+on+war&rlz=1C1HKFL%5FenUS1208US1208&oq=edward+Starr+song+on+war&gs%5Flcrp=EgZjaHJvbWUyBggAEEUYOTIICAEQABgWGB4yCAgCEAAYFhgeMgcIAxAAGO8FMgoIBBAAGIAEGKIEMgoIBRAAGIAEGKIEMgcIBhAAGO8F0gEKMTI4NjdqMGoxNagCCLACAfEFfoN4QE4H4hE&sourceid=chrome&source=chrome.rb&ie=UTF-8#fpstate=ive&vld=cid:d52e12d1,vid:mqVau%5FaQIZ8,st:0) as a single. The song's answer to the question is "Absolutely nothing!" The powerful lyrics include: "It ain't nothing but a heartbreaker / Friend only to the undertaker, woo!" Financial market history shows that geopolitical crises, including wars, often have been good buying opportunities for stocks (chart). That was true during Gulf War III, as the S&P 500 bottomed on March 30 and rose 18.3% through yesterday's close. The ceasefire in the war between Iran and the US ended abruptly today; will that present another buying opportunity? We think so. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-97.png) The numerous crises and wars in the Middle East since the 1970s have all been good for oil prices, at least initially. The end of the ceasefire today boosted the price of a barrel of Brent crude oil by $4.42 to $78.59 this morning. However, there was a significant bear market in oil before the current war started, which explains why the price didn't increase much more in March and April than it did and why it came tumbling down in May and June (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-107.png) The S&P 500 Energy stock price index spiked during Gulf War III in March and fell during the ceasefire, finding support at its 200-day moving average (chart). It undoubtedly will bounce off that level today after President Donald Trump declared that the tentative ceasefire with Iran is over after Iran attacked ships transiting the Strait of Hormuz yesterday. At the NATO summit in Ankara, Trump blasted Iran, saying: “I don’t want to deal with them, but they’re scum. They’re sick people, they’re led by sick people, and they’re vicious, violent people, and if they had a nuclear weapon, they’d use it.” ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-99.png) We continue to recommend overweighting the S&P 500 Energy sector as a hedge against increased geopolitical risk in the Middle East. That's easy to do since the sector accounts for just 2.9% of the market capitalization of the S&P 500 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-103.png) We view the recent weakness in semiconductor stocks as a buying opportunity. Their meltup over the past three years has been well supported by their earnings (chart). The S&P 500 Semiconductor industry's forward P/E was 17.4 yesterday. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-106.png) This morning, the 2-year US Treasury yield is up to 4.21%, reconfirming that the markets expect the Fed to raise the federal funds rate by a couple of 25-bps moves in the coming months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-101.png) The 10-year US Treasury bond yield is up to 4.57% this morning, retesting the yield's downward trend line (chart). We think it will hold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-102.png) The gold price is retesting support (again) around $4,000 (chart). We expect that support level will hold. Weighing the gold price down currently is the resumption of the war, since it’s boosting the foreign exchange value of the dollar and bond yields. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-105.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### WEEKLY WEBCAST: Making Sense Of A Strange Jobs Report URL: https://www.yardeniquicktakes.com/weekly-webcast-making-sense-of-a-strange-jobs-report/ Last updated: 2026-07-08T13:00:01.000Z The June jobs report was widely characterized as weak. Ed and Elias don’t see it that way. The disappointing headline gain reflected a misleading statistical distortion. June’s decline in Leisure & Hospitality was attributable to an early Memorial Day, which boosted May’s gain. With the support of multiple underlying strengths, the labor market remains resilient, as demand slightly exceeds supply. The Fed’s tightening bias—prioritizing its inflation mandate over its labor market one—therefore remains appropriate, with a July rate hike still possible. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Booming AI Imports Depressing US GDP, Though Not Final Sales URL: https://www.yardeniquicktakes.com/booming-ai-imports-depressing-us-gdp-though-not-final-sales/ Last updated: 2026-07-08T02:59:45.000Z The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model estimates Q2-2026 real GDP growth at just 1.4% (saar). That's because net exports (i.e., exports minus imports) dragged it down by 1.3 ppt. During the quarter, AI-related imports increased sharply, outpacing the large increase in US exports of crude oil and petroleum products. The picture is brighter below the headline number. Real final sales to private domestic purchasers, which strips out volatile trade and inventory swings, is tracking at 2.9%, up from 1.7% in Q1-2026 (chart). Consumer spending growth is projected at 2.0%, a sharp rebound from 0.5% in Q1, and business fixed investment is running at 8.2%, up from 6.5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-89.png) A closer look at the recent economic data reveals what is driving the Q2 GDP estimate and hiding the underlying strength of the economy: _This post is for paying subscribers only._ ### Rotation Or Correction Ahead In Response To Earnings Season? URL: https://www.yardeniquicktakes.com/rotation-or-correction-ahead-in-response-to-earnings-season/ Last updated: 2026-07-07T03:14:34.000Z The Q2-2026 earnings reporting season begins next week. The major banks will report at the end of next week. We expect they will beat expectations by reducing their bad-loan provisions. In addition, loan demand has been growing faster in recent weeks, and the IPO calendar has been busy. The big risk up ahead is that technology companies, especially the hyperscalers, won't beat analysts' overly optimistic earnings growth estimates for the quarter. That could cause a correction among technology stocks. The overall stock market might dodge a correction if investors rotate into sectors that have lagged and report better-than-expected earnings. We are in the rotation camp for the stock market's outlook up ahead. **(1) Are analysts too bullish?** The problem is that industry analysts may be projecting a hard-to-beat earnings outlook in 2026 and 2027\. They are projecting that S&P 500 earnings per share will increase 18.9% this year to $342.17 and 17.8% next year to $402.96 (chart). Both numbers exceed our forecasts of $330 and $375\. We've been bullish on earnings, but perhaps not bullish enough. Or else the analysts are entering the realm of irrational exuberance. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-21.jpg) The stock market discounts analysts' earnings estimates over the next 52 weeks, which can be calculated using forward earnings, i.e., the time-weighted average of their weekly estimates for the current year and the coming year (chart). This series rose to a record $373.73 last week, already matching our projection for the end of this year. To forecast the stock market outlook, we assume that analysts' forward earnings estimates at the end of each remaining year of the Roaring 2020s will match our estimate for the following year. So for example, our estimate for 2030 is $500, which we assume will be the analysts' forward earnings at the end of 2029. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-22.jpg) We assume the forward P/E of the S&P 500 remains in the range of 18.0 to 22.0 through the end of the decade (chart). That's a lofty range, but it's consistent with our view that the economy won't experience a recession over the rest of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-68.png) Multiplying our year-end forward earnings estimates by our forward P/E range produces a year-end 2026 range of 6,750-8,250 for the S&P 500 (chart). Our point estimate is the top of that range. Similarly, we reach 9,000-11,000 for the S&P 500 by the end of the decade, with a mid-point estimate of 10,000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-70.png) **(2) Are expectations too high for the earnings reporting season?** For the here and now, industry analysts are estimating a 22.5% y/y increase in S&P 500 earnings during Q2-2026 (chart). The risk is that Q1's exceptionally strong results led them to raise their estimates for the remaining three quarters by too much. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-23.jpg) The latest Q2-2026 proforma y/y growth rates for the 11 sectors of the S&P 500 show huge gains for Energy (116.0%), Information Technology (65.5%), and Materials (32.7%). In our opinion, the risk is that some of the best-performing tech stocks get hit if they don't beat already heady expectations. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: July 6-10 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-6-10/ Last updated: 2026-07-05T17:09:31.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/Screenshot-2026-07-04-111446.png) The S&P 500 closed Thursday at 7,483.23, up 1.8% on the week, while the Nasdaq rose 2.1%. Memory chip stocks pulled back sharply last week, cooling off the parabolic run that followed Micron's blowout June 24 earnings report (chart). Shares surged 17% the next day to a new all-time high of $1,255.00, then closed Thursday at $975.56, down 22.3% from the intra-day high. That is the same pattern as March, when a blowout earnings report also sent shares to a high before a sharp pullback. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-23.png) June's jobs report on Friday adds to the uncertainty. Payrolls rose just 57,000, well below the 115,000 consensus, with April and May revised down a combined 74,000\. The unemployment rate still fell to 4.2%, but only because labor market participation dropped to 61.5%, the lowest since March 2021. Nothing on this week’s calendar rivals either of those stories for market impact. Earnings season doesn’t start in earnest until JPMorgan and Citigroup report on July 14\. Here are the key economic releases most likely to shape investors' thinking this week: **(1) PMI.** June's ISM Services PMI (Mon) should remain in expansion territory, according to the comparable S&P Global index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-62.png) **(2) Employment.** Initial unemployment insurance claims for the week of June 26 held at 215,000, a 4-week average of 222,000, both within the range of the past two years (chart). Thursday’s report is the most current read on the labor market since the payrolls miss. It should confirm that layoffs remain low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-63.png) **(3) FOMC Minutes.** June‘s meeting minutes (Wed) is the first under new Fed Chair Kevin Warsh. He skipped the dot plot in June and has avoided forward guidance since taking over. Fed funds futures now imply 1.5 rate hikes over the next 12 months, a sharp reversal from the deep rate cut pricing that dominated the past three years (chart). The minutes should indicate how much of that repricing the committee actually endorses. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-27.png) **(4) Inflation Expectations.** June's NY Fed survey of inflation expectations (Tue) is due this week. Its one-year-ahead measure was at 3.5% in May, with the three-year-ahead measure lower still at 3.1% (chart). The gap between the two suggests that consumers see current price pressures as more temporary than structural ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/image-32.png) **(5) Global Inflation.** June'sEurozone PPI (Mon) is due to open the week’s international data. Japan’s PPI (Thu) accelerated to 6.3% y/y in May, the fastest pace since 2023 (chart). China’s PPI (Wed) rose to 3.9% in May from deeply negative readings a year ago, while the CPI stayed muted at 1.2%. Both probably moderated in June along with falling oil prices. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-64.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### GLOBAL MARKET CALL: AI Trade Depresses EM Trade URL: https://www.yardeniquicktakes.com/global-market-call-ai-trade-depresses-em-trade/ Last updated: 2026-07-05T16:03:06.000Z _This post is for paying subscribers only._ ### US MARKET CALL: A Bubble In Bubbles? URL: https://www.yardeniquicktakes.com/us-market-call-a-bubble-in-bubbles/ Last updated: 2026-07-05T04:00:50.000Z The S&P 500 rose 9.3% ytd through July 2\. Can it rise another 10.2% over the rest of this year to achieve our S&P 500 target of 8250? We still think so. Consider the following: **(1) FOMO vs FEMO.** Is it time to underweight the S&P 500 Information Technology sector? It is if you believe the AI trade is a bubble about to burst. We think it has been losing some air already, so it’s less likely to burst. We are sticking with our recommendation to market-weight the sector. Investors are suffering from AI fatigue. They aren't convinced that the huge investments in AI infrastructure will earn a good rate of return. They are worried about the possibility of excess capacity and increasing competition among AI providers, including the ones from China. They are unsettled by the decline in token prices, though the impact of that on providers’ revenues might be offset by greater usage. The rapid pace of technological innovation also increases the risk that today's expensive state-of-the-art semiconductors (including memory chips) will be made obsolete by the next wave of innovation. Nevertheless, we don't buy the bubble stories that compare the current bull market in stocks to the tech bubble of the late 1990s, which was followed by the Great Tech Wreck (GTW) of the early 2000s. The current forward P/E of the S&P 500 Information Technology sector is 22.2, not much above the S&P 500's 20.4 (chart). Just before the GTW, the former peaked at 55.0 and the latter did so at 25.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-56.png) The late 1990s meltup was led by the forward P/E of the S&P 500 Information Technology sector (chart). It was driven by FOMO (fear of missing out). The current bull market is driven by FEMO (fabulous earnings momentum). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-57.png) In the past, irrational exuberance was a FOMO-driven phenomenon that inflated valuation multiples. Can irrational exuberance also affect FEMO? Surprisingly strong earnings during the Q1-2026 earnings reporting season led analysts to raise their long-term earnings growth (LTEG) expectations for the S&P 500 companies collectively to a record 25.5% per year over the next 3-5 years last week (chart). That was driven by a surge in the Tech sector’s LTEG to an off-the-charts 43.5% reading last week! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-32.png) The bubble this time might be in analysts' expectations for the forward profit margin of the S&P 500 Semiconductors industry, which we calculate from their revenue and earnings estimates (chart). The industry’s aggregate forward profit margin rose to a record 50.3% last week (chart). In the past, the industry was viewed as highly cyclical, with recurring booms followed by busts. The industry's analysts might be irrational in believing that it is now a secular grower capable of maintaining its extraordinary profit margin and earnings growth rate. Investors certainly have their doubts, given that they are paying a forward P/E of only 18.4 currently. That reduces the risk of a FOMO-led bubble. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-61.png) **(2) More FEMO.** Meanwhile, S&P 500 forward earnings rose to yet another record high at the end of June (chart). Industry analysts now collectively project that S&P 500 EPS will be up 26.1% this year and 17.8% next year! They are currently expecting $402.96 next year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-18.jpg) If the S&P 500’s forward EPS converges to $400 by the end of this year, a 20.0 forward P/E would put the S&P 500 at 8000\. We are aiming for 8250, which is the highest on the Street; but it may be too low if the 2027 consensus earnings estimate continues to rise (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-20.jpg) There's a lot of FEMO in industry analysts' estimates of S&P 500 earnings growth for the remaining three quarters of 2026 (chart). They all exceed 20.0% y/y and are rising! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-19.jpg) The percent of S&P 500 companies with positive three-month changes in forward earnings is at a new cyclical high of 86.2% (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-58.png) **(3) Rotation.** We anticipated June's swoon in the S&P 500, but predicted that it would be a rotation rather than a correction. The rotation actually started at the beginning of the year but was interrupted by Gulf War III. It now seems to be resuming, as the S&P 500 equal-weight index once again is outperforming the one weighted by market capitalization (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-36.png) The rotation is also broadening the stock market rally, as evidenced by the new highs in the Russell 2000 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-60.png) Recent record highs in the DJIA have been confirmed by record highs in the DJTA (chart). That's a bullish signal according to Dow Theory. Investors experiencing AI fatigue are finding comfort in companies with more conventional business models. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-40.png) The Magnificent-7 stocks collectively outperformed in recent days but continue to lag the Impressive-493 so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-59.png) **(4) Sentiment.** The two Bull-Bear Ratios we monitor are not too bullish currently (chart). From a contrarian perspective, this suggests there is more upside in the current rally. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-38.png) **(5) Interest rates.** The FOMC turned hawkish last month, which contributed to June's stock market swoon. Nevertheless, Treasury yields should remain relatively stable during the second half of this year (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-39.png) **(6) Some winners.** Finally, let's have a look at some of the areas of the stock market that have done well recently and should continue to do so over the rest of this year. During the first half of this year, there was a lot of rotation in the Information Technology sector, away from software stocks and the Mag-7 toward semiconductor stocks (chart). The second half of the year might show more of the same, though semiconductors may be starting to experience a short pullback. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-13.jpg) Cybersecurity is breaking out of the recent morass experienced by software stocks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-42.png) In the Financials sector, banks are performing very well (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-43.png) In the Health Care sector, both Biotechnology and Pharmaceuticals are breaking out (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-55.png) Industrials continue to power ahead thanks to the huge demand for AI infrastructure and ongoing onshoring of manufacturing (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-46.png) **Happy July 4th!** 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### God Bless America! URL: https://www.yardeniquicktakes.com/god-bless-america/ Last updated: 2026-07-03T03:29:14.000Z The United States of America has thrived for 250 years. There have been setbacks along the way. But they were overcome. The Declaration of Independence on July 4, 1776 set the stage for Americans to prosper by declaring: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed." The Constitution of the United States, signed September 17, 1787, was based on these principles. It established the rule of law for Americans and provided a system of checks and balances designed to reduce the chances that any faction could gain enough power to rule over the governed without their consent. Its preamble states: "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America." The rule of law thus established protected life, liberty, and property with a justice system overseen by the Supreme Court, which had the final say on the constitutionality of any law passed by Congress or any executive order issued by the president. The system was designed to protect the rights of minority factions from the tyranny of the majority. Most Americans accept that the right to pursue happiness does not come with a government guarantee to provide happiness. The American constitutional system has been and will continue to be challenged. The factions will continue to complain that it is prone to gridlock. That's true because it was designed that way. Hopefully, our constitutional system of checks and balances will survive the next 250 years of our nation's future. Here are some of the macroeconomic achievements of the United States: **(1) GDP & Consumers.** Real GDP is on track to hit another record high this year (chart). Recessions have been less frequent in recent years than in the past. The current expansion has lasted since 2009, with the exception of the two-month lockdown in early 2020\. During the current decade, the economy passed several stress tests, including the pandemic and the lockdowns, supply-chain disruptions, soaring inflation, the tightening of monetary policy, higher tariffs, and Gulf War III. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-10.png) Productivity growth has been a key driver of real GDP growth in the United States. Productivity is the main driver of the standard of living, measured by inflation-adjusted hourly compensation (chart). Both are at record highs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-3.jpg) The number of hours worked by Americans is at an all-time high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-16.png) Inflation-adjusted household consumption, another measure of the standard of living, is also at a record high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-5.jpg) **(2) Housing.** The "American Dream" of owning a home is attainable, contrary to popular belief. During Q1-2026, 65.3% of all households owned their homes (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-11.png) Homeownership rates for young adults fell in the years following the 2008 Great Financial Crisis (GFC) but have been relatively stable since roughly 2015 (chart). Of course, in the years just before the GFC, a speculative bubble in the housing market had boosted homeownership. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-4.jpg) **(3) Household Net Worth.** Household net worth rose to a record $174.0 trillion during Q1-2026 (chart). The top 50 percentile group held almost all of it. The apparent wealth inequality is mostly attributable to older people having higher net worth than younger ones! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-26.png) Baby Boomers and the Silent Generation have a combined net worth of $109.4 trillion (chart). They are the largest and wealthiest cohort of seniors in history. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-15.png) **(4) Productivity and Capital Spending.** America is probably on the verge of a major productivity growth boom. A labor shortage combined with a skills mismatch is forcing businesses to invest in productivity-enhancing technologies. Over the past 12 quarters through Q1-2026, productivity has risen at a 2.7% annual rate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-12.png) The demand for productivity-enhancing technologies, along with onshoring in manufacturing, is boosting capital spending dramatically (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-30.png) High-tech currently accounts for a record 54.9% of current-dollar capital spending in the US (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-14.png) **(5) Profits.** Corporate profits and cash flow rose to record highs during Q1-2026 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-18.png) Corporate profit margins are matching recent record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-8.jpg) Proprietors' income and rental income are also at record highs (chart). Combined, they totaled a record $3.3 trillion during May 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-19.png) **(6) Entrepreneurs.** America is a great country for sole proprietors and entrepreneurs to pursue their happiness. What makes them happy is growing their businesses by providing their customers with the best goods and services available on the market. They prosper when their customers are happy with what they are offering. There were a record 31.1 million sole proprietorships in America during 2023 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-9.jpg) Business applications rose to a record 6.0 million during the 12 months through May 2026 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-31.png) **(7) Capital Markets.** The US has the largest capital markets in the world. The US equity market totaled $106.9 trillion during Q1-2026 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-23.png) New issuance of bonds and stocks totaled a record $3.0 trillion over the 12 months through May (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-21.png) At the end of June, the US MSCI accounted for 63.5% of the market capitalization of the All Country World MSCI (chart). Its earnings share was 54.1%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-27.png) **(8) Energy.** The US turned into a net exporter of crude oil & petroleum products at the beginning of the current decade (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-25.png) The US turned into a net exporter of natural gas at the end of the previous decade (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-28.png) **(9) Foreign Investors.** Contrary to popular opinion, foreign investors remain major net buyers of US fixed-income and equity securities (chart). Over the past 12 months through April, they purchased a record $763.0 billion in US equities. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-29.png) Foreign investors hold a record $9.4 trillion in US Treasuries (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-6.jpg) The US dollar accounts for more than half (57.1%) of foreign currency exchange reserves (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-7.jpg) Happy 250th birthday, America! Godspeed! 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Warsh's Sintra Serenade To The Bond Vigilantes URL: https://www.yardeniquicktakes.com/warshs-sintra-serenade-to-the-bond-vigilantes/ Last updated: 2026-07-02T02:53:51.000Z The temperature was 81 degrees in Sintra, Portugal, today. Tomorrow it will be 101 degrees. Fed Chair Kevin Warsh spoke on a panel in Sintra today. He was cool as a cucumber. This was his second public appearance since his first press conference as the new Fed chair on June 17\. Back then, he was surprisingly hawkish, stressing that he and his colleagues on the FOMC are committed to restoring price stability. At Sintra, Warsh reiterated that pledge and explicitly stated that price stability means lowering inflation to the Fed's 2.0% target. The former has exceeded the latter for more than five years. He refused to provide any forward guidance in response to several questions by moderator Sara Eisen. Instead, he repeated that as Fed chair, he won't provide any forward guidance. Instead, he wants the financial markets to provide guidance to the Fed about the proper course for monetary policy. In effect, Warsh will be guided by the Bond Vigilantes. He said today that he was pleased to see that since his presser, measures of expected inflation in the fixed-income markets have moderated. That's correct. The 10-year bond yield has declined in recent weeks. The yield spread between the 10-year Treasury nominal and TIPS bonds has narrowed to 2.23%. And the 10-year forward breakeven inflation rate has dropped to 2.30% (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/07/gateway-1.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Update On The ‘G-Shaped’ Versus ‘K-Shaped’ Economy Debate URL: https://www.yardeniquicktakes.com/weekly-webcast-update-on-the-g-shaped-versus-k-shaped-economy-debate/ Last updated: 2026-07-01T13:00:00.000Z Consumer spending has been remarkably resilient, growing for the past two years faster than consumers’ disposable incomes have and depressing their saving rate. Current trends point to a negative saving rate by 2030\. But that’s nothing to worry about, explain Ed and Elias. What we have isn’t a “K-shaped” economy, with the affluent spending briskly and everyone else struggling to make ends meet, as many assume. It’s a “G-shaped” economy—generational factors explain the data anomaly. The massive ranks of retired Baby Boomers, with no paychecks anymore but plenty of assets and leisure time, are keeping spending aloft. … Also: Ed reviews “The Sheep Detectives” (+). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### A Well-Balanced US Labor Market URL: https://www.yardeniquicktakes.com/a-well-balanced-us-labor-market/ Last updated: 2026-07-01T02:25:38.000Z The stock prices of ADP, Paychex, and ManpowerGroup sold off sharply last year as hiring cooled. Employers froze their headcounts as they assessed the impacts of Trump's tariffs and of AI technologies on their businesses (chart). On May 8, we wrote that the labor market was showing early signs of improvement and that employment-related stocks may have bottomed. So far, so good. Employers now seem to have a clearer, more optimistic sense of the economic outlook. As a result, payroll employment growth has improved in recent months and should continue to do so. Employment-related stocks still have room to run in this scenario. We expect the June employment report (released on Thursday) to show a gain of 188,000, matching the three-month average through May, with the unemployment rate remaining at 4.3%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-328.png) _This post is for paying subscribers only._ ### Warsh Taking Hawkish Path to Lower Interest Rates URL: https://www.yardeniquicktakes.com/warsh-taking-hawkish-path-to-lower-interest-rates/ Last updated: 2026-06-30T02:38:02.000Z Fed Chair Kevin Warsh has often said that the members of the Federal Open *Mouth* Committee should talk publicly less often. He wants the Fed to follow the financial markets rather than the other way around. Yet, two weeks after his first press conference as Fed chair on Wednesday, June 17, he is scheduled to appear on a policy panel on Wednesday, July 1, at the annual ECB Forum on Central Banking. Investors will be following closely what he has to say. They did the same during his presser. They heard him mention "price stability" eight times. In effect, he reiterated the final sentence of the June 17 FOMC statement: "The Committee will deliver price stability." In his prepared comments for his presser, he said, "We recognize that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2 percent that’s been going on for more than five years." We anticipated that the FOMC would pivot from its easing bias to a tightening bias at the June meeting. However, we were surprised by Warsh's hawkishness. After all, President Donald Trump picked him to replace Fed Chair Jerome Powell because he publicly backed the president's call for the Fed to lower the federal funds rate (FFR). Yet the White House didn't call out Warsh for his hawkish stance during his presser. When asked for his reaction, Trump said Warsh is "fantastic" and stated, "I want him to do whatever he wants." Speaking at the Economic Club of New York on June 23, Treasury Secretary Scott Bessent responded to a question about Warsh saying, "Warsh will optimize the path for inflation and economic growth. He will be independent and do what he wants." We believe that there is a new Treasury-Federal Reserve Accord aimed at lowering the 10-year Treasury bond yield. Bessent and Warsh are working as a team. They seem to have convinced the president that the best way to lower borrowing costs is to talk tough about bringing down inflation and to hike the FFR if necessary. That should lower bond yields, stimulating the economy. Consider the following: **(1) Bond Vigilantes.** Easing monetary policy does not always result in lower borrowing costs. When the Fed started its latest rate-cutting cycle during September 2024, we warned that easing into a resilient economy with entrenched inflationary pressures would incite the Bond Vigilantes. It did. Since then, the policy rate has fallen 175bp, yet the 10-year Treasury yield has risen from 3.70% to 4.38% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-315.png) Mortgage rates also rose, following the lead of the Bond Vigilantes rather than the Fed (chart). _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: War & Peace URL: https://www.yardeniquicktakes.com/global-market-call-war-peace/ Last updated: 2026-06-29T03:48:46.000Z During the Napoleonic Wars, British financier Nathan Mayer Rothschild allegedly said: "Buy on the sound of cannons, sell on the sound of trumpets." This has become a legendary contrarian investing maxim. It suggests you should buy stocks when war or panic causes markets to plummet ("cannons"), and sell to lock in profits when peace returns and market euphoria sets in ("trumpets"). The maxim seems to be working again. The latest Gulf War started on February 28\. It ended on April 8, when the US and Iran signed a Memorandum of Understanding. The S&P 500 tumbled during March, but bottomed on March 30\. That selloff provided lots of great buying opportunities. The index rose to a record high on June 2\. It has been a sea of red across global stock markets since then through Friday's close, despite the opening of the Strait of Hormuz and the plunge in oil prices in June. Consider the following: **(1) June Swoon.** The country ETF panel was a wipeout in June, with only Turkey, the Philippines, India, Spain, and Singapore with gains (chart). China continued to lag, with a 9.9% drop. South Korea gave back 4.2% after May’s surge. EMXC was down 1.0%, while EEM fell 2.1%. Both beat the US SPY, which fell 3.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-289.png) **(2) Stay Home vs Go Global.** The ratios of the US MSCI to the Developed World ex-US MSCI edged down last week (chart). They were on steep uptrends from 2010 through 2024\. But they have been stalled since early 2025\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-55.jpg) The ratios for the US MSCI to the Emerging Markets MSCI were also on long-term uptrends from 2011 through 2024 (chart). But they have both been falling since then. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-56.jpg) **(3) Revenues & earnings.** The global economy is growing faster this year, according to the ACW MSCI. Its forward revenues rose to a record high last week (chart). The inflationary consequences of the war might have provided a boost to global revenues, which nonetheless appear resilient. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: June 29 - July 3 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-29-july-3/ Last updated: 2026-06-28T17:35:33.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/economic_calendar_July_2026_week1--1-.png) The S&P 500 closed Friday at 7,354.02, down 2.0% on the week, while the Nasdaq fell 4.5%. Apple and Microsoft raised their consumer product prices on Thursday, citing memory and storage chip costs that have more than doubled since last fall and are expected to double again by late 2027\. The driver is demand for DRAM and NAND from AI data centers. Memory chip stocks have gone parabolic, extending their rally after Micron’s blowout earnings report on Wednesday (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-190.png) The price of a barrel of WTI crude oil fell to $69.23 on Friday, down 9% on the week and marking the lowest weekly close since February 27\. Strait of Hormuz traffic continues to pick up, with Persian Gulf exports back to roughly 75% of prewar levels. President Trump accused Iran of violating the ceasefire after drones struck a vessel in the strait on Friday. US Central Command (CENTCOM) executed retaliatory airstrikes. US aircraft targeted and destroyed Iranian coastal radar stations as well as missile and drone storage facilities. In retaliation for the US airstrikes, the IRGC launched a wave of attack drones targeting Bahrain, home to the US Navy's 5th Fleet. Just another day in paradise. US financial markets are closed on Friday for Independence Day, and June's employment report has been pulled forward to Thursday. The ECB Sintra Forum runs Monday-Wednesday, with Kevin Warsh making his first international appearance as Fed chair on a policy panel Wednesday. Here are the key economic releases most likely to shape investors' thinking this week: **(1) Employment.** June’s employment report (Thu) is the headliner. Labor-market data have shown strength in recent months: May payrolls rose 172,000, lifting the three-month average to 188,300 after revisions added 93,000 to March and April combined (chart). The question is whether that strength is sustainable, with average hourly earnings the key indicator of whether wage inflation is stabilizing or still easing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-192.png) So far this year, Challenger layoff announcements (Wed) have been volatile but relatively subdued. June's number probably remained low, with AI likely cited as the main reason for job cuts, particularly in the technology industry (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-193.png) May's ADP private payrolls rose 122,000, the strongest monthly total since January 2025, and broad-based, with eight of 10 sectors yielding monthly gains. Education & Health Services led with 57,000\. June's ADP report (Wed) should show more of the same, given ADP's recent strong weekly readings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-308.png) May’s JOLTS data will also be reported on Tuesday. April’s job openings rate suggests this series is bottoming (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-195.png) **(2) Manufacturing Surveys.** ISM's M-PMI (Wed) was 54.0 in May, its fourth straight expansionary month (chart). Recent FEMO (Fabulous Earnings Momentum) points to further upside for June's M-PMI. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-174.png) The Dallas Fed's June regional business survey (Mon), along with the four other regional surveys already released, should confirm that June's M-PMI remained above 50.0 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-309.png) **(3) Consumer Confidence.** June's Consumer Confidence Index survey should confirm that the labor market remains stable (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-310.png) **(4) Eurozone Inflation.** The Eurozone headline and core CPI inflation rates (Wed) for June should show the former easing, alongside energy prices (chart). The core inflation rate should determine whether the ECB continues to raise interest rates. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-311.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: AI Fatigue Weighs On The 'Lag-7' URL: https://www.yardeniquicktakes.com/us-market-call-ai-fatigue-weighs-on-the-lag-7/ Last updated: 2026-06-28T04:00:41.000Z As we predicted, the S&P 500 had a June Swoon. We expected that it would be more of a broadening rotation than a widespread correction. That's the way it played out. The S&P 500 market-weighted stock price index peaked at a record high of 7,609.78 on June 2 (chart). It fell 3.4% through Friday's close. Over that same period, the S&P 500 equal-weighted stock price index was unchanged (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-298.png) Investors seem to be experiencing AI Fatigue. They are questioning whether the hyperscalers' massive spending on AI infrastructure will ever pay off. They see token prices falling, suggesting there might already be excess compute capacity. They see that yet another Chinese company is offering cheaper, powerful, and open-source LLMs. They worry that new technologies will rapidly make current ones obsolete in a process known as "creative destruction." Companies are experiencing "token budget hangover," where agentic AI usage is blowing up forecasted budgets. Microsoft is eyeing DeepSeek as a hyper-cheap, optional alternative to the expensive OpenAI and Anthropic models currently powering its enterprise agent tool, Copilot Cowork. To cut its own soaring internal AI token usage costs, Microsoft issued a firm June 30, 2026 cutoff deadline for its Experiences + Devices (E+D) division—the engineering teams behind Windows, Office, Teams, and Surface—to stop using Anthropic's Claude Code. As a result, the Mag-7, which includes the biggest hyperscalers, hasn't been so magnificent in June. The MAGS ETF peaked at a record high on May 26 and fell 12.9% though Friday's close (chart). It is down 6.6% ytd, while the XMAGS ETF (a.k.a. the "Impressive 493") is up 13.7%. The Mag-7s have been the Lag-7s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-304.png) While the MAGS and IGV (i.e., software ETF) swooned during June, the SOXX semiconductor ETF continued to soar to a new record high on June 22 (chart). So there has been rotation even within the Information Technology sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-61.jpg) Now let's turn to some other market-moving developments: **(1) Earnings.** FEMO (Fabulous Earnings Momentum) may be starting to lose a wee bit of its mojo. S&P 500 forward earnings edged up to another record high during the week of June 25 as both the 2026 and 2027 analysts' consensus earnings expectations edged down (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-57.jpg) The same can be said for the analysts' consensus earnings estimates for Q2-Q4 of 2026 (chart). However, they are still forecasting y/y growth rates in the low- to mid-20s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-58.jpg) The forward earnings of the S&P 500, S&P 400, and S&P 600 all rose to record highs last week (chart). This confirms that FEMO continues to broaden within the stock market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-295.png) FEMO is also confirmed by the percent of S&P 500 companies with positive 12-month percent changes in forward revenues (88.4%) and forward earnings (85.8%) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-296.png) Irrational exuberance is starting to show up in FEMO, as consensus-expected long-term earnings growth (LTEG) rose to a record 43.5% for the S&P 500 Information Technology sector last week (chart). That boosted the LTEG of the S&P 500 to a record 25.5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-305.png) Meanwhile, the combined forward earnings share of the S&P 500 Information Technology and Communication Services sectors rose to a record 44.0% last week (chart). Such FEMO has driven the sectors' combined market-cap share to 47.6%. That suggests a bubble only if the analysts who cover companies in these two sectors are irrationally exuberant about forward earnings, which have been driven by much better-than-expected earnings during the Q1-2026 earnings season. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-60.jpg) **(2) Sentiment.** Meanwhile, the Bull-Bear Ratios that we follow indicate greater bullishness relative to their historical averages (chart). They aren't high enough yet to provide a sell signal from a contrarian perspective. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-307.png) **(3) Dow Theory.** Both the DJTA and the DJIA have been very strong so far this year. Both are near their recent record highs (chart). So [Dow Theory](https://www.investopedia.com/terms/d/dowtheory.asp?ref=yardeniquicktakes.com) remains bullish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-303.png) The transportation sector of the economy is showing recent improvement in ATA Truck Tonnage through April, along with a new record high in railcar loadings of intermodal containers through the week of June 19 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-306.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Fed Still Has An Inflation Problem Despite Plunging Oil Prices URL: https://www.yardeniquicktakes.com/fed-still-has-an-inflation-problem-despite-plunging-oil-prices/ Last updated: 2026-06-26T03:12:26.000Z The FOMC’s policy stance is determined by the balance of risks to its dual mandate of price stability and full employment. In the current environment, those risks remain firmly skewed toward inflation, justifying last week's FOMC pivot from an easing bias to a tightening one. Today's plethora of May economic data shows that the economy and the labor market are in great shape, while both headline and core PCED inflation rates rose further above the Fed's 2.0% target (chart) . June's plunge in oil prices will certainly reduce the headline inflation rate, but the core rate is now up to 3.4% y/y. Before the war, it was stuck just below 3.0%. In his press conference last week, Fed Chair Kevin Warsh acknowledged that inflation has exceeded the FOMC's target for more than five years and committed the Fed to restoring price stability. Accordingly, we remain inclined to expect at least one rate hike before year-end, with July a live possibility. Falling energy prices may slow core inflation. However, the AI spending boom is driving up electricity bills and consumer electronics prices. Today, Apple announced significant price increases because of soaring memory chip prices. The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) projects that June's headline inflation fell to 3.9%, while the core inflation rate remained stuck at 3.4%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-268.png) Let's have a closer look at today's inflation report and economic indicators: _This post is for paying subscribers only._ ### Is The Dollar Debasement Trade Kaput? URL: https://www.yardeniquicktakes.com/is-the-dollar-debasement-trade-kaput/ Last updated: 2026-06-25T02:30:46.000Z The "Dollar Debasement Trade" was a big theme in global financial markets last year. The thesis was that President Donald Trump's aggressive tariff hikes would revive inflation in the US and undermine foreigners' confidence in the US's reliability, especially among America's allies. In addition, the president's attacks on Fed Chair Jerome Powell threatened the Fed's independence and heightened concerns that a compliant Fed would keep rates artificially low to finance widening federal budget deficits. In this scenario, foreign investors would respond by selling the US dollar and US securities in favor of foreign currencies and securities, gold, Bitcoin, commodities, and other non-US assets. The result would be a bad combination of rising US Treasury bond yields, falling US equity prices, and a weaker dollar. Following Trump's Liberation Day tariffs on April 2, 2025, and his attacks on the Fed, that scenario briefly materialized, with the dollar falling, equities declining, and yields rising. We were rightly skeptical about this so-called "Sell America Trade." As tariff concerns eased and recession fears abated, the debasement narrative lost momentum. Its credibility might have ended last Wednesday, when Fed Chair Kevin Warsh made price stability his top priority at his first FOMC monetary policy meeting. Traders rapidly priced in two rate hikes by early 2027, bolstering the dollar. Consider the following developments suggesting that the debasement trade is kaput. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Will the Real Kevin Warsh Please Stand Up? URL: https://www.yardeniquicktakes.com/weekly-webcast-will-the-real-kevin-warsh-please-stand-up/ Last updated: 2026-06-24T19:30:01.000Z Kevin Warsh’s first press conference as Fed chair after last week’s FOMC meeting settled a question that the markets had been debating for a year: Which Warsh would show up? In the past, Ed and Elias explain, Warsh hawkishly prioritized fighting inflation, but he presented himself as a dove when auditioning for the Fed chairmanship. Would Chair Warsh be some new hybrid? The hawk won: The FOMC swung to a tightening bias as expected, and Warsh’s rhetoric was hawkish point for point. The bottom line: Investors would be well advised to position for a chair who will advocate for raising rates if the data demand it, not for lowering them just because the President demands it. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### June's Swoons URL: https://www.yardeniquicktakes.com/junes-swoons/ Last updated: 2026-06-24T02:50:19.000Z The stock market was hit by another June swoon today. Investors were unnerved by the outcome of last Wednesday's FOMC meeting. The committee participants were more hawkish than expected, according to their Dot Plot. Fed Chair Kevin Warsh abstained from providing his dot, but he came across as very hawkish during his presser, repeatedly stressing the importance of the Fed achieving price stability. Also weighing on AI-related stocks is news that token prices are falling as competition heats up, and that a Chinese company introduced a new dirt-cheap open-source AI model. **(1) Crude oil.** Meanwhile, the June swoon for oil prices continued today. Brent crude fell below $77 a barrel this evening (chart). The decline reflects an improving supply outlook following the US-Iran MOU, with tanker traffic resuming through the Strait of Hormuz and the lifting of the US blockade of Iran's ports. The sharp reversal suggests the geopolitical risk premium in the crude oil market is rapidly unwinding and that the underlying trend is bearish, with crude prices falling from early 2022 until the latest war in the Middle East began. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-236.png) Another factor explaining why oil prices never spiked as much as the closure of the Strait of Hormuz would historically have implied, and why they have since fallen so sharply, is the secular decline in Chinese crude oil demand. After three decades of near-uninterrupted growth, crude imports fell to just 4.6 million barrels per day in May, well below their 12-month average (chart). Chinese demand was already being weighed down by rapid EV adoption, a prolonged property downturn, slower economic growth, and elevated oil inventories before the Middle East conflict. According to JPMorgan, China accounts for 74% of the recent decline in global crude imports. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-242.png) **(2) Stock prices.** Lower oil prices should boost US economic growth. That should be bullish for stocks. But the stock market has been weighed down by the Magnificent-7, which have been weighed down by mounting uncertainties about the AI trade (charts). The MAGS ETF is down 2.9% ytd, while the XMAG ETF is up 14.1%. _This post is for paying subscribers only._ ### FEMO Lifting Economic Growth & Foreigners Lifting US Stocks URL: https://www.yardeniquicktakes.com/femo-lifting-economic-growth-foreigners-lifting-us-stocks/ Last updated: 2026-06-23T02:47:09.000Z In the spectrum of bullish stock markets, there are two polar opposites. The first is driven by FOMO, the Fear of Missing Out, which inflates P/E multiples as investors chase hope and hype rather than fundamentals, creating the conditions for a bubble. The second is driven by FEMO, or Fabulous Earnings Momentum, which works the other way around: Corporate earnings grow faster than stock prices, compressing P/E multiples rather than expanding them, and analysts raise their estimates because the fundamentals justify doing so. The current bull market has been in the middle of the spectrum, but has moved more toward the FEMO variety this year. It is being driven by real, measurable, and record corporate profits. And it is lifting not just stock prices but the entire economy. Consider the following: **(1) FEMO & the Index of Coincident Economic Indicators.** S&P 500 forward earnings multiplied by a constant forward P/E of 15.0 tracks the S&P 500 price index remarkably well over time (chart). The two series have moved together through every cycle since the mid 1990s, confirming that earnings drive the stock market. Since the bull market began in October 2022, the S&P 500 has risen above the forward earnings series multiplied by 15.0\. That gap is multiple expansion: Investors are paying more per dollar of forward earnings as confidence in the upward trajectory has solidified. The current bull market has been driven by rising forward earnings and also by multiple expansion. The index is up 105% since October 22, 2022, while forward earnings is up 56%. However, this year, the index has been led mostly by FEMO. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-219.png) FEMO is lifting the economy through two channels. The first is the wealth effect: Rising stock prices increase household net worth, boosting consumer spending. The second is the profit channel: Profitable companies expand operations, hire more workers, pay higher wages, and invest in new productive capacity. Workers spend their wages, companies respond to demand, and a virtuous cycle takes hold. Both channels currently show up in the economic data. The Citigroup Economic Surprise Index stands at 48.7, firmly in positive territory (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-220.png) Meanwhile, the Weekly Economic Index has accelerated meaningfully, pointing to real GDP growth of around 3.1% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-206.png) On the other hand, the index of Coincident Economic Indicators (CEI) is growing at just 0.8% y/y, well below the real GDP growth of 2.6% y/y in Q1-2026 (chart). In the past, their growth rates tended to coincide more often than not. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-209.png) At the same time, S&P 500 forward earnings per share has grown much faster than the CEI since mid-2025, a deviation from their historically tight relationship (chart). _This post is for paying subscribers only._ ### Healthcare: Pockets Of Alpha URL: https://www.yardeniquicktakes.com/healthcare-pockets-of-opportunity-alph/ Last updated: 2026-06-22T21:34:26.000Z We recommend a market-weight position in the S&P 500 Health Care sector. It is down 3.8% ytd, the worst among all 11 S&P 500 sectors, and remains one of the clear laggards of the bull market that began in October 2022 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-203.png) That underperformance has created selective opportunities. The aggregate sector still lacks a near-term earnings catalyst, carries the second-lowest forward profit margin in the index, and has the weakest 2026 EPS growth outlook of any S&P 500 sector. However, some of the industries within the sector have improving outlooks. Pharma is rerating as GLP-1 economics mature into a durable earnings base, while Biotech is benefiting from M&A activity, patent-cliff pressure, and improving risk appetite. Health Care has quietly held up month-to-date, eking out a small gain, while the S&P 500 sits modestly in the red and high-beta pockets like the Consumer Discretionary, Communication Services, and Information Technology sectors have all dropped more than 4.5%. The sector also trades at a 17.1 forward P/E, below the S&P 500’s 20.4\. We would own the areas where earnings, margins, and catalysts are improving, not the whole index. Consider the following: **(1) Composition.** Health Care accounts for 8.8% of the S&P 500’s market capitalization, the lowest weight the sector has carried in three decades. The S&P 400 MidCap and S&P 600 SmallCap sectors carry larger weights of 8.9% and 11.5%, respectively (chart). SmallCap Health Care is up 8.7% ytd, and MidCap Health Care is up 4.3%, both well ahead of LargeCap Health Care’s 3.8% decline. Smaller companies have benefited from M&A premiums and are less exposed to the mega-cap pharma and equipment drag. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-139.png) **(2) Breadth.** Health Care’s performance gap is unusually wide. Managed Health Care leads the sector, up 22.1% ytd, while Health Care Equipment is down 23.8% (chart). Managed Care has rallied on a stronger-than-expected 2027 Medicare reimbursement rate, while Equipment has been pressured by litigation overhangs and dilutive acquisitions. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-147.png) The earnings picture is just as uneven. Health Care Services is up 14.4% ytd, supported by a 2026 EPS growth forecast of 7.2%, nearly triple the sector’s 2.5% forecast (chart). Pharmaceuticals are the exception. The industry’s 4.0% ytd gain rests on only 1.0% expected 2026 EPS growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-148.png) **(3) Earnings trough.** Health Care is in its own earnings cycle. The sector’s 2026 EPS growth forecast of 2.5% is the lowest of any S&P 500 sector and far below the S&P 500’s 24.3% forecast (chart). Prospective growth in 2027 looks better, with expected EPS growth rebounding to 19.2%. The trough reflects Pharma’s compliance reset following 2025’s 32% earnings surge, while litigation continues to drag on Health Care Equipment. Net earnings revisions for 2027 are turning higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-204.png) **(4) Margin compression.** The sector's forward profit margin has fallen to 8.2%, the second lowest in the index, down from a peak of 11.5% in February 2022 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-149.png) **(5) Pharma's rerating.** Pharmaceuticals remains our preferred pocket within Health Care. The S&P 500 Pharmaceuticals index is up 4.0% ytd and accounts for 37.6% of the sector's market capitalization. Its forward profit margin has climbed to 30.1%, near a record high, almost four times the sector average (chart). Pharma trades at an 18.2 forward P/E, below its 18.7% expected 2027 EPS growth rate. That makes it one of the cleaner growth-at-a-reasonable-price opportunities in the sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/Screenshot-2026-06-19-at-3.36.09---PM.png) **(6) Biotech.** Biotech has recovered, but the recovery has been selective. Equal-weighted XBI and FBT show better breadth than cap-weighted IBB, while speculative ARKG remains far below its 2021 peak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-144.png) Biotech’s fundamentals are still mixed. Forward earnings has stalled since peaking at $433 per share in January 2022, while the forward profit margin has compressed from above 40% to 30.1% (chart). Longer term, AI-driven drug discovery could lift R&D productivity, but that upside is not yet visible in reported earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-150.png) Health Care is no longer a sector to ignore, but it is still not a broad overweight. The index-level numbers remain weak, with slow earnings growth and compressed margins. The opportunity is underneath the surface. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: June 22-26 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-22-26/ Last updated: 2026-06-21T16:28:53.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/IMG_0023.png) The US economic calendar is mostly quiet this week, but Thursday packs a heavy data load: final Q1-2026 GDP, May PCED, May durable goods orders, and weekly jobless claims. Lots of Fedspeak will be provided by FOMC participants this week. They will not lack for opinions to compare with those Fed Chair Warsh expressed in his debut presser last week. Globally, the Bank of Canada's Tiff Macklem speaks alongside Tuesday's May CPI release, and flash PMIs from Germany, France, the Eurozone, and the UK also drop on Tuesday. On Wednesday after the close, Micron Technology, arguably one of the world's most important companies, reports fiscal Q3 earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-151.png) Wednesday's FOMC meeting reset the bar. The June Summary of Economic Projections raised the median 2026 federal funds rate projection from 3.4% to 3.8% and the median 2026 core PCED inflation projection from 2.7% to 3.3%. Nine of 18 dots now pencil in hikes by year-end. The 2-year US Treasury note jumped to 4.19% in response (chart). Warsh's first press conference left no ambiguity. He called inflation "a choice," insisted price stability is the FOMC's number-one goal, and signaled the Fed will look through any supply-side disinflation from Iran. We continue to expect a first hike as soon as July. That expectation is more hawkish than the markets’, which put the odds of a hike in July at just 38% and one by September at 92%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-127.png) Here are the key economic releases most likely to shape investors' thinking this week: **(1) GDP.** The final reading of Q1-2026 GDP (Thu) should hold near the 1.6% second estimate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-129.png) The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model has Q2-2026 tracking 3.0% saar as of June 17, led by surging fixed business equipment (+13.8%) and goods exports (+15.2%) (chart). The AI-led capex cycle remains the engine of the Roaring 2020s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-130.png) **(2) PCED.** May's headline and core PCED (Thu) are expected to be up 0.38% and 0.24%, according to the Cleveland Fed's Inflation Nowcasting. On a y/y basis, the numbers are hot at 3.97% and 3.30%. April's headline and core PCED inflation rates were 3.8% and 3.3% y/y. May's CPI rose 4.2% y/y, and PPI Final Demand rose 5.9% (chart). The risk again skews to an upside surprise. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-131.png) **(3) Unemployment*.*** Initial unemployment insurance claims (Thu) totaled 226,000 in the latest week, with the four-week moving average continuing to rise to 223,200 (chart). Continuing claims were 1,810,000 in the week ended June 5, with the four-week moving average rising to 1,780,000\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-132.png) **(4) PMIs and business surveys.** S&P Global's June flash PMIs (Tue) follow May's final readings of 55.1 for manufacturing and 50.7 for services (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-133.png) The week's regional Fed business surveys include Richmond (Tue), Chicago (Thu), and Kansas City (Thu). Both the ISM national M-PMI and the regional Fed average have turned higher in recent months, confirming that the manufacturing recovery is broadening (chart). Prices-paid components remain elevated, with the regional average at 55.2 in May, reinforcing the upside inflation risk. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-202.png) **(5) Consumer sentiment.** The final June University of Michigan reading (Fri) follows June's preliminary print of 48.9, with current conditions at 48.4 and expectations at 49.3\. The more important numbers are the one-year and three-year inflation expectations. The former should decline along with the price of gasoline (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-200.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-201.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### GLOBAL MARKET CALL: The Fog Of War Is Lifting URL: https://www.yardeniquicktakes.com/global-market-call-the-fog-of-war-is-lifting/ Last updated: 2026-06-22T21:35:02.000Z As we’ve flagged in recent weeks, an end to the conflict in the Middle East should see many foreign stock markets outperform the US. Lower oil prices reduce global inflationary pressures, give central banks room to ease policy, and tend to benefit oil-importing economies, particularly in emerging markets, more than the US, which exports oil. Last week’s tape delivered exactly that, with Asia leading the Go Global trade higher. Here's more: **(1) Stay Home vs Go Global.** EM ex-China (EMXC) dominated the week as the peace dividend filtered through to the regional names most exposed to lower energy prices and the AI capex cycle. The semiconductor trade continues to lead, which is why Korea and Taiwan sit at the top of this week's leaderboard. Korea led with an 11.0% gain for the week, with Taiwan, EM ex-China, the EM Index, Japan, and EM Asia all up between 3.7% and 7.2% (chart). External to Asia, moves were modest in either direction. The US SPY rose 0.7%, while China was the worst in the panel at -5.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway--3-.jpg) The US MSCI outperformed the Developed World Ex-US MSCI from 2010 to 2024\. Since then, they have performed about the same (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-34.jpg) Emerging markets are doing the heavy lifting for Go Global (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-35.jpg) **(2) Sectors.** In the Developed World, Telecom is up 52.2% ytd, Tech 23.4%, Energy 19.7%, and Basic Materials 18.7% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-179.png) In the Emerging Markets, Tech is up 35.8% ytd, followed by Industrials, up 19.0% (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-180.png) **(3) Yields.** Sovereign bond yields are easing on hopes that the ceasefire holds. The US 10-year is at 4.46%, down from the May peak (chart). Falling oil prices give central banks room to lean dovish where the data permit. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-184.png) **(4) Forex.** The US dollar index rallied to 100.8 after the FOMC’s hawkish reset reinforced the rate-differential advantage in its favor (chart). Dollar strength supports the Stay Home trade at the margin and is a near-term headwind for the price of gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-181.png) The EM MSCI currency ratio is at 63.17, still pinned near the bottom of its multi-decade downtrend (chart). EM equities are outperforming despite the currency headwind. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-185.png) **(5) Bank of Japan.** Following the BOJ’s latest rate hike, the main policy rate is at 1.00%, with the 2-year JGB yield at 1.38% pricing in roughly two more hikes from here (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-182.png) The 10-year JGB is at 2.61%, off its recent peak but still at multi-decade highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-183.png) Yet the yen is at 160.86 against the dollar and looks ready to break through 160 despite the BOJ's tightening (chart). Intervention risk continues to surface. A weak yen is a problem that the BOJ can’t ignore much longer. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-36.jpg) We are sticking with overweighting Go Global, with Asia ex-China leading the way. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: Is Irrational Exuberance Driving FEMO? URL: https://www.yardeniquicktakes.com/us-market-call-is-irrational-exuberance-driving-femo/ Last updated: 2026-06-22T21:35:50.000Z The stock market bubble of the late 1990s was driven by fear of missing out (FOMO) on the tech-led bull market. As a result, the forward P/E of the S&P 500 rose to a record high of 25.0 in early 2000 as the forward P/E of the S&P 500 Information Technology sector soared to a record high of 55.0 (chart). The current bull market has been increasingly driven by fabulous earnings momentum (FEMO). On Friday, the S&P 500 closed near its June 2 record high of 7609.78\. Its forward P/E was 20.4, while the Information Technology sector's was just 23.0. An earnings-led rally should be much more sustainable than a P/E-led one fueled by irrational exuberance. FEMO beats FOMO. The question that we are asked more often these days is whether the quality of earnings is eroding and fueling irrational exuberance in earnings expectations. Might circular financing be artificially boosting earnings among the AI-related companies? Might capital gains on their investments in one another be doing the same? ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-198.png) Let’s have a look: **(1) FEMO.** The S&P 500 Information Technology analysts' consensus expected long-term earnings growth (LTEG) soared to 38.0% during the week of June 18, while the S&P 500 LTEG climbed to 23.1% (chart). Both well exceed their 2000 peaks of 28.7 and 18.7 (chart). The 14.9-point spread between the two is wider today than the 10.0-point gap at the 2000 peak. Some of the FEMO is not pure operating income either. In Q1-2026, mark-to-market gains on equity investments in AI companies accounted for 58% of Alphabet's net profit, 52% of Amazon's, and 27% of Nvidia's. Circular financing across the AI hyperscalers is a related concern. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-195.png) The Information Technology plus the Communication Services sectors of the S&P 500 currently account for a whopping 47.2% of the index's market capitalization (chart). That's not a sign of irrational exuberance, given that their combined forward earnings share of the index is 43.8%. However, irrational exuberance might play a role to some extent if the earnings expectations are unlikely to be realized for the reasons mentioned above. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-40.jpg) Then again, investors certainly aren't valuing the analysts' earnings outlooks for the two sectors as highly as they did during the tech bubble of the late 1990s (chart). Back then, it was FOMO driving the bull market. Now it's FEMO. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-199.png) While the earnings quality of the Magnificent-7 might be reduced by circular financing and capital gains, that's not an issue for the earnings of the Impressive-493, which has been increasing at a faster pace since mid-2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-196.png) Meanwhile, S&P 500 forward EPS rose to $368.91 during the June 18 week, with 2026 at $340.82 and 2027 at $399.25 (chart). That's another record high for forward earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-38.jpg) S&P 600 SmallCap and S&P 400 MidCap forward earnings also have been rising at faster paces over the past year, to record highs (chart). FEMO is broadening. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-192.png) **(2) Stocks.** FEMO is driving Momentum ETFs to record highs, led by iShares MSCI USA Momentum (MTUM), up 33.9% ytd (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-174.png) Semiconductor ETFs are also at record highs (chart). Micron is now the third-largest weighting in SMH after a 259% ytd return. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-175.png) The Russell 2000 ETF (IWM) is breaking out to new highs, a sign that the rally is broadening beyond mega-cap stocks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-173.png) **(3) Valuation & sentiment.** The forward P/E spread between the S&P 500 and S&P 400 has narrowed to 4.0, and the spread to the S&P 600 is at 4.3 (chart). Both are off late-2025 highs of 6.9 and 7.5. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-152.png) The Investors Intelligence Bull/Bear ratio is 2.45 against its long-run average of 2.59, and the AAII ratio is 0.93 against its 1.19 average (chart). Sentiment is balanced, neither too bullish nor too bearish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-172.png) **(4) Commodities.** The price of Brent crude is down sharply to $79.85 a barrel in recent days (chart). That should contribute to more FEMO in the coming weeks. Then again, the oil price might rebound if the latest peace deal is already falling apart. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-170.png) The price of gold might have bottomed around $4,000 an ounce a few days ago (chart). However, a hawkish Fed might continue to weigh on this price. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-194.png) **(5) Credit.** The markets have repriced since Fed Chair Kevin Warsh's debut presser last Wednesday, with federal funds rate (FFR) futures now pointing to one 25bps FFR increase over the next six months and two over the next 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-178.png) The 2-year Treasury yield at 4.19% is well above the effective FFR of 3.63% (chart). The spread between the 2-year and 10-year Treasury yields has flattened to its tightest level in a year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-176.png) Private-credit ETFs have rolled over, with Virtus Private Credit (VPC) down 3.3% over the past month to $15.09 and VanEck BDC Income (BIZD) down 1.2% to $12.36 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-177.png) At the same time, commercial bank loans and leases are still growing 7.3% y/y, a pace consistent with a healthy expansion and well above the contractionary readings that have preceded past downturns (chart). There is no credit crunch underway, and banks are still financing the real economy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-197.png) We remain constructive on the bull market, with FEMO now broadening across the market-cap structure. We will continue to monitor the quality of earnings. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Geopolitical Release Valve Taking Pressure Off Resilient Economy URL: https://www.yardeniquicktakes.com/geopolitical-release-valve-taking-pressure-off-resilient-economy/ Last updated: 2026-06-22T21:36:24.000Z The US-Iran interim peace deal is shaky; but if it holds, it will end the US blockade of Iranian ports and reopen the Strait of Hormuz to commercial shipping. Now comes a 60-day negotiating period to hammer out a permanent agreement, centered on restricting Iran's nuclear program. The price of Brent crude oil extended its sharp decline following the peace deal announcement, with markets pricing in the return of Iranian barrels and the normalization of Persian Gulf shipping lanes (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-187.png) Meanwhile, the 10-year US Treasury yield fell from 4.67% on May 19 to 4.46% on Thursday, a sign that the market believes inflation will be contained over the longer term (chart). The 2-year Treasury yield steadied at around 4.19% on Thursday after climbing to this highest level in more than a year on Wednesday following Fed Chair Kevin Warsh's surprisingly hawkish comments at the June FOMC meeting. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-188.png) With the geopolitical pressure valve beginning to release, the latest economic data tell an encouraging story about how well the US economy has held up under the strain of higher energy prices and elevated geopolitical uncertainty. Consider the following: **(1) Retail sales.**May retail sales rose 0.9% m/m, marking the fourth straight month of expansion (chart). Much of the headline increase was driven by a 3.4% m/m surge in sales at gasoline stations, as prices at the pump averaged $4.50 per gallon in May. However, even after excluding autos and gasoline, retail sales still rose at a solid 0.5% m/m pace. Eleven of the 13 major categories posted gains, suggesting broad-based resilience in consumer spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-33.jpg) Control-group retail sales, used in calculating GDP, rose a solid 0.7% m/m following a healthy gain of 0.5% in March (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-191.png) We were not surprised by the blockbuster increase in retail sales, given that we have been closely following and reporting on the Redbook same-store retail sales index, which continued to accelerate in May (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-1-2.png) **(2) GDP.** Following the strong increase in control-group retail sales, the Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model estimate for Q2-2026 real GDP growth was revised higher, from 2.8% to 3.0% (chart). The “nowcast” for real consumption growth was raised from 2.4% to 2.7%, and real gross private domestic investment was lowered from 8.6% to 8.5%. These numbers imply that consumer spending growth accelerated in the second quarter and that capital investment remains strong due to the AI infrastructure buildout. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-5-1.png) **(3) Labor market.** Initial unemployment insurance claims dropped slightly to 226,000 last week, a low level that is consistent with very subdued layoff activity (chart). Continuing claims ticked up to 1,810,000\. The readings suggest that the labor market remains in good shape and continues to support consumer spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-2-2.png) **(4) Regional Fed surveys.** The average of the business conditions indexes across two Fed regional business surveys ticked down to 8.0 in June but still suggests that manufacturing activity in the US economy remains in expansionary territory (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-189.png) At the same time, the averages of prices-paid and prices-received indexes across the two Fed regional business surveys indicate that inflation pressures have remained elevated in June (chart). These surveys confirm that the balance of risks remains skewed toward the inflation side of the Fed's dual mandate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-190.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### A Hawk In Dove's Clothing ... June Swoon Is Back ... 'We Have A Task Force On That' URL: https://www.yardeniquicktakes.com/a-hawk-in-doves-clothing-june-swoon-is-back-we-have-a-task-force-on-that/ Last updated: 2026-06-22T21:36:45.000Z We weren't surprised by most of the news following today's FOMC meeting. We expected the committee to pivot from April's easing bias to a tightening bias, and they did. We expected the committee to acknowledge that, in their dual mandate, the risk of higher inflation had risen, while the risk of higher unemployment had fallen, and they did. The FOMC's Summary of Economic Projections (SEP), including the Dot Plot, unambiguously confirmed the committee's hawkish pivot. We expected a June Swoon in the stock and bond markets because investors hadn't fully discounted our hawkish Fed scenario. The stock market swooned today as yields rose. The 2-year US Treasury note jumped to 4.20% today in response to the FOMC news (chart). On the other hand, we were blown away by Fed Chair Kevin Warsh's press conference. We thought he was a dove who favored lowering the federal funds rate (FFR) because he believes that AI is boosting productivity and economic growth while keeping a lid on inflation. Instead, he hammered home a strict, orthodox message on inflation with a strong commitment to price stability. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-165.png) Here are six key takeaways from June's FOMC meeting and Warsh's first press conference as Fed chair: **(1) A more hawkish interest-rate outlook.** In the June SEP, the median FFR projection for the end of 2026 increased from 3.4% in March to 3.8% (chart). The 2027 projection increased from 3.1% to 3.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-30.jpg) The June Dot Plot pulled off a massive hawkish pivot compared to March. Over the rest of this year, nine meeting participants expect hikes: three expect one more, five expect two, and one expects three more (chart). Eight participants see rates remaining unchanged this year, while one still expects a cut. Warsh abstained, so there are 18 rather than 19 dots. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-32.jpg) **(2) No more easing bias in the policy statement.** In the FOMC's policy statement, the April language hinting at future rate cuts was replaced by a much shorter, blunter sentence committing to inflation control: "This Committee will deliver price stability." Warsh stripped the document down from over 300 words to a very brief 130 words. The text now narrowly outlines present economic facts (e.g., solid growth, energy-driven inflation) without any forward guidance. Nevertheless, the Dot Plot clearly reflects the hawkish shift we expected. **(3) Acknowledgment of the economy's resilience.** Warsh characterized economic growth as solid, broad-based, and supported by strong fundamentals, stating that “economic activity is expanding at a solid pace despite elevated uncertainty.” He said that “productivity growth and capital investment both \[are\] strong” and that “job gains have kept pace with the workforce.” He also emphasized that the labor market is “stable” and that “the jobs data has been moving in a good direction.” The SEP's projection for the unemployment rate at year-end was lowered from 4.4% in March to 4.3% (chart). It is projected to remain there in 2027. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-29.jpg) **(4) Acknowledgment of persistent above-target inflation.** Again, we were blown away by how often Warsh stressed that the FOMC's number-one goal was to bring inflation down to 2.0% y/y. He described inflation aspersistently elevated, noting that it has been “running well ahead of the Fed’s … 2% \[goal\] … for more than five years” and said it “remains elevated … in part reflecting supply shocks.” While acknowledging uncertainty around inflation’s “first- and second‑round effects,” he stressed that the key risk is the prospect of inflation broadening. At the same time, he emphasized that inflation is controllable, arguing that it is “primarily determined by monetary policy” and that “inflation is a choice,” underscoring his view that any potential build‑up in inflation pressures reflects policy decisions rather than an embedded acceleration dynamic. The SEP projections for the core PCED inflation rate were raised from 2.7% to 3.3% this year and from 2.2% to 2.5% next year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-31.jpg) **(5) The restrictiveness of the policy rate.** Warsh suggested that the current policy stance is unevenly restrictive rather than uniformly tight. Overall, his remarks imply that the FFR is partially restrictive but not broadly so, with tightening effects concentrated in certain areas rather than the economy as a whole. The SEP shows that the "longer-run" (a.k.a. the neutral) FFR projection remained at 3.1%, in a 100bps range from 2.9% to 3.9% (chart). Warsh did not reveal whether he gives any credence to the concept of a neutral FFR. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-164.png) **(6) Warsh aims to reform the Fed.** Warsh announced that he is launching five task forces to overhaul key operational areas of the Fed: monetary policy frameworks, communications, regulatory scope, balance-sheet operations, and data and modernization. Warsh used the exact phrase "we have a task force on that" to deflect questions four times during his Q&A session. Whenever a reporter tried to pin him down on a specific market pain point, economic distortion, or policy prediction, he systematically dodged by pointing to his new five-panel security blanket. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### WEEKLY WEBCAST: Hawks Versus Doves Debate At The Fed URL: https://www.yardeniquicktakes.com/weekly-webcast-hawks-versus-doves-debate-at-the-fed/ Last updated: 2026-06-22T21:37:39.000Z This week’s FOMC meeting will be the first over which Kevin Warsh, President Trump’s dovish appointee, presides as Fed chair. Will he succeed in dissuading the hawkishly leaning committee from moving to a tightening bias? Today, Ed and Elias set out both the dovish and hawkish points that the committee no doubt will discuss in what’s bound to be a heated debate. … Also: Warsh steps into his new role planning to implement big changes at the Fed. Elias describes how Warsh views the Fed’s role, the reforms he has in store, and the potential ramifications for Wall Street. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! ### Crib Notes For Warsh & Co. On The Fed's Dual Mandate URL: https://www.yardeniquicktakes.com/crib-notes-for-warsh-co-on-the-feds-dual-mandate/ Last updated: 2026-06-22T21:38:21.000Z During the final four months of 2025, the Fed lowered the federal funds rate (FFR) three times by a total of 75bps. The cuts were justified for two reasons: Inflation was approaching the Fed's 2.0% target, and the labor market was weakening. So the FFR was deemed to be too restrictive, i.e., above the "neutral" FFR. Under the Fed's dual mandate, the risk that unemployment would rise was increasing, while the risk that inflation would rise was falling. Neither of these conditions holds today. Inflation has moved higher. Hiring has picked up, and the unemployment rate has remained low. Arguably, the current FFR is no longer restrictive, as the neutral rate has been boosted by robust AI-related capital spending and a drop in the personal saving rate as Baby Boomers retire. The balance of risks suggests that the FOMC needs to pivot away from its easing bias at today's meeting. Here is an update on the current status of the Fed's dual mandate to maintain stable prices and full employment. **(1) Target practice.** Headline and core CPI inflation rates have both exceeded the Fed's 2% target for five consecutive years. The former rose to 4.2% y/y in May, its highest since April 2023\. The latter reached 2.9%, the loftiest since September 2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-155.png) **(2) Energy inflation.** Most of the recent acceleration in inflation is attributable to the jump in energy prices caused by the Persian Gulf war. Gasoline surged 40.5% y/y in May's CPI, lifting overall energy inflation to 23.5%, its highest reading since August 2022 (chart). The US-Iran peace deal, set to be signed on Friday, should reopen the Strait of Hormuz. As a result, petroleum prices have fallen sharply in recent days. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-158.png) **(3) Goods inflation.** Soaring energy prices caused nondurable goods inflation to rise to 8.0% y/y in May, the highest pace since November 2022 (chart). On the other hand, durable goods inflation may be moderating. The spike resulting from last year's tariffs seems to be abating now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-154.png) **(4) Trimmed inflation**. Fed Chair Kevin Warsh favors trimmed mean inflation measures, which remove outlier price moves. They are designed to show the underlying inflation rate. The Dallas Fed's trimmed-mean PCED inflation rate was only 2.35% y/y in April, very close to the Fed's inflation target (chart). Warsh will likely push back against an overly hawkish pivot by attributing this year's inflation spike to a transitory supply shock related to the war in the Middle East, which seems to be ending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-25.jpg) **(5) Rent inflation.** Shelter accounts for roughly 44% of the CPI basket. Its shelter inflation component lags real-time market rents. Both the Zillow and Apartment List rent measures have declined sharply, with the Apartment List index now in negative territory (chart). Official shelter inflation is likely to continue converging toward spot-market rents, creating a disinflationary tailwind in the months ahead. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-153.png) **(6) Productivity & unit labor costs**. The underlying inflation rate in the labor market is very low because productivity gains offset gains in hourly compensation. Unit labor costs rose just 0.5% y/y in Q1-2026, the lowest since 2019 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-159.png) That said, several factors suggest that a tightening bias is warranted. **(7) Sticky underlying inflation.** Core services inflation remains stuck around 3.5% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-163.png) **(8) AI inflation**. The AI buildout is inflationary, boosting the demand for energy, semiconductors, and skilled labor. During May, the PPI for electronic components surged 26.9% y/y, while the CPI for software jumped 14.5% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-24.jpg) **(9) Labor market conditions.** Private employers added an average of 25,500 jobs per week in the four weeks ending May 30, according to ADP (chart). That implies a solid 116,000-job increase in May (chart). Then again, this series has been trending lower in recent weeks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-162.png) Meanwhile, May was the first month since June 2025 where labor demand exceeded supply (chart). If that persists, nominal wage growth will likely accelerate, exerting upward pressure on underlying inflation. Currently wage inflation remains moderate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-27.jpg) **(10) Consumer spending.** Consumer spending remains robust. The Redbook same-store retail sales index rose 9.2% y/y for the week ending June 12; the four-week average hit 9.1%, the highest since October 2022 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-161.png) **(11) Bottomline. T**he recent acceleration in inflation is largely tied to the oil supply shock stemming from the closure of the Strait of Hormuz. Headline inflation should moderate once the Strait reopens. However, even before the war, inflation remained above the Fed's target. In any event, the risks are now clearly skewed toward the inflation side of the Fed's dual mandate. The rate cuts implemented in 2025 were justified at the time. They are no longer justified today, which is why we expect the Fed to drop its easing bias and to signal a tightening bias at the June FOMC meeting. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Why Is The US More Exuberant Than China? URL: https://www.yardeniquicktakes.com/why-is-the-us-more-exuberant-than-china/ Last updated: 2026-06-22T21:38:55.000Z China has accomplished a great deal over the past few decades, transforming from a poor, insular, and rural economy to the world's second-largest economy. Its transformation has been hailed as an economic miracle. Yet this miracle hasn't been reflected in China's stock market. The China MSCI stock price index has been flatlining since the end of the Great Financial Crisis (GFC) in 2010\. Over this same period, the US MSCI has increased sevenfold (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-149.png) The same underperformance is visible in the Invesco China Technology ETF (CQQQ), which has been flat since the GFC (chart). Over the same period, Invesco's QQQ ETF--which tracks 100 of the largest US domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization--is up seventeenfold! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-150.png) Meanwhile, the other major Chinese benchmark stock market indexes show that Chinese equities have been good for short-term trading, but not for long-term investing (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-140.png) Let's have a closer look at some of the fundamentals that account for the underperformance of Chinese stocks compared to US stocks: **(1) Why China lacks mojo.** The divergence has occurred because China has an authoritarian command economy, while the US has an entrepreneurial capitalistic economy. US entrepreneurs are far freer to innovate, take risks, and prosper. Their Chinese counterparts operate under a government that tightly limits their freedom to run their enterprises optimally and to accumulate private wealth (and power). Much of China's prosperity since the 1970s occurred during periods when the government allowed capitalism to flourish. Under President Xi Jinping, the government increasingly imposed authoritarian and arbitrary economic policies to maintain its control and to limit the power of entrepreneurs. On the other hand, the government did nothing to stop the formation of a huge speculative bubble in the property market during the 2010s. When it burst, it caused a huge negative wealth effect that has been depressing consumer confidence and spending in recent years (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-148.png) Consumer confidence crashed during the pandemic in China and has yet to recover (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-139.png) That negative wealth effect is evident in China's real retail sales growth, which has been declining on a y/y basis in recent years and was down -1.2% in April (chart). This is the first time real retail sales growth has been negative when excluding the pandemic years. Sluggish domestic demand has, in turn, created significant excess industrial capacity. Industrial production rose 4.1% y/y in April. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-138.png) To absorb that excess capacity, China has been aggressively increasing exports to Europe. Meanwhile, US tariffs have significantly curtailed Chinese exports to the US in recent years(chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-143.png) Chinese manufacturers have been circumventing US tariffs by routing shipments through countries with lower tariffs, particularly Vietnam (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-142.png) The weakness in China's domestic demand is further confirmed by bank loan growth, which dropped to 5.5% y/y in May, the lowest since 2001 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-145.png) **(2) Why the US has exuberance.** Today's US industrial production report for May shows some of what's fueling exuberance in the US. After stagnating for much of the pandemic, industrial production has been rising since mid-2024 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-133.png) While the 0.1% m/m gain in May was modest, the AI buildout is a durable secular tailwind that should keep industrial production on an upward trajectory. The industry breakdown confirms the AI footprint, with semiconductors and other technology industries among the primary growth drivers (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-132.png) The AI buildout is a crucial driver of the US economy. Since the release of ChatGPT in late 2022, industrial production of technology has accelerated meaningfully (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-134.png) Two additional secular tailwinds reinforce the sunny economic outlook. First, electricity and gas utilities' output will continue to grow rapidly to meet the power needs of AI data centers (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-136.png) Second, the Trump administration is seeking to expand defense spending from $1 trillion this year to $1.5 trillion next year. Armaments must be replenished following recent military operations, and the relentless pace of technological advancement in the defense sector will be a persistent driver (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-135.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### GLOBAL MARKET CALL: Peace Dividend Should Revive 'Go Global' URL: https://www.yardeniquicktakes.com/global-market-call-peace-dividend-should-revive-go-global/ Last updated: 2026-06-22T21:39:20.000Z The past week was a win for our "Go Global" pivot at the end of last year, as foreign equity markets mostly outperformed the "Stay Home" alternative, i.e., the US stock market. Most of the move came in anticipation of lower oil prices on a possible deal between the US and Iran to end their war. This evening, both sides confirmed that a memorandum of understanding will be signed on Friday in Geneva. Oil prices fell sharply on Friday in anticipation of a weekend deal and are continuing to decline this evening on the news. As we anticipated, the price of gold held support just north of $4,000 per ounce last Thursday and is currently over $4,300 (chart). We also expected that the end of the war, the opening of the Strait of Hormuz, and lower oil prices would benefit many foreign economies and stock markets more than the US. This evening, the Nikkei and Kospi are up 4.91% and 5.48%, while the S&P 500 and Nasdaq futures are up 0.95% and 1.59%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-130.png) The logic of a peace dividend is simple. Lower oil prices reduce inflation worldwide, give central banks room to ease if necessary, allow bond yields to fall, and weaken the dollar (chart). Those are especially positive developments for oil-importing countries, particularly emerging economies (EMs). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-113.png) Here's more: **(1) Global stocks.** Go Global outperformed last week in anticipation of a peace deal and lower oil prices. Korea (12.7%), Indonesia (9.9), Chile (7.5), EM ex-China (6.2), and Poland (5.3) led the way (chart). The US ranked near the bottom at 0.6%. EM ex-China is the standout among the regions, consistent with our call at the end of last year. We expect Go Global to outperform again after the war interrupted its momentum. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-104.png) The Stay Home versus Go Global ratios (in US dollars and in local currencies) suggest that their long-term uptrends from 2010 through 2025 might have started to turn into down trends last year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-108.png) **(2) Global bond yields.** The opening of the Strait of Hormuz should continue to put downward pressure on oil prices in the coming months. That should calm the Bond Vigilantes around the world (chart). The 10-year US Treasury bond yield is down from the year's peak of 4.67% on May 19 to 4.42% tonight. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-129.png) **(3) Global central banks.** Falling oil prices should give dovish members of central banks some ammo to counter their hawkish colleagues. The ECB raised its benchmark rate to 2.25% from 2.00% last week (chart). It might now pause. The Bank of Japan, with an official rate of 0.75%, is expected to raise it to 1.00% to bolster the yen. The Fed and the Bank of England are at 3.75% and on hold for now. However, we expect Wednesday's FOMC to pivot from its easing bias to a tightening bias. Inflation risks are higher than unemployment risks in the US. We acknowledge that falling oil prices increase the odds of a neutral Fed stance. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-128.png) **(4) Global currencies.** The Developed World ex-US MSCI currency ratio has been weak since 2012 (chart). It did rebound in early 2025 as the dollar weakened, but has been relatively flat since then. We are neutral on this dollar measure for the rest of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-126.png) The EM currency ratio has also been weak since 2012 (chart). Falling oil prices should provide some support for the weak currencies of some EMs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-127.png) **(5) Forward earnings.** The forward earnings of the US MSCI and the All Country World (ACW) ex-US are rising faster this year, reaching record highs despite the war in the Middle East (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-131.png) **(6) Valuation.** Based on forward P/Es, the ACW ex-US is much cheaper than the US MSCI (charts). The US is currently at 20.5, while the rest of the world is at 13.6\. That's a 6.9 ppts spread. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-19.jpg) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-22.jpg) All we are saying is give peace a chance and Go Global for now. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: June 15-19 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-15-19/ Last updated: 2026-06-13T17:27:34.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/IMG_9914.png) The week ahead is dominated by the Fed. Kevin Warsh delivers his first press conference as Fed chair on Wednesday, right after the FOMC releases its policy statement and its Summary of Economic Projections (SEP), which includes the Dot Plot showing meeting participants’ forecasts for the federal funds rate. We expect the Fed to abandon its easing bias and pivot toward a tightening bias. The ECB raised its official rate by 25bps last week (chart). The Bank of Japan is set to lift its short-term policy rate from 0.75% to 1.00% on Tuesday, the highest level since 1995\. The Reserve Bank of Australia and the Bank of England round out the global central bank docket, though no rate changes are expected. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-121.png) The S&P 500 closed Friday at 7,431.46, comfortably above its 50-day moving average at 7,282.00 and its 200-dma at 6,902.33\. The uptrend is intact heading into the meeting. SpaceX began trading on Friday and will continue to dominate headlines this week alongside Warsh's debut. Options on the stock go live on Tuesday. Keep in mind, US markets will be closed on Friday for Juneteenth. Here are the key releases most likely to shape investors' thinking this week: **(1) FOMC and the SEP.** In recent months, markets have flipped from pricing in Fed rate cuts to pricing in rate hikes, which are expected to start either later this year or early next year (chart). No one expects a rate hike on Wednesday. The only issue is whether the FOMC adopts a neutral or tightening stance. We are in the latter camp since inflation risks are higher than unemployment risks. We admittedly are in the minority. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-84.png) March's SEP had core PCED easing from 2.7% this year to 2.2% next year and 2.0% by 2028 (chart). With recent inflation readings running hot, that glide path looks optimistic. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-91.png) June's SEP will likely show less optimistic projections for the federal funds rate (FFR) over the course of this year and next year compared to March's SEP (chart). June's Dot Plot is also likely to show higher for longer FFR projections than it did in March. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-18.jpg) **(2) Unemployment.** Initial jobless claims (Thu) have drifted higher over the past month. The four-week moving average has climbed to 219,000, with the latest week (June 5) at 229,000\. Continuing claims were at 1,795,000 with the four-week average at 1,777,000\. The recent uptrend in jobless claims is worth monitoring, though it remains well below levels that would signal labor-market stress or an increase in the unemployment rate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-122.png) **(3) Retail sales.** May retail sales (Wed) should be strong. The Redbook same-store gauge rose 9.1% y/y for the week of June 5, well above the 5.4% y/y reading for official retail sales excluding food services, gasoline, and autos in April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-119.png) **(4) Business surveys.** The June regional business surveys conducted by the New York Fed (Mon) and Philly Fed (Thu) are the early reads on what June's national M-PMI might be (chart). They should continue to show the economy and manufacturing expanding nicely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-120.png) **(5) Industrial production.** Industrial production (Mon) probably rose solidly in May, given the upbeat reading of May's M-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-81.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: Roaring 2020s Rockets To Mars & Beyond URL: https://www.yardeniquicktakes.com/us-market-call-roaring-2020s-rockets-to-mars-beyond/ Last updated: 2026-06-14T04:00:29.000Z "Space: the final frontier. These are the voyages of the starship *Enterprise*. Its five-year mission: to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before!" That's the introduction to *Star Trek*, the long-running TV series. On Friday, Elon Musk, the CEO of SpaceX, went where no man has gone before. He became the world's first trillionaire. The company's IPO went off without a hitch, raising $75 billion, with its shares rising 19% on their first day of trading. While it was the largest IPO ever, it was a drop in the bucket given that the Wilshire 5000 has a $74 trillion market cap (chart). We congratulate Elon on his remarkable achievement. We do have some advice for him, however. First and foremost, there is absolutely no reason to go to Mars. There is nothing up there. Second, it makes much more sense to locate data centers on the ocean floor than in outer space. It will be much easier to install and repair them. They will get damaged by space debris if they are put in orbit. Third, we also suggest that Tesla offer a hybrid model to boost that company’s sales. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-115.png) Providing some rocket fuel to the SpaceX launch on Friday was news that the US and Iran might sign a memorandum of understanding (MOU) on Sunday. It could turn out to be a memorandum of misunderstanding (MOMU). Nevertheless, the price of a barrel of Brent crude oil fell to $87.33 on Friday (chart). Iranian officials said today that they won’t be ready to sign on Sunday. Contributing to the fall in oil prices was news that the US military is escorting ships carrying approximately 7 million barrels a day of crude oil and fuel products through the Strait of Hormuz. Energy Secretary Chris Wright said so Friday. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-113.png) That news also lifted the S&P 500 and Nasdaq slightly on Friday. Both rebounded off their 50-day moving averages. The stock market has been rocketing on fabulous earnings momentum (FEMO). Analysts' consensus expected long-term earnings growth (LTEG) jumped again to 24.0% at an annual rate for the next five years during the week of June 12 (chart). That's a record high and twice as fast as the average of this series since 1985\. It's also as unlikely to be achieved as colonizing Mars. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-114.png) More realistic is the S&P 500 forward earnings per share, which rose to yet another record high last week. It is up to $366.92, which is a time-weighted average of the current analysts' consensus EPS estimates for 2026 and 2027, at $340.39 and $397.87 (chart). Those are also supercharged estimates compared to our current forecasts of $330 and $375\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-17.jpg) In any case, FEMO is spreading. The forward earnings of both the S&P 400 MidCap and S&P 600 SmallCap have been rocketing to new highs, along with that of the S&P 500, in recent weeks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-116.png) Notwithstanding our FEMO story, we've been predicting since June 3 a June Swoon that might present a good buying opportunity. It might have happened on June 5, when the S&P 500 fell 2.6% on a much better-than-expected May employment report. That increased the odds that the FOMC might pivot toward a tightening stance at Wednesday's meeting, which has been our contrarian view since early May. The Magnificent-7 stocks certainly have swooned so far this month, especially compared to the rest of the S&P 500, a.k.a. the Impressive-493 (charts). One possible reason is that investors might have raised some cash to buy SpaceX by taking profits in the Mag-7\. Investors might also be concerned that businesses are tightening their AI budgets, forcing the AI suppliers to lower their prices for "tokens." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-117.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-118.png) So is the June Swoon over now that the SpaceX IPO has launched successfully? We see reasons to think so. A MOU between Iran and the US could push the stock market higher as it pushes oil prices still lower. The FOMC's doves could use such a development to push back against the committee's hawks. We are still leaning toward a tightening pivot in the FOMC's Wednesday statement; however, we acknowledge that recent events increase the odds of a neutral stance as well as a resumption of the bull market to fresh record highs. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Bull Jumping In Crete URL: https://www.yardeniquicktakes.com/bull-jumping-in-crete/ Last updated: 2026-06-11T21:17:05.000Z Greetings from Greece. My colleagues, Elias and Toby, have been writing the QTs this week while my wife and I are vacationing in Crete and Santorini. The weather, food, and people are great. In Crete, we visited the ruins of the Palace at Knossos. It was the ceremonial and political center of the Minoan civilization and culture that thrived during the Bronze Age. We learned that for fun, Minoans enjoyed bull jumping. In Greek mythology, Zeus was born in Crete. In addition, the Minotaur, who was half human and half bull, was confined by King Minos of Crete to dwell in the Labyrinth, designed by the architect Daedalus and his son Icarus. Icarus died by flying too close to the sun, which melted his wax wings. **(1) Markets.** Today’s bull market in stocks has raised concerns that investors are flying too close to the sun and are in for a meltdown like Icarus’. We try not to be bullheaded, but we think that the earnings-led bull market will continue at least through the end of the decade. We think that June’s Swoon so far is more likely to be a rotation than a correction (chart). The S&P 500 bounced off its 50-day moving average today on news that President Donald Trump decided to postpone a planned attack on Iran. He subsequently said that a deal to end the war is imminent. Iran has yet to confirm this. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-103.png) While the Magnificent-7 companies mostly continue to deliver fabulous earnings momentum (FEMO), investors aren't sure that they can sustain it given their enormous AI capex. In addition, there is lots of uncertainty about the AI investments’ payoff. Recently, LLM providers have had to lower the prices of their "tokens" in response to pushback by business users at the high cost of using AI tools. In recent weeks, the Impressive-493 collectively have outperformed the Magnificent-7 stocks (chart). The latter might also be getting hit by profit-taking by investors participating in tomorrow's gigantic SpaceX IPO. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-104.png) The MAGS ETF is down 2.6% ytd, while the XMAGS is up 9.4% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-112.png) Another reason we don't expect the current June Swoon to turn into a correction is that our two favorite Bull-Bear Ratios remain subdued (chart). We tend to get concerned when there are too many bulls. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-105.png) By the way, a couple of days ago, when the price of gold dropped below its 200-day moving average around $4,500, we concluded that it was likely to fall further and find support at $4,000 (chart). We still think that, expecting it to bounce off that level and resume the bull market that began in late 2022\. We would have to seriously reconsider our current stance should the price fall below $4,000. _This post is for paying subscribers only._ ### Inflation & Employment Indicators Are Mixed As Fed Meets URL: https://www.yardeniquicktakes.com/inflation-employment-indicators-are-mixed-as-fed-meets/ Last updated: 2026-06-10T21:32:46.000Z The latest batch of inflation and employment indicators suggests that the FOMC might adopt a neutral policy stance at next week's meeting rather than a tightening one as we have been expecting. That seemed to be the initial reaction in the US Treasury market, as 2- and 10-year yields edged lower on today's cooler-than-expected core CPI inflation news. We are sticking with our prediction that the FOMC will pivot toward a tightening stance rather than a neutral one next week, followed by a rate hike at the July FOMC meeting. We are also sticking with our June Swoon scenario as investors fret about the Fed, mega IPOs, AI uncertainties, and the war in the Middle East. Here’s a closer look: **(1) Inflation.** Today's CPI report for May was about as hot as expected for the headline inflation rate at 4.2% y/y and a bit cooler than expected for the core inflation rate at 2.9% (chart). Fed Chair Kevin Warsh prefers to use trimmed measures of the CPI, which show lower inflation, in his approach to monetary policy. But we doubt that he will succeed in convincing his colleagues to change their reliance on the CPI and PCED. Any move away from these inflation measures would probably be shot down by the Bond Vigilantes anyway. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-95.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST URL: https://www.yardeniquicktakes.com/weekly-webcast-on-consumer-strength-bitcoin-weakness/ Last updated: 2026-06-10T13:00:01.000Z 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! ### Booming Number Of Retiring Boomers Supports Consumer Spending & Depresses Saving URL: https://www.yardeniquicktakes.com/booming-number-of-retiring-boomers-supports-consumer-spending-depresses-saving/ Last updated: 2026-06-09T22:12:30.000Z The Doomsayers have long warned about one specific vulnerability of the US economy, i.e., the sustainability of consumer spending growth. Since July 2024, real consumer spending has outpaced real disposable income growth on a y/y basis for 22 consecutive months. Spending is up 4.1% over that period, while disposable income rose just 1.1%. The widening gap has been filled by declining personal savings. The personal savings rate fell from 5.3% in July 2024 to 2.6% in April 2026, its lowest reading since June 2022\. We understand why this seems alarming. Yet while the Naysayers have been sounding this alarm for some time, the latest Redbook same-store retail sales index (excluding food services, gasoline, and autos) is up 9.1% y/y for the week ending June 5, far above the 2025 full-year average of 5.8%. Consumer spending continues to grow at a solid pace. Unlike the depressing K-Shaped Economy story promoted by the pessimists, our G-Shaped Economy hypothesis explains why consumer spending should continue to grow. We are focusing on the generational age profile of consumers. The sizeable Baby Boomer cohort is retiring. They are no longer earning wages and salaries, nor are they saving for retirement. But they are continuing to spend their record net worth on themselves. They are also providing some financial support to their younger relatives. That's been our narrative for quite some time. We recently found some additional Census data to support it: _This post is for paying subscribers only._ ### MATERIALS: Small Weight, Big Growth URL: https://www.yardeniquicktakes.com/materials-small-weight-big-growth/ Last updated: 2026-06-08T20:13:54.000Z We recommend overweighting the S&P 500 Materials sector. The sector accounts for just 1.9% of the S&P 500's market capitalization, so an overweight is cheap to implement, the same logic we applied to our Energy sector recommendation on April 20. S&P 500 Materials is up 9.9% ytd, fifth behind Energy, Information Technology, Industrials, and Real Estate. The stock price index is near a record high. Forward operating earnings per share continues to climb back toward its 2022 peak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-27.png) Materials’ 2026 EPS growth forecast is 39.7%, the third-highest among sectors (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-10.jpg) Here's more: _This post is for paying subscribers only._ ### GLOBAL MARKETS CALL: 'Go Global' Getting Fried By Rising Fed Rate Hike Expectations URL: https://www.yardeniquicktakes.com/global-markets-call-go-global-getting-fried-by-rising-fed-rate-hike-expectations/ Last updated: 2026-06-08T00:00:08.000Z Hot US data are pulling capital flows back home. The US share of the All Country World (ACW) MSCI is at 63.7%, well off the early-2025 peak of 67.4% but firming again. Europe’s share has slipped to 13.8% and Japan’s to 5.0% (chart). Emerging Markets’ share, at 12.3%, is near its cycle high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-77.png) The ratio of the US MSCI to the ACW ex-US MSCI has rebounded sharply in dollar terms, with the local-currency ratio close behind (chart). Rising Fed rate-hike expectations have flipped the short-term setup against Go Global, but the structural case for it remains intact. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-76.png) Here's more: _This post is for paying subscribers only._ ### US MARKET CALL: June Swoon! URL: https://www.yardeniquicktakes.com/us-market-call-june-swoon/ Last updated: 2026-06-07T19:45:27.000Z On Wednesday, June 3, we titled our QuickTakes "June Swoon?" As it turned out, thequestion mark should have been an exclamation mark. On Friday, June 5, stocks swooned unmistakably. The S&P 500 closed at 7,383.74, down 2.64%. The Nasdaq and S&P 500 equal-weight indexes fell 4.77% and 1.45%, respectively. The catalyst was a stronger-than-expected payroll employment report that reinforced what we have been saying for weeks: The labor market is improving. Inflation remains a bigger risk than unemployment. That puts a federal funds rate (FFR) hike back on the table sooner rather than later, in our opinion. Add SpaceX's coming mega-IPO, which already may be pulling capital away from other stocks, and market volatility was bound to pick up. For now, we see the recent action as a rotation, not the start of a correction, though the June swoon may not be over yet. Consider the following: **(1) Stock prices.** The S&P 500 remains comfortably above its 50-day moving average (dma) of 7,200.96 and its 200-dma of 6,879.38 (chart). Friday's drop was sharp, but we are still in a bull market, in our opinion. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: June 8-12 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-8-12/ Last updated: 2026-06-07T14:31:26.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-45.png) The week ahead is dominated by inflation prints. The May CPI (Wed) and PPI (Thu) top the calendar. From a consumer perspective, we will also see the NY Fed's consumer inflation expectations survey (Mon) and the University of Michigan’s preliminary sentiment release (Fri). The “Federal Open Mouth Committee” is in the blackout period ahead of next week's committee meeting—i.e., the talking Fed heads won't be talking. The Bank of Canada meets on Wednesday and is expected to hold its overnight rate steady at 2.25%. Most importantly, the SpaceX IPO will continue to dominate headlines, with the company's stock set to begin trading on Friday. The S&P 500 closed Friday at 7,383.74, 7.7% above its 200-day moving average (chart). The equal-weight index closed at 8,398.26, also well above its 200-dma. Friday's session retreated after a much stronger-than-expected May payrolls gain of 172,000, which increased the odds of a Fed rate hike in coming months. The broad uptrend in stock prices remains intact across both market-cap and equal-weight measures. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-53.png) Here are the key economic releases most likely to shape investors' thinking this week: **(1) Inflation.** The Cleveland Fed Inflation [Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model has May's headline CPI (Wed) rising 0.46% m/m, enough to push the annual rate to 4.18% y/y, up from 3.8% in April. The core CPI looks more benign, rising 0.23% m/m, with the annual rate edging up to 2.82% y/y from 2.80% in April (chart). The model's June preliminary nowcast points to headline inflation easing back to 4.05% y/y, reflecting the recent drop in nearby gasoline futures to $3.05 on June 5 from above $3.70 earlier this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-48.png) April's PPI Final Demand rose 6.0% y/y. The composite ISM Prices-Paid Index, a six-month forward inflation signal, eased to 153.4 in May from 155.3 in April but remains elevated (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-51.png) **(2) Inflation expectations.** The NY Fed's Survey of Consumer Expectations (Mon) covers May. April's release showed the median one-year-ahead inflation expectation at 3.6%, with three-year expectations at 3.2% and five-year at 3.0% (chart). Long-term inflation expectations remain well anchored. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-44.png) **(3) Unemployment.** Friday's 172,000 May payrolls increase is consistent with the subdued trajectory of initial jobless claims (Thu). Initial unemployment insurance claims printed at 225,000 for the week of May 29, with the four-week moving average ticking up to 214,800 (chart). The drift higher remains well below levels that would signal labor-market stress. Continuing claims are trending down. The labor market continues to add jobs without meaningfully shedding them. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-31.png) **(4) Consumer sentiment.** May’s final University of Michigan sentiment dropped to 44.8, an all-time low (chart). Current conditions printed at 45.8, with expectations a touch below the headline at 44.1\. The June preliminary release (Fri) will test whether the strong May payrolls print has lifted sentiment off these depressed levels. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-57.png) The one-year-ahead inflation expectations stood at 4.8% in May, tracking the trajectory of retail gasoline prices, which printed at $4.44 per gallon on June 1 (chart). Easing nearby gasoline futures should pull this expectation lower in the coming months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-42.png) **(5) Global inflation.** April data showed China's CPI rising 1.2% y/y while the PPI climbed to 2.8%, the first sustained positive PPI reading after a long stretch of deflation (chart). May's release (Wed) is expected to show the CPI ticking up slightly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-35.png) Japan's PPI (Tue) accelerated to 4.9% y/y in April and is expected to push above 5.0% in May (chart). Markets are pricing an 82% probability of a rate hike at the Bank of Japan’s June 16 meeting. A hot print would tip those odds close to certainty. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/image-54.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Employment Is Heating Up, But So Is Inflation URL: https://www.yardeniquicktakes.com/employment-is-heating-up-but-so-is-inflation/ Last updated: 2026-06-05T03:26:41.000Z _This post is for paying subscribers only._ ### June Swoon? URL: https://www.yardeniquicktakes.com/june-swoon/ Last updated: 2026-06-04T03:54:46.000Z So far, the S&P 500 bottomed this year on March 30 in response to the latest Gulf War. Since then, Fabulous Earnings Momentum (FEMO) during the Q1 earnings reporting season fueled a remarkable 19.1% rally in the index, led by an amazing 44.5% increase in the S&P 500 Information Technology sector (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-31.png) Yesterday, we raised the caution flag, suggesting a possible pullback over the next few weeks. We are concerned about warnings from Exxon and Chevron executives that global crude oil inventories are so low that the crude oil price could spike to $150 a barrel unless the war ends very soon. We also expect the FOMC to pivot from an easing bias to a tightening bias at the committee's next meeting later this month. We then expect the FOMC to raise the federal funds rate by 25bps in July. The financial markets are also expecting a rate hike, but late this year. The SpaceX IPO should be a big hit because everyone knows Wall Street has bent the rules to ensure the stock price soars initially. However, that could cause lots of volatility if a price spike triggers a wave of profit-taking. In any event, we view any pullback as a buying opportunity and maintain our 8250 target for the S&P 500 by year-end. Might there be more FEMO ahead? Yes, but it might already be discounted by the market, making it vulnerable to even slight disappointments. A case in point is Broadcom's 13% after-hours sell-off today, when the company's solid earnings report was somewhat weaker than expected. S&P 500 forward earnings is up 26.6% y/y through May. That's as good as FEMO gets historically, with the exception of post-recession recoveries (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-29.png) Meanwhile, it is puzzling that oil prices remain around $100 a barrel, despite warnings from oil industry leaders of much higher prices ahead (chart). Apparently, oil tanker owners are paying Iran a "toll" to allow them safe passage out of the Persian Gulf. Russia is selling lots of oil to China and India. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-16.png) The US has also been exporting more crude oil an petroleum products in recent weeks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-33.png) The 2-year US Treasury yield is a good leading indicator of the federal funds rate (FFR). It is up to 4.08%, exceeding the current 3.50%-3.75% FFR range (chart). It is anticipating a Fed rate hike in response to recent hotter-than-expected inflation reports and stronger-than-expected employment indicators. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-35.png) Another concern is that Q1's FEMO seems to have stimulated irrational exuberance about the long-term earnings growth (LTEG) prospects of the S&P 500 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-18.png) Analysts' heady expectations for LTEG are mirrored in the Nasdaq's vertical ascent (chart) ... ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-22.png) ... momentum ETFs (chart) ... ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-23.png) ... semiconductor ETFs (chart) ... ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-24.png) ... quantum computing stock prices (chart) .... ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-1.jpg) ... emerging market ETFs bolstered by AI bets on Taiwan and South Korea (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-25.png) Then again, some of the froth seems to be coming out of the Magnificent-7 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-19.png) Last but not least, our two favorite bull/bear ratios remain relatively subdued, suggesting that any pullback should be modest (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-20.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### WEEKLY WEBCAST: Fed Turning Hawkish URL: https://www.yardeniquicktakes.com/weekly-webcast-fed-turning-hawkish/ Last updated: 2026-06-03T13:00:07.000Z Today, Dr Ed and Elias set out the case for the Fed to tighten sooner rather than later. Unlike the consensus, which doesn’t expect a rate hike until late this year at the earliest, we see the FOMC raising the federal funds rate in July, after pivoting to a tightening bias at its meeting this month. That would be appropriate given the resilient economy, stable labor market, and rising inflation. Indeed, recent statements by various Fed officials suggest that a hawkish recalibration is underway. … Also: A sanguine take on recent consumer debt and credit statistics. They’re not cause for alarm, initial appearances to the contrary. … And Dr Ed reviews “Pressure” (+ +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Is Wall Street's AI Boom Spreading To Main Street? Nothing To Fear But FOMO? URL: https://www.yardeniquicktakes.com/is-wall-streets-ai-boom-spreading-to-main-street-nothing-to-fear-but-fomo/ Last updated: 2026-06-03T03:15:16.000Z The S&P 500 rose to yet another record high today, rising above 7600 for the first time. On May 11, we raised our year-end S&P 500 target from 7700 to 8250, still the highest forecast on Wall Street. We did so because of the strength and breadth of S&P 500 earnings during the Q1 earnings reporting season. That led us to conclude that the rally in the stock market since this year's low on March 30 (which we called the next evening on March 31) was driven by Fabulous Earnings Momentum (FEMO) rather than FOMO. A FEMO-led stock market meltup should be more sustainable than a FOMO-led one. Nevertheless, we are turning cautious about the prospects for the stock market in the coming weeks. The war in the Middle East isn't over. Executives at Exxon and Chevron are warning that global oil inventories are dangerously low and that oil prices could soon spike to $150 a barrel or higher. We've explained why the FOMC might possibly shift from an easing bias to a tightening bias this month, followed by a rate hike in July. Three gigantic IPOs might also increase market volatility in the coming weeks, as we discussed yesterday. On the other hand, the price of oil remains remarkably subdued at around $100 a barrel. The Strait of Hormuz is no longer completely closed. Oil tankers are reportedly passing through by paying a "toll" to Iran. The Fed might postpone a rate hike for later this year, as widely expected. SpaceX might have a very successful IPO. *Maybe*. Meanwhile, the AI boom *may be* spreading to Main Street, which has certainly benefited from Wall Street's AI-led bull market. Now there are signs confirming our view that AI is providing a tailwind rather than a headwind for the economy in general and the labor market in particular. Consider the following: _This post is for paying subscribers only._ ### Is There Enough IPO Money On Planet Earth To Fund SpaceX? URL: https://www.yardeniquicktakes.com/nee/ Last updated: 2026-06-02T03:27:25.000Z The mega IPOs are coming. SpaceX is set to go public on June 12, raising $75 billion to $80 billion at a market valuation of up to $1.8 trillion. It will be the largest equity offering in history. Then, Anthropic and OpenAI are expected to go public with market capitalizations of $1 trillion to $1.75 trillion each. Fears are mounting that the "AI-3" IPOs will suck the oxygen out of the rest of the stock market. We aren't as concerned. The combined market value of these three companies is widely expected to total $4 trillion to $5 trillion once they go public. The capital being raised is around $200 billion. To raise so much money, Wall Street's investment bankers are planning to give retail investors the opportunity to participate in these IPOs. We expect that they will respond enthusiastically. The market capitalization of the Wilshire 5000 is $75.6 trillion (chart). It is close to $60.0 trillion for the S&P 500\. Will these measures increase by $4 trillion to $5 trillion when the AI-3 go public? Not based on free float, i.e., the shares that are available for the pubic to trade (excluding closely held shares, insider holdings, and government stakes). SpaceX is only floating roughly 4.3% of its shares to the public. The other two AI-3 are also likely to provide relatively puny free float. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-3.png) Here's more: **(1) AI-3 vs Mag-7\.** The Magnificent-7 currently have a total market capitalization of $24 trillion (chart). They have remarkably high public ownership, ranging between 81% and 98%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway.jpg) The Mag-7 have total market capitalizations ranging from $1.5 trillion to $5.4 trillion (chart). The AI-3 won't be in the same league, given how tiny their free float will be initially. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-6.png) **(2) Equity IPO market.** In any event, the AI-3 should have no trouble raising $200 billion in the IPO market, which has financed $232 billion in new equity issuance over the past 12 months through April (chart). During 2021, more than $450 billion was raised with equity IPOs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-7.png) **(3) Retail investors.** The AI-3 IPOS could attract new retail investors into the stock market. Lots of Americans are already in the market. Last year, 62% of adult Americans owned stock, according to Gallup (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-8.png) That's not surprising given that assets held in IRAs probably exceed $20 trillion currently (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-9.png) At the end of last year, households (including nonprofit organizations) held a record 36.8% and 47.1% of their net worth and financial assets in equities, respectively (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-5.png) **(4) Wall Street's games.** The index providers are rewriting their playbooks to accommodate new entrants to public markets. S&P Dow Jones is considering cutting the S&P 500's seasoning requirement for mega-caps from 12 months to six and waiving the four-quarter GAAP profitability gate that has been in place since 2002\. Further, the Nasdaq cut its inclusion window from 90 trading days to 15, effective May 1\. Bloomberg Intelligence estimates S&P 500 funds would need to absorb 19% of SpaceX's public float within six months, with the Russell 1000 and Nasdaq-100 funds absorbing another 24%. Float at the IPO will be roughly 4.3%, as noted above. This is forced buying colliding with a very limited supply. (Where is the SEC?) Allocation conventions are bending too. We have already personally received emails from our brokers inviting us to participate in the SpaceX IPO. Retail involvement of this scale is unusual. **(5) Burning cash faster than rocket fuel**. The combined 2025 losses of the AI-3 topped $25 billion. SpaceX lost $4.9 billion last year. Much of its projected valuation is based on a $22.7 trillion enterprise AI market that does not yet exist as a revenue source. There has been no proof of concept for launching data centers into space. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### CONSUMER STAPLES: High P/E With Low Earnings Growth URL: https://www.yardeniquicktakes.com/consumer-staples-high-p-e-with-low-earnings-growth/ Last updated: 2026-06-01T03:09:42.000Z We recommend an underweight position in the S&P 500 Consumer Staples sector. At first glance, the sector looks fine. Its stock price index is near a record high (chart). Consumer Staples could turn out to be a haven if AI exuberance is fueling a tech bubble that bursts. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-1.png) On the other hand, Consumer Staples is up 6.5% ytd, ranking 7th among the 11 S&P 500 sectors and trailing the S&P 500's 10.7%. Since the current bull market began on October 12, 2022, the sector is up 30.7%, second-worst of the 11 sectors, ahead of only Health Care (chart). The defensive rotation that some have called has not come to fruition. A sector trading at a market-plus multiple on muted earnings and revenue growth is one to underweight, not to chase, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/06/gateway-2.png) Here's more: _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: 'Go Global' Should Outperform When Strait Reopens URL: https://www.yardeniquicktakes.com/global-market-call-go-global-should-outperform-when-strait-reopens/ Last updated: 2026-05-31T15:15:47.000Z Our call to Go Global rather than Stay Home has paid off so far this year, despite the latest war in the Middle East, which boosted Stay Home, especially in March. However, Go Global was mostly driven by the AI trade in South Korea and Taiwan. The Emerging Markets MSCI ETF (EEM) is up 25.4% ytd against 10.9% for the S&P 500\. Moreover, we recommended staying out of China. The EM ex-China ETF (EMXC) is up 39.0% ytd. Europe, Japan, and many EMs that are net petroleum importers should outperform when the Strait of Hormuz reopens, at least on a short-term basis. Here's more: **(1) Go Global vs Stay Home.** The ratio of the US MSCI to the All Country World (ACW) ex-US MSCI stock price index had been on a solid upward trend since 2010, peaking at a record high in early 2025 (chart). It fell below this trend in late 2025\. It rebounded during the war because the US is a net petroleum exporter. The ratio remains below the trendline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-287.png) The forward earnings per share of the ACW ex-US MSCI has been rising rapidly, along with the comparable series for the US (chart). The strength is broad-based across regions, with India a notable upside surprise. This is a bit surprising, though the AI-led boom in South Korea and Taiwan certainly explains much of the strength in the overseas measure of forward earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-289.png) The US MSCI’s forward P/E is currently 21.5 versus 14.2 for the ACW ex-US MSCI, and the gap has widened recently (chart). There's clearly room for multiple expansion overseas, though that's been true for a long time. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-288.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: JUNE 1-5 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-1-5/ Last updated: 2026-05-30T21:28:44.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/Screenshot-2026-05-30-165403.png) The S&P 500 climbed to another record high on Friday, closing at 7,580.05\. Fabulous earnings momentum (FEMO) and falling oil prices boosted stock prices. Brent crude settled at $92.05 a barrel, the lowest weekly close since April 17\. Axios reports that the US and Iran have reached a ceasefire-extension deal, pending President Trump's approval. The odds that the US blockade of the Strait of Hormuz will be lifted by June 30 are up to 68% from 42% on May 20. The 10-year US Treasury yield fell 12 basis points for the week to 4.45% (chart). So far, the bond yield continues to follow our "Old Normal" script. The 10-year Treasury yield has been range-bound between 4% and 5% since mid-2023\. That was also its range (with a few brief exceptions) from 2001 to 2007 before the Great Financial Crisis and the Great Virus Crisis. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-292.png) The week ahead is heavy on labor market data releases, including JOLTS (Tue), ADP private payrolls (Wed), Challenger layoff announcements (Thu), and BLS employment (Fri). ISM PMI reports will be released on Monday (manufacturing) and Wednesday (non-manufacturing). Thursday brings revised Q1-2026 productivity and unit labor costs, along with weekly jobless claims. Eight Fed speeches fill the docket, with Barr appearing twice plus Waller, Kashkari, Hammack, Logan, Barkin, and Daly. The Fed's Beige Book will be released on Wednesday afternoon. Broadcom reports its Q2 results on Wednesday. Here are the key economic releases most likely to shape investors' thinking this week: **(1) ISM PMIs.** ISM and S&P Global release the May results of their purchasing managers’ surveys this week, the M-PMI (Mon) and NM-PMI (Wed). Manufacturing has been expanding for four straight months as of April, while services industries’ business has been drifting lower but has remained in expansion. The y/y growth rate of S&P 500 forward earnings has tended to lead the M-PMI. The former is pointing to further upside for the latter, given recent FEMO (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-40.jpg) **(2) Employment.** May's employment report (Fri) is the headliner for the week. April's payrolls rose 115,000, with the three-month average cooling to 48,000\. April's unemployment rate held at 4.3% and likely stayed there in May, given the low pace of initial unemployment claims. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-293.png) Jobless claims also suggest that Challenger layoff announcements (Thu) remained subdued in May. April's announced layoffs printed at 83,400, well below the 2022-2023 peaks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-211.png) As we discussed on Thursday, the ADP NER Pulse implies a monthly private payroll pace of about 143,000 through May 9\. May's ADP private payrolls report (Wed) should also confirm continued hiring strength. April's report came in at 109,000, with Education & Health Services contributing 61,000 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-212.png) April's JOLTS data (Tue) should show labor market turnover activity continuing to normalize. March's quits rate held at 2.0%, back in its mid-2010s range. The job openings rate at 4.2% is also back to its pre-pandemic normal. The hires rate at 3.4% showed improvement (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-213.png) **(3) Productivity and labor costs.** Q1's revised nonfarm productivity and unit labor costs (Thu) should confirm the divergence underway between price and labor cost inflation. The headline PCED was 3.8% y/y in April, while unit labor costs rose just 1.2% over the past four quarters (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-214.png) According to the preliminary Q1 report, productivity rose 2.9% y/y, above its long-run average of 2.1% (chart). It might be revised down as was real GDP growth during Q1. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-215.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### US MARKET CALL: FEMO-Driven Stock Market Meltup URL: https://www.yardeniquicktakes.com/us-market-call-femo-driven-stock-market-meltup/ Last updated: 2026-05-31T04:00:39.000Z As stock prices continue to soar, fears of an AI bubble are increasing. The tech bubble of the 1990s was driven by fear of missing out (FOMO). This time, fabulous earnings momentum (FEMO) is driving tech stock prices higher. An earnings-led meltup like this should be more sustainable than a P/E-led meltup fueled by irrational exuberance. That’s especially true of FEMO meltups, like this one, that have been climbing a wall of worry. Consider the following: **(1) Stock prices.** The S&P 500 closed at a record 7,580.06 on Friday, 11.0% above its 200-day moving average (chart). The equal-weight index closed at 8,442.40, 7.2% above its 200-dma. Both are elevated and may pull back. On May 10, we raised our year-end target for the S&P 500 from 7,700 to 8,250\. We are sticking with it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-285.png) On Friday, the Russell 2000 closed at a record 2,919.34, 14.2% above its 200-dma (chart). We expect that the stock market's breadth will continue to broaden once the Gulf War ends. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-216.png) **(2) S&P 500/400/600 earnings.** S&P 500 forward earnings is at a record high. The latest analysts' consensus has S&P 500 operating EPS at $339.24 for 2026 and $394.52 for 2027 (chart). When we raised our year-end S&P 500 target to 8,250, we raised our comparable earnings forecasts to $330 and $375\. The analysts are even more bullish than we are. We might have to follow their lead again. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-33.jpg) Needless to say, technology is leading the way in the analysts' FEMO derby. S&P 500 Information Technology operating EPS is forecast to grow 47.2% in 2026 and 32.7% in 2027, after growing 24.7% in 2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-290.png) The consensus quarterly EPS growth rates continue to rise. Q1-2026 earnings growth is currently tracking at 19.3% y/y, up from a low of 12.5% in April, just before the start of the Q1-2026 earnings season. Q4-2026 is now tracking at a remarkable 24.5% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-39.jpg) FEMO is running wild across the market-cap spectrum. S&P 400 MidCap and S&P 600 SmallCap forward EPS are also rising rapidly to fresh record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-277.png) A full 85.8% of S&P 500 companies have positive forward y/y earnings growth, while 88.8% have positive forward y/y revenue growth. Both are near previous cycle highs (chart). The breadth of earnings growth is still improving. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-279.png) **(3) S&P 500 valuation.** Despite S&P 500 Information Technology and Communication Services leading the FEMO charge, their combined forward P/E is just 23.2, not much above the overall S&P 500's 21.2 (chart). In 1998-2000, this same combined forward P/E rose over 40.0\. That was FOMO then versus FEMO now. Investors apparently are dumbfounded by the pace of earnings growth and haven't raised the valuation multiples that they are willing to pay for that growth commensurately. If they do, then we will worry about a bubble. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-283.png) **(4) S&P 500 technicals.** Investor sentiment is not exuberant. The Investors Intelligence Bull/Bear Ratio is 2.00, which is below its 2.60 long-term average, while the AAII Bull/Bear Ratio is 0.85, also below its 1.19 long-term average (chart). This suggests that there is more upside for stock prices. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-284.png) On the other hand, several S&P 1500 sectors look seriously extended compared to their 200-dma (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-278.png) **(5) Bonds.** We continue to expect the 10-year Treasury bond yield to mostly range between 4.25% and 4.75% this year (chart). The release last week of April's hawkish FOMC minutes calmed the Bond Vigilantes, who want the Fed to be more vigilant about inflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-280.png) **(6) Commodities.** The combination of the AI infrastructure boom and the war in the Middle East has boosted commodity prices so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-36.jpg) The price of copper rose to another record high last week (chart). It is at the top end of its bullish channel. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-282.png) **(7) Gold.** The price of gold seems to be finding significant support at its intermediate uptrend line, its 200-dma, and its low earlier this year (chart). If Trump agrees to the current ceasefire proposal, which might open the Strait of Hormuz, gold's price is likely to rise. The war has been bearish, not bullish, for gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-281.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Inflating, But Not Stagnating URL: https://www.yardeniquicktakes.com/inflating-but-not-stagnating/ Last updated: 2026-05-29T03:02:30.000Z The three major US stock market price indexes (i.e., the S&P 500, Nasdaq, and DJIA) rose to record highs again today. So did the Russell 2000\. Leading the way higher were technology stocks. Driving stock prices higher was a report that the US and Iran have "mostly agreed" to extend their ceasefire by 60 days. The market ignored a warning from ExxonMobil that oil inventories will fall to record lows in the coming weeks, possibly pushing oil prices as high as $150 per barrel. Meanwhile, Dell's stock price soared by 39% in after-hours trading following the company's fabulous earnings momentum (FEMO) report. The latest economic releases show that while elevated oil prices are boosting inflation, they aren't slowing the economy: **(1) Inflation.** Today we learned that April's headline PCED rose 0.4% m/m in February, with the core PCED up 0.2%, both 0.1ppt below consensus. Headline PCED rose 3.8% y/y, its highest since March 2023\. Core PCED climbed 3.3% y/y, its highest reading since November 2023 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-254.png) In April, all three measures of PCED goods inflation rose sharply (chart). PCED goods jumped 4.4% y/y, driven by a severe energy shock that pushed PCED nondurable goods up 4.9%. Concurrently, import tariffs continue to exert upward pressure on PCED durable goods, which rose 3.4% y/y. In his final press conference, Fed Chair Jerome Powell stated he expected the inflationary impact of tariffs to fade within two quarters. That's not happening yet. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-276.png) PCED services edged up 3.5% y/y. It remains stubbornly high. The wage-sensitive super-core measure of PCED services (i.e., excluding energy and housing) also rose 3.5%. The 3.2% y/y uptick in PCED housing & utilities was driven higher by shelter costs and a sharp rise in household energy utility rates (chart). _This post is for paying subscribers only._ ### Gold Ready To Shine Again? URL: https://www.yardeniquicktakes.com/gold-ready-to-shine-again/ Last updated: 2026-05-28T19:09:17.000Z This is a quick QuickTakes on gold. Its price seems to be holding above its 200-day moving average on news that Iran and the US have reached an agreement on a memorandum of understanding to extend their ceasefire for 60 days, but President Donald Trump has yet to approve it, according to Reuters. The price of gold peaked at a record $5,318 per ounce on January 29 (chart). It fell sharply during the war in the Middle East in March to $4,375 near the end of the month. It rebounded through mid-April when a ceasefire was in place. Now it seems to be testing its March 26 low, its 200-day moving average, and its intermediate uptrend line. That's quite a bit of support, which should hold, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-272.png) The drop in the price since the end of January has put it back within an upward-trending channel that began in late 2023 (chart). Traders may be anticipating that a 60-day extension of the ceasefire would confirm that neither side wants to resume the shooting war. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-267.png) The rally in gold should resume once the war is over. We are currently targeting the gold price to reach $5,500 by the end of this year, and $10,000 by the end of the decade. The war boosted the dollar's foreign-exchange value, which is bearish for gold. It also put upward pressure on interest rates, which is also bearish for gold. A few central banks were forced to sell their gold reserves to support their currencies as higher oil prices weighed on their currencies. The Fed is likely to turn more hawkish during the summer. That could stall any serious rally attempt by gold traders. The end of the war should diminish those bearish factors. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-268.png) Our long-term bullish stance on gold rests on the idea that the S&P 500 could rally to 10,000 by the end of the decade. We expect that along the way, investors will rebalance into other assets, including gold. The S&P 500 and the price of gold tend to be inversely correlated on a cyclical basis, but in sync on a trend basis (chart). So if and when the S&P 500 reaches 10,000, then the price of gold should reach $10,000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-32.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### What Could Possibly Go Wrong? URL: https://www.yardeniquicktakes.com/what-could-possibly-go-wrong/ Last updated: 2026-05-28T03:42:28.000Z The bull case for the stock market remains intact. The S&P 500 rose to yet another record high today. The economy and the labor market remain resilient. Consumers are spending. The AI boom is boosting capital spending. Corporate earnings are soaring on strong revenues growth and higher profit margins. The odds of a recession in 2026 fell to 19% today, the lowest reading of the year (chart). Stock prices are rising on FEMO (fabulous earnings momentum) rather than FOMO. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-248.png) We have been steadfastly bullish during the first seven years of our Roaring 2020s thesis. We still project the S&P 500 will rise over the final three years of the decade to 10,000\. The fundamentals continue to support our stance. But a disciplined bull monitors the risks. Here are the ones we're watching: _This post is for paying subscribers only._ ### WEEKLY WEBCAST: FOMO vs FEMO (Fabulous Earnings Momentum) URL: https://www.yardeniquicktakes.com/weekly-webcast-on-chinas-lagging-stock-market-an-ai-chokepoint/ Last updated: 2026-05-31T05:06:46.000Z 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Retiring Baby Boomers & The G-Shaped Economy URL: https://www.yardeniquicktakes.com/retiring-baby-boomers-the-g-shaped-economy/ Last updated: 2026-05-27T03:33:12.000Z Many economists continue to question the resilience of consumer spending in the US. The naysayers don't believe it's sustainable and continue to expect significant consumer retrenchment. They claim that the economy is "K-shaped," with the wealthiest 10% of households accounting for 50% of all retail spending. Those widely quoted numbers are from Moody's Chief Economist Mark Zandi. They make no sense to us. We don't doubt that the *growth* of high-income households' spending has been faster than that of low- and middle-income households over the past couple of years. The former has certainly been boosted by a very positive wealth effect from the stock market. The latter undoubtedly slowed over the past couple of years once consumers spent all the government-provided pandemic support checks. But there is no way that 10% of households account for 50% of consumer spending. Just go to Costco or your local mall to see what we mean. Our alternative is the "G-shaped" economy, in which older Americans, who tend to be among the wealthiest households, provide financial support to their younger adult children and grandchildren. In our opinion, much of the affordability crisis in America today is affecting younger generations, while the older generation of Baby Boomers is helping them cope with it. This explains the resilience of consumer spending and suggests that it can continue. Let's have a close look at the data that, on balance, support our relatively optimistic viewpoint: **(1) Retiring Baby Boomers earn less and continue to spend.** The alarmists are alarmed that real disposable income (DPI) has been flattening in recent months (chart). They say that real consumer spending cannot continue to rise to record highs as it has so far. We attribute the real DPI flattening largely to the retirement of Baby Boomers. As more of them do so, they no longer earn paychecks. That is weighing on real DPI because they tend to earn more than younger workers. They are drawing on their retirement funds to support their spending. Just for fun, let's assume that real DPI remains flat over the next several years and that real consumer spending continues its current upward trend. If so, then real consumption will start to exceed real DPI around 2030\. In this scenario, the personal saving rate will then turn negative if and when that happens. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-237.png) **(2) Baby Boom retirement wave is underway.** Social Security data confirm that the Baby Boomers are retiring at a faster pace (chart). In 2025, a record 1.85 million additional retired workers received Social Security benefits. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-218.png) That pushed the total to a record high of 53.6 million retired workers receiving Social Security benefits (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-234.png) Retired workers now account for a record 19.5% of the civilian working-age population (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-235.png) The labor force participation rate for those aged 65 and older has been declining since COVID (chart). _This post is for paying subscribers only._ ### GLOBAL MARKET CALL: US-Iran Deal Would Boost Go Global Investment Strategy URL: https://www.yardeniquicktakes.com/global-market-call-us-iran-deal-would-boost-go-global-investment-strategy/ Last updated: 2026-05-25T17:33:53.000Z On Sunday night, Reuters reported that oil prices slipped to a two-week low as US-Iran talks seemed to be moving closer to a peace deal. Then again, the news service also reported that President Donald Trump is in no rush to make a deal and that the US will continue to blockade Iran. If so, then Iran will continue to blockade the Strait of Hormuz. Nevertheless, Japan's Nikkei 225 rose above 65,000 for the first time on Monday because oil prices fell. The All Country World (ACW) ex-US MSCI outperformed the US MSCI last year and early this year for the first time since the 2000s (chart). Since the start of the latest Middle East war, the US has outperformed the ACW ex-US MSCI because it is more energy-independent than most of the rest of the world. The rest of the world might soon start outperforming the US again on expectations that the end of the war is in sight. Falling oil prices would clearly benefit the rest of the world more than the US. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-216.png) The US MSCI’s market-cap share of the ACW MSCI remains very high at 63.9% (chart). It is down from a record high of 67.4% during January 2025\. Much of that market-cap share was gained by the Emerging Markets MSCI, which rose from 9.6% in early 2025 to 12.2% currently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-201.png) Interestingly, the only major regional MSCI index to gain a share of the ACW forward earnings so far this year has been Emerging Markets (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-202.png) Consider the following: _This post is for paying subscribers only._ ### CONSUMER DISCRETIONARY: Another Concentrated Sector URL: https://www.yardeniquicktakes.com/consumer-discretionary-another-concentrated-sector/ Last updated: 2026-05-24T21:51:28.000Z We recommend a market-weight position in the S&P 500 Consumer Discretionary sector. At first glance, the sector looks strong. Its stock price index is near a record high, forward earnings is rising, and the forward P/E has held in the mid-20s (chart). The surface-level fundamentals are attractive. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-166.png) Look closer, and the strength narrows. Consumer Discretionary is up just 2.3% ytd, ninth among the 11 S&P 500 sectors. Only the sector’s retail industries are positive so far this year. The rest of its industries are down ytd by various amounts running from Automobile Manufacturers, down 4.4%, to Other Specialty Retail, down 25.7% (chart). A handful of names has carried the index’s performance while most of the sector trades lower. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-167.png) Consider the following: _This post is for paying subscribers only._ ### US MARKET CALL: FOMO vs FEMO (Fabulous Earnings Momentum) URL: https://www.yardeniquicktakes.com/us-market-call-fomo-vs-femo-fabulous-earnings-momentum/ Last updated: 2026-05-24T18:43:53.000Z The stock market has had an exuberant stretch since the S&P 500 bottomed on March 30\. The index is up 17.8% since then through Friday, after hitting a record high on May 14\. The DJIA rose to a record high this past Friday. The bears say the exuberance is irrational, driven by lots of excitement about AI. We say it is rational, based on our Buzz Lightyear Theory (BLT) of "To Infinity and Beyond!" According to our BLT, there’s a fourth factor or production, not just the historically recognized three. In addition to land, labor, and capital, which are relatively scarce, there’s now data, the supply of which is unlimited. The Digital Revolution, which began in the 1960s, is all about processing as much information as possible, as quickly as possible and as cheaply as possible. Today's AI technologies can certainly do all that much better than IBM mainframes back in the mid-1960s. Instead of focusing on rational versus irrational exuberance, let's compare FOMO to FEMO. The former stands for “Fear Of Missing Out.” Investors pile into stocks, bidding up their price-to-earnings multiples. FEMO is “Fabulous Earnings Momentum.” Analysts raise their earnings estimates because hard data and company guidance give them reason to do so. We would rather see FEMO than FOMO every time. This year has been all about FEMO. Through Friday, the S&P 500 is up 9.2% ytd, forward earnings is up 14.4%, and the forward P/E is down 4.6% (chart). The entire rally has been driven by forward earnings. The multiple has contracted. FOMO inflates the P/E. This market did the opposite. That is why we are not in the bubble camp. FOMO is based on hope and hype. FEMO is based on fundamentals. At 21.1 times forward earnings, the S&P 500 is not irrationally valued unless a recession is coming in the foreseeable future. We don't see one. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-195.png) Now consider the following: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: May 25-29 URL: https://www.yardeniquicktakes.com/economic-week-ahead-may-25-29/ Last updated: 2026-05-24T14:32:52.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/Screenshot-2026-05-22-at-8.12.40---PM.png) The US financial markets are closed on Monday for Memorial Day, and the holiday-shortened week is light on economic data releases. On Thursday, the second estimate of Q1-2026 GDP will be reported alongside April's core PCED, the Fed's preferred inflation gauge. Eight Fed officials speak over the week. With little fresh data to help investors gauge whether the FOMC is turning more hawkish, they’ll be parsing the speakers’ commentary for signs. The markets now reflect a 62.5% chance of a rate hike this year, arriving in December, up from 50.0% a week ago. We think one could come as early as July. The wild card is whether President Donald Trump's latest "likely negotiated" peace deal is the real deal. On Saturday, he said that it would reopen the Strait of Hormuz. The deal under discussion includes a memorandum of understanding as a first phase, Iran’s foreign ministry said Saturday, with broader talks to follow within 30 to 60 days. The two sides remain far apart on key issues. Globally, bond yields backed off this week’s highs but stayed elevated. The 10-year US Treasury yield eased to 4.56% from a 4.69% peak, and the UK 10-year gilt slipped to 4.90% from 5.19% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-165.png) Here are the key economic releases most likely to shape investors’ thinking this week: **(1) GDP.** Thursday's second estimate of Q1-2026 GDP should hold near the 2.0% advance reading. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model already has Q2 tracking 4.3%, led by a surge in business equipment spending (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-145.png) **(2) Core PCED.** April's core PCED, the Fed's preferred inflation gauge, arrives Thursday. It ran at 3.2% y/y in March, up from 3.0% in February, with headline inflation at 3.5% (chart). Given that the latest CPI and PPI both ran hot, the risk is another upside surprise that further strengthens the case for a Fed rate hike. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-163.png) **(3) Consumer confidence.** May's Consumer Confidence Index survey (Tue) should tick higher from April's 92.8 (chart). We will focus on the labor market indicators, which are likely to show some improvement. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-149.png) **(4) Unemployment.** Initial jobless claims (Thu) came in at 209,000, with the four-week moving average at 202,500 (chart). Continuing claims were 1,782,000, with the four-week moving average at 1,778,000\. The labor market continues to improve. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-150.png) **(5) Regional business surveys.** The week's regional Fed business surveys include Dallas (Tue) and Richmond (Wed). Both the ISM national M-PMI and the regional average of the five Fed surveys have turned higher in recent months (chart). The recovery in manufacturing is broadening. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-151.png) The regional prices-paid average has climbed back to 54.9, and PPI final demand is already running at 6.0% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-159.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Mindboggling: Quantum Computing + AI + Resilient Economy URL: https://www.yardeniquicktakes.com/mindboggling-quantum-computing-ai-resilient-economy/ Last updated: 2026-05-24T04:00:55.000Z The Department of Commerce signed letters of intent to invest $2 billion in federal incentives under the CHIPS and Science Act across nine quantum computing and hardware companies. Rather than issuing traditional research grants, the Trump administration is taking minority equity stakes in these companies in exchange for the capital, continuing a broader policy shift toward direct government ownership in strategically critical sectors (similar to previous moves with Intel and rare-earth mining). Publicly traded quantum stocks experienced immediate and intense price surges today following the announcement (chart). This is government-financed exuberance about the future of quantum computing. The question is whether it is rational or irrational exuberance. We are in the rational exuberance camp. Just imagine the combination of quantum computing and AI. This is all consistent with our Buzz Lightyear Theory: "To Infinity and Beyond." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-24.jpg) Then again, exuberance may be turning a wee bit irrational. S&P 500 consensus expected long-term earnings growth (LTEG) soared to 21.9% during the week of May 21 (chart). That's the highest reading on record, except during the pandemic period. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-179.png) On the other hand, our two favorite Bull-Bear Ratios remain relatively subdued, suggesting that a serious stock market pullback isn't likely for now (chart). Furthermore, our friend Michael Brush reports: "Last week, the week ending May 15, actual insiders purchased an enormous $224 million worth of stock. Granted, insider buying bounces around quite a bit week to week. But this is so high above the pre-war weekly average of $86 million, it is a meaningfully bullish signal." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-183.png) The latest batch of economic indicators confirms our forecast that economic growth will improve during Q2, following weather-related lackluster growth during the previous two quarters: **(1) GDP indicators.** The Citigroup Economic Surprise Index is solidly in positive territory (chart). That's because recent economic indicators have been stronger than expected. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-186.png) The New York Fed's weekly economic index is showing that real GDP is growing 3.0% y/y as of the week of May 15 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-182.png) The latest Atlanta Fed GDPNow estimate for Q2-2026 is 4.3% q/q saar (chart). Capital spending is leading the way. Consumer spending is up solidly at 2.9%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-184.png) **(2) Labor market.**Initial jobless claims fell to 209,000 for the week ending May 16, with the four-week moving average dropping to 202,500, its lowest level since January 2024\. Continuing claims ticked up slightly to 1,782,000, but the four-week moving average fell to 1,773,000, its lowest since January 2020, indicating it has become easier for unemployed workers to find new jobs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-175.png) The moderation in initial jobless claims suggests the unemployment rate likely fell in May (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-177.png) **(3) Flash PMIs.** The S&P Global M-PMI rose to 55.3 in May from 54.5 in April, its highest reading since May 2022, marking continuous improvement since last August. Output rose at the fastest pace in just over four years, payrolls posted their largest increase in 11 months, input costs posted their largest monthly increase since June 2022, and selling prices posted their highest level since September 2022\. The S&P Global NM-PMI eased from 51.0 in April to 50.9 in May, with energy cost increases pushing service costs to a one-year high, selling price inflation accelerating to a 10-month high, service exports falling at the sharpest rate in six years, and sector jobs cut at the second-fastest pace since May 2020. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-48-1.png) **(4) Regional business surveys.** The average of the three available Fed business surveys moderated in May but remained close to a 4-year high, confirming the strong reading in the S&P Global Manufacturing M-PMI and suggesting that the ISM M-PMI will also point to a strong manufacturing sector in May. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-178.png) (**5) Consumer spending.** The Bank of America [consumer checkpoint survey](https://institute.bankofamerica.com/economic-insights/consumer-checkpoint-may-2026.html?ref=yardeniquicktakes.com) offered a constructive read. Headline card spending rose 4.8% y/y in April, the strongest monthly growth in three years, and even stripping out the gasoline price boost, spending still rose 4.0% y/y, confirming solid underlying demand. Restaurant and travel transactions both increased y/y, suggesting that spending on discretionary services is growing. Meanwhile, Target reported 4.4% customer traffic growth and comparable sales up 5.6% for Q1-2026, its strongest since early 2022\. Target's new CEO, Michael Fiddelke, observed that the company saw "broad-based consumer strength." Walmart posted solid 7.3% y/y revenue growth, but its stock fell over 7% on weak guidance, with its CFO noting that higher-income households are spending confidently, while lower-income households are "navigating financial distress." 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Fed Minutes Should Please Bond Vigilantes URL: https://www.yardeniquicktakes.com/fed-minutes-should-please-bond-vigilantes/ Last updated: 2026-05-21T13:49:32.000Z On Monday, we made a few headlines in the financial press with our out-of-consensus prediction that the FOMC would adopt a tightening bias at the June meeting of the Fed's policymaking committee. That would be followed by a 25-bps hike in the federal funds rate (FFR) at the July FOMC meeting. Today, the minutes of the April FOMC meeting showed that the vote to maintain an easing bias was close. There was considerable support for dropping it and adopting a tightening bias. Changing to a neutral stance wasn't seriously discussed. Treasury bond yields fell this morning before the minutes were released in the afternoon. The 2-year yield edged down to 4.04%, still signaling that a 25bps hike in the FFR is likely soon (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-164.png) The 10-year yield fell back below 4.60%, an important level from a technical perspective (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-166.png) The pullback in yields was triggered by a slide in oil prices, with Brent crude dropping more than 5% to $105 perbarrel (chart). The selling pressure on crude reflects escalating market optimism surrounding the US-Iran peace negotiations, which reports suggest have entered the "final stages," alongside comments from President Donald Trump indicating he expects the conflict to wrap up quickly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-167.png) Also helping to calm the Bond Vigilantes was April's FOMC minutes, which were unexpectedly hawkish. If the Fed is going to be more vigilant about the latest inflation problem, then the Bond Vigilantes can be less so. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Bond Vigilantes Welcome New Fed Chair Warsh With Loud Bronx Cheer URL: https://www.yardeniquicktakes.com/weekly-webcast-bond-vigilantes-welcome-new-fed-chair-warsh-with-loud-bronx-cheer/ Last updated: 2026-05-20T12:00:46.000Z The financial markets expect interest rates to remain higher for longer, notwithstanding President Trump's demands that Kevin Warsh, newly instated as Fed chief, get rates down. But the macroeconomic backdrop no longer supports an easing bias, let alone a rate cut. Paradoxically, Elias and Ed explain, a more hawkish Warsh than investors expect would actually work in Trump's favor via its downward effect on long-term Treasury yields. … We expect the Fed to hold rates unchanged at its June meeting, shifting to a tightening policy stance, followed by a rate hike in July. … Also: Two recent Fed reports confirm consumers' resilience. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Don't Freak Out About The Bond Vigilantes Just Yet URL: https://www.yardeniquicktakes.com/dont-freak-out-about-the-bond-vigilantes-just-yet/ Last updated: 2026-05-20T03:22:41.000Z The selloff in the US Treasury bond market continued today. The 30-year yield hit a high of 5.19%, its highest level since July 2007\. The 10-year yield surged to 4.69%, its highest since January 2025 (chart). Just as unsettling as these levels is how quickly yields have risen over the past few days. We think that happened in response to last week's hotter-than-expected April PPI as well as the latest batch of stronger-than-expected economic indicators. That combination cannot be described as “stagflation.” In fact, while some economists have warned that yields are in the "Danger Zone," we think they remain in the "Normal Zone," reflecting a resilient economy with a short-term inflation problem. The Fed should respond to the latter by raising the federal funds rate within the next two months. Nevertheless, we expect that the economy and corporate earnings will remain resilient. Our current assessment is that the bull market isn't at risk of being derailed by the sell-off in the bond market, which presents a very good opportunity to buy both bonds and stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-155.png) The breakout in the 10-year yield above 4.60% suggests that the next move could be up to 4.75% (chart). If so, then a retest of the November 1, 2023 peak of 5.00% is very likely. That would mark the peak for 2026, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-152.png) The 10-year yield has been trading within the same 4.00%-5.00% range since mid-2023, similar to the years prior to the Great Financial Crisis (chart). Hence our conclusion that yields are back to normal. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-154.png) The recent ascent of the 10-year yield has been mostly attributable to the widening of the spread between that yield and the comparable TIPS yield (chart). This spread also briefly widened in response to the 2022 oil price spike. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-156.png) The 2-year Treasury yield, an excellent leading indicator of the Fed’s interest rate policy, rose more than 5bps today to 4.13%, well above the upper end of the Fed's current federal funds rate range of 3.50%-3.75% (chart). The Bond Vigilantes are threatening that if the Fed doesn't tighten credit conditions, they will do so to maintain law and order in the economy! _This post is for paying subscribers only._ ### Leaders, Laggards & Breadth In The Current Bull Market URL: https://www.yardeniquicktakes.com/leaders-laggards-breadth-in-the-current-bull-market/ Last updated: 2026-05-19T03:20:22.000Z The current bull market didn't start on March 31, 2026\. Yet many commentators have noted that the bull market is at risk because it has been so narrow since then. The bull market actually started on October 12, 2022\. Since then, most market segments have delivered solid double-digit gains. The problem is that several large-cap technology companies have delivered triple-digit gains, thereby making the double-digit growers appear to be underperformers. Nevertheless, even without the outperformers, it would still have been a solid bull market since October 12, 2022. The outperformers have been mostly associated with the AI theme. Shortly after the bear market ended in October 2022, ChatGPT was introduced in late November 2022\. The Magnificent-7 led the initial exuberance about AI, but along the way, semiconductor-related stocks soared too. That's where most of the triple-digit gains have occurred. However, investors hope that AI will lead to widespread improvements in productivity and earnings growth. We think that this is starting to happen. If so, then the bull market should broaden and continue. That is the key assumption behind our S&P 500 target of 10,000 by the end of the decade. Since the start of the current bull market, only two of the 11 S&P 500 sectors have outperformed the index's 107.0% gain (chart). Information Technology is up 225.7%, and Communication Services is up 212.3%. The Industrials sector is up 102.1%, making it a slight underperformer despite a triple-digit gain. The remaining eight sectors are all double-digit underperformers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-140.png) The same conclusion results from an analysis of the stock market's numerous indexes covering Growth versus Value and SMidCaps versus LargeCaps since October 12, 2022 (chart). However, as we showed yesterday, earnings breadth is improving within the S&P 500 and also among the SMidCaps. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-141.png) The naysayers have been comparing the current bull market to that of the late 1990s. Our comparison of the two shows fewer excesses in the current bull market so far. For example, the ratio of the S&P 100 to the S&P 500 remains well below its late-1990s peak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-143.png) Most importantly, the current forward P/E for the S&P 500 Information Technology sector is 24.3, not much above the S&P 500's 21.1 (chart). During the Tech Bubble of the late 1990s, the spread between the two was around 20 points. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-144.png) Similarly, the current combined market-cap share of the S&P 500 Information Technology and Communication Services sectors at 48.0% is well supported by their forward earnings share of 42.9% (chart). During the Tech Bubble of the late 1990s, the two sectors' market-cap share peaked at 40.2%, while their forward earnings share was around 24.0%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-22.jpg) Then again, the Buffett Ratio is at a record high (chart). While Warren Buffett is still the Chairman of the Board of Berkshire Hathaway, the fund's portfolio is now distinctively run by CEO Greg Abel. He made waves during Q1-2026 by aggressively reshaping the portfolio—completely exiting a third of Berkshire's positions (including Amazon and Domino's) and heavily buying Alphabet, building on the massive $373 billion cash hoard Buffett left behind at the end of 2025\. We respect Buffett and his ratio. Nevertheless, we remain bullish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-145.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: Time for A Break Or a Brake? URL: https://www.yardeniquicktakes.com/market-call-59/ Last updated: 2026-05-18T03:46:19.000Z The S&P 500 sold off by 1.2% on Friday after hitting a record high of 7501.24 on Thursday. We are sticking with our 8250 year-end target for the S&P 500 (chart). However, the index might have peaked for a while. That's because bond yields spiked on Friday, which just happened to be Kevin Warsh's first day at the office as the new Fed chair. The bond market fears that he will tolerate inflation rather than hike the federal funds rate (FFR). He will likely have to cave and join the tightening camp sooner rather than later. The Bond Vigilantes will force him to pivot. So will his colleagues on the FOMC. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-139.png) The Strait of Hormuz remains closed. In a post on Truth Social, President Donald Trump warned: "For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!" A drone strike caused a fire at a nuclear power plant in the ​United Arab Emirates, officials there said on Sunday, while Saudi Arabia reported intercepting three drones. Brent crude is up $2 to $111 per barrel this evening (chart). The longer it remains here or higher, the greater is the likelihood that the Fed will have to pivot from its easing bias in April to a tightening bias in June and an actual rate hike in July. We wouldn't rule out a June rate hike. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-123.png) Last Wednesday, when the 10-year US Treasury yield was 4.46%, we predicted it was "likely to move up to 4.60% in the coming days." It got there on Friday (chart). This evening, it is at 4.63%. If it moves higher from here, then we would expect it to peak between 4.75% and 5.00% in the coming weeks. That would be a good buying opportunity for both bonds and stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-137.png) The S&P 500 forward P/E has risen 10% from its recent low of 19.1 to 21.1 on Friday, while the 10-year yield has climbed 63 bps from its low of 3.96% earlier this year (chart). If yields continue climbing, stocks will likely experience another P/E-led pullback. We would view it as another buying opportunity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-122.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: May 18-22 URL: https://www.yardeniquicktakes.com/economic-week-ahead-may-18-22/ Last updated: 2026-05-17T17:09:47.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/IMG_9400.jpeg) On Friday, the S&P 500 fell 1.2% from its record high of 7501.24 on Thursday. A run of hot inflation data and a spike in bond yields did the damage on Friday. April headline CPI hit 3.8% y/y, the highest since May 2023, while core CPI was 2.8%. The big shocker was last Wednesday's April PPI for final demand, which rose 6.0% y/y, the biggest increase since December 2022 (chart). Federal funds futures have fully reversed the Fed's easing path priced just three months ago, with the next move now expected to be a hike. The 2-year Treasury yield rose to 4.08% on Friday, confirming that the current federal funds rate (FFR) range of 3.50%-3.75% is too low. The 10-year Treasury yield jumped to 4.60%, and the 30-year topped 5.10%, the highest since May 2025\. As we signaled last week, we expect the FOMC to signal a tightening bias at the June meeting of the monetary policy-setting committee, followed by a 25bps FFR hike at the July meeting. We can't rule out more rate hikes over the rest of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-132.png) The Trump-Xi summit in Beijing produced verbal alignment on keeping the Strait of Hormuz open and barring Iran from nuclear weapons, but no comprehensive tariff deal emerged. We expect that Trump might signal his next move in the Gulf War in the coming days. Odds are he will maintain the blockade of Iran's ports. The week ahead is very light on US data. April's FOMC minutes will be released on Wednesday, with a couple of regional business surveys on Thursday. NVIDIA will report on Wednesday. The UK and Eurozone CPI will be reported on Wednesday. With that said, here are the key releases most likely to shape investors' thinking this week: **(1) FOMC minutes.** Wednesday brings the minutes from the April FOMC meeting, when the Fed kept rates on hold for the third consecutive meeting. The headline was the dissent: As usual, Stephen Miran voted for a cut; but three officials objected to including an easing bias in the policy statement, arguing that the data no longer justify signaling that the next move would be a cut. The minutes will indicate how many other participants might have also leaned toward either a neutral or hawkish bias. In the past few weeks, Fed funds futures have flipped from pricing in cuts to pricing in one hike over the next 12 months (chart). With inflation now running too hot, the easing-bias language is the most dovish element of current Fed communication. It is unlikely to survive June’s FOMC meeting. The bias is likely to flip straight from dovish to hawkish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-123.png) **(2) Unemployment.** Initial jobless claims (Thu) rose to 211,000, with the four-week moving average at 203,800 (chart). Continuing claims came in at 1,782,000, with the four-week moving average at 1,786,000\. Until claims break decisively higher, the case for Fed rate hikes should build. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-124.png) **(3) Global yields.** Yields have surged across developed markets in recent weeks (chart). UK 10-year gilts at 5.18% lead the G7, with Australia at 5.07% and the US at 4.60% (chart). Japan, at 2.72%, has climbed from essentially zero in 2021\. Monday brings Japan's Q1-2025 GDP, and Thursday brings Japan's core CPI. Wednesday is jam-packed with bond-moving data. April's UK CPI lands in the morning, followed by the German 10-year bund auction and the US 20-year Treasury auction in the afternoon. A weaker UK CPI would take pressure off the entire complex. A hot print would extend the move higher. BoE members Mann and Greene speak on Monday, with Mann the most hawkish dissenter on the MPC. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-134.png) **(4) Business Surveys.** Thursday's S&P Global flash PMIs for May are the first hard read on the month's economic activity. According to the ISM surveys, April manufacturing came in at 54.5, the strongest in over a year, while non-manufacturing slipped to 51.0\. May's Philadelphia and Kansas City Fed regional business surveys will also be released on Thursday. The NY Fed survey was very strong for May (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-138.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### COMMUNICATION SERVICES: Highly Concentrated With GOOGLE & META URL: https://www.yardeniquicktakes.com/communication-services-highly-concentrated-with-google-meta/ Last updated: 2026-05-17T04:00:14.000Z We continue to recommend a market-weight position in S&P 500 Communication Services, alongside our market-weight call on Information Technology, which we reiterated on April 25\. The sector is a lopsided barbell. Alphabet and Meta together are the only two components of the sector's Interactive Media Services industry. Together, they account for almost 80% of the industry's market capitalization and 69% of its earnings (chart). The other 20% of the industry's market-cap share is a long list of advertising, broadcasting, cable, and telecom names that have largely underperformed. Any sector-level call is really a call on Alphabet and Meta. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-132.png) So far this year, Alphabet is up, while Meta is flat (chart). The divergence sharpened during the Q1 earnings season. Both beat on the top and bottom lines. Alphabet rose 10.0% after reporting a big increase in cloud revenue. Meta fell 8.6% after raising capex guidance. As a result, JPMorgan downgraded the name to "rising AI spend without a clear monetization path." Same sector, same capex story, opposite reactions. The market is rewarding companies that are clearly already monetizing their AI investments. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-131.png) The Communication Services sector is up 11.1% ytd, beating the S&P 500's 8.2% gain (chart), but the headline flatters the breadth. Seven of the sector's nine main industries are still down so far this year (chart). Interactive Media Services (16.0%) and Integrated Telecom Services (1.1%) are the only positive readings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-133.png) Let's have a closer look at the sector's latest forward dynamics: **(1) Forward Earnings. T**he sector's forward earnings has soared to record highs since 2023 (chart). Q1 earnings growth is tracking at 54.8*%* y/y*,*the highest among all S&P 500 sectors. Annual earnings growth forecasts have also swung higher, with 2026 expectations now at 28.2%, firmly above the 18.3% recorded in 2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-134.png) **(2) Forward Revenues & Profit Margin.** Q1 revenue growth is tracking at 13.6% y/y, the second-highest among all S&P 500 sectors. Annual revenue growth forecasts have been steadily revised higher, with 2026 now at 12.6%, up from 9.0% for 2025. The sector's forward profit margin is 20.9%, the third-highest among the S&P 500 sectors, behind only Information Technology and Financials (chart). The sector's forward profit margin has steadily climbed from below 10% in the mid-2000s to record levels today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-135.png) **(3) Valuation.** The sector's 21.6 forward P/E is only marginally above the S&P 500's 21.1, suggesting that its valuation is attractive given its high earnings growth rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-136.png) **(4) Bottom line.** S&P 500 Communication Services is a concentrated bet on AI monetization. Strong earnings growth, healthy margins, and attractive valuation underpin our market-weight call. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Another Day, Another Step Closer to a Tightening Bias URL: https://www.yardeniquicktakes.com/another-day-another-step-closer-to-a-tightening-bias/ Last updated: 2026-05-15T09:50:52.000Z Two important psychological levels are being tested in the US Treasury market right now. The 2-year yield is trading just above 4.00% this evening, May 14 (chart). That's 25bps above the current federal funds rate (FFR) range of 3.50%-3.75%. That implies investors believe the Fed may need to raise the FFR by at least 25 bps in the foreseeable future. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-18-2.png) The 30-year yield breached 5.00% on May 13, triggered by a $25 billion auction that drew such weak demand that it marked the first time since 2007 that the Treasury has auctioned a 30-year bond with a 5% handle. The 30-year has held above 5.00% since, trading at 5.06% this evening (chart). The 10-year yield is trading just above 4.50%, at 4.51% this evening. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-19-2.png) The Bond Vigilantes are sending a clear message to the Fed. Drop the easing bias that was in the April FOMC statement. Don't replace it with a neutral stance, but go straight for a tightening bias. Otherwise, the yield curve might start pricing in another Fed policy mistake, i.e., failing to turn hawkish quickly enough to fight inflationary pressures stemming from the Gulf War. Today's economic data fueled these bearish sentiments in the fixed-income markets: _This post is for paying subscribers only._ ### From Cuts to Hikes: The Fed's Shifting Calculus URL: https://www.yardeniquicktakes.com/from-cuts-to-hikes-the-feds-shifting-calculus/ Last updated: 2026-05-14T02:10:14.000Z The April FOMC statement contained an easing bias, signaling that the Fed remained likely to cut the federal funds rate (FFR) over the rest of the year. That bias is becoming increasingly difficult to defend. Three voting members on the FOMC (Hammack, Kashkari, and Logan) already dissented against retaining it at the April meeting of the monetary policy committee. Boston Fed President Susan Collins has since added her voice to those calling for its removal. The consensus on Wall Street has coalesced around June 16-17 as the next FOMC meeting at which the easing bias will be dropped. The question is whether the easing bias will be replaced with a tightening bias. The US Treasury market is pushing for that outcome. The 2-year Treasury yield is currently trading above the effective federal funds rate (chart). When 2-year yields trade significantly above the policy rate, the market is signaling that the current FFR is too low to curb inflation and may have to be hiked–and certainly not cut. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-9-1.png) A simple removal of the easing bias may not be enough. After five consecutive years of above-target inflation, the Fed may need to signal a willingness to hike (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-10-1.png) The data support such a pivot. Consider the following: _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Sweet Spot For The Labor Market URL: https://www.yardeniquicktakes.com/weekly-webcast-sweet-spot-for-the-labor-market/ Last updated: 2026-05-13T13:00:03.000Z April’s employment report had lots of good news for the labor market. Ed & Elias discuss some of the news that seemed to be bad but really wasn’t on closer inspection. In their view, the April jobs report amounts to a vote of confidence in the narrative that the labor market is stabilizing and may even be improving without boosting inflation. Meanwhile, retiring Baby Boomers are weighing on wages, payroll employment, disposable income, and the personal saving rate. But they are boosting consumer spending by spending their substantial net worth. … Incoming Fed chair, Kevin Warsh is likely to find that the majority of his FOMC colleagues will want to eliminate the easing bias in the committee's next statement. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### CPI Heats Up But, Unlike 2021-22, Wages Remain Cool URL: https://www.yardeniquicktakes.com/cpi-heats-up-but-unlike-2021-22-wages-remain-cool/ Last updated: 2026-05-13T01:08:04.000Z During 2021 and 2022, a wage-price spiral was exacerbated by widespread global supply chain disruptions and a spike in oil prices following Russia's invasion of Ukraine (charts). This time, the war in the Middle East has caused oil prices to spike. Some supply chains have been disrupted. But a wage-price spiral is less likely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-113.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-14.jpg) The labor market is in equilibrium this time (chart). In 2021-22, demand for labor significantly exceeded the supply of labor. So, wage inflation should remain much more moderate this time than it was back then (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-108.png) If so, then a wage-price spiral is unlikely to amplify the inflationary consequences of the supply shock attributable to the Strait of Hormuz blockade (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-109.png) Unit labor cost inflation fell to 1.2% y/y during Q1 as productivity gains offset increases in hourly compensation (chart). In our Roaring 2020s scenario, productivity should remain a powerful disinflationary force, while wage inflation remains moderate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-107.png) As a result of the latest energy shock, the headline and core CPI inflation rates rose to 3.8% and 2.8% y/y during April (chart). The headline inflation rate was the highest since May 2023, and up half a percentage point from March. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-97.png) The CPI inflation rate was driven higher by a 6.6% y/y increase in nondurable goods prices, as energy prices rose 17.9% y/y (chart). Durable goods inflation continued to moderate to -0.1% y/y, indicating that the impact of tariffs is diminishing. The services inflation rate edged higher to 3.4%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-104.png) Let's have a closer look at the CPI data: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: May 11-15 URL: https://www.yardeniquicktakes.com/economic-week-ahead-may-11-15/ Last updated: 2026-05-11T02:45:37.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/IMG_9253.jpeg) The S&P 500 closed Friday at 7,398.93, another record high. The index is 9.2% above its 200-day moving average. Earnings have done the heavy lifting so far this year. The Q1-2026 earnings reporting season is winding down, with companies representing 1% of the S&P 500’s market cap reporting this week and another 12% the following week. Industry analysts’ consensus Q1-2026 earnings forecasts for the S&P 500 companies in aggregate represent growth of 18.0% y/y, while their full-year estimates imply 2026 growth of 24.0%, well above the 11.7% and 13.6% posted in 2024 and 2025 (chart). The growth expected in 2027 is 14.9%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-11-1.jpg) The week ahead is dominated by inflation reports, with both April headline CPI (Tue) and PPI (Wed) expected to push above 3.5% y/y, as the average national retail gasoline price climbed to $4.58 per gallon, and nearby gasoline futures to $3.53, last week (chart). The Trump-Xi meeting (Thu and Fri) is the most under-discussed event on the calendar and the most consequential, particularly with the Iran conflict still unresolved and Beijing's posture on the war and tariffs all in play. Finally, we will see the appointment of Kevin Warsh as Fed chair when Jerome Powell's term as chair ends (Fri). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-100.png) With that said, here are the key releases most likely to shape investors' thinking this week: **(1) Inflation.** The Cleveland Fed Inflation [Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model has Tuesday’s headline CPI rising 0.45% m/m, enough to push the annual rate to 3.56% y/y, up from 3.30% in March. Core CPI looks more benign, rising 0.21% m/m, with the annual rate edging down to 2.56% y/y from 2.60% (chart). More consequentially, May’s preliminary Nowcast points to headline inflation rising to 3.89% y/y, a trajectory that would constrain Warsh from easing monetary policy from day one. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-73.png) The ISM Prices-Paid Index, a six-month forward inflation signal, rose to 155.3 in April, the highest reading since December 2022, suggesting upside risk to April's Final Demand PPI inflation rate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-74.png) **(2) Retail Sales.** April retail sales (Thu) will arrive amid a chorus of predictions of an imminent consumer retrenchment, which weekly data refute. Redbook same-store sales rose 7.8% y/y for the week of May 1, the highest reading since late 2022 (chart). Spending is advancing, not retreating. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-58.png) **(3) Unemployment.** Initial jobless claims (Thu) rose to 200,000 for the week of May 1, with the four-week moving average at 203,200 (chart). Continuing claims came in at 1,766,000, with the four-week moving average at 1,794,000. Friday’s April payroll employment report beat expectations, confirming our assessment that the labor market is improving enough to keep the Fed on hold. The six-month average gain in payrolls climbed to 55,000 in April, the highest since May of last year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-60.png) **(4) Industrial Production.** April industrial production (Fri) should show a solid increase given the recent strength of the national M-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-90.png) The bright spot should remain technology production, with communications equipment, computer and peripheral equipment, and semiconductor output all at record highs during March (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-80.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: Raising Our 2026 S&P 500 Target Range Due To Earnings-Led Meltup URL: https://www.yardeniquicktakes.com/market-call-raising-our-2026-s-p-500-target-range-due-to-earnings-led-meltup/ Last updated: 2026-05-10T17:10:03.000Z We are raising our year-end S&P 500 target from 7700 to 8250\. We've been bullish on earnings but not as bullish as the recent consensus of industry analysts. We've never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months. The result has been an earnings-led meltup in the stock market. Our 2026 and 2027 EPS estimates have been $310 and $350, respectively, since late last year. Those were bullish estimates back then. Consensus EPS estimates have rocketed above our targets in recent weeks. They are currently $336.49 (up 22.0% from last year!) and $386.70 (up 14.9% from the 2026 consensus estimate) (chart). We are raising our EPS estimates to $330 this year and $375 next year. We are sticking with our forward P/E range of 18.0-22.0, resulting in a year-end range for the S&P 500 of 6750-8250, assuming (as we do) that forward earnings per share will be will be $375 at the end of this year. The latter is already at $354. _This post is for paying subscribers only._ ### INDUSTRIES: Mag-7 Isn't The Only AI Game In Town URL: https://www.yardeniquicktakes.com/industries-mag-7-isnt-the-only-ai-game-in-town/ Last updated: 2026-05-10T04:00:34.000Z Since ChatGPT was introduced in late November 2022, the AI trade has been mostly focused on the Magnificent-7, especially the big cloud companies, i.e., the "hyperscalers” (chart). For a while, they were all viewed as AI dominators until DeepSeek was released by a Chinese software company in late January 2025\. Increasing confidence that US Large Language Models (LLMs) would remain competitive revived the Mag-7's stock market performance during the spring and summer of 2025\. Then, late last year, a growing concern that the AI boom was turning into an AI capital spending arms race among the Mag-7 was heightened by Michael Burry’s warnings that the hyperscalers' massive AI capex might prove unprofitable for various reasons. But those concerns have diminished in response to significant beats by the hyperscalers during the Q1 earnings season in April. Their cloud earnings continue to soar, confirming that rapidly growing demand for "compute" might justify all the AI capital spending after all. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-9.jpg) Since late last year, investors have come to realize that while there may be uncertainty about the profitability of hyperscalers’ AI capex, there is no doubt that their massive capex will boost demand for semiconductors and related AI components. As a result, the prices of ETFs investing in semiconductors soared to new record highs in April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-74.png) Leading the way higher have been the memory chip companies in the US and South Korea. We wrote about them with a positive tilt in our March 24 Q[uickTakes](https://www.yardeni.com/research/quicktakes/2026/03/24/thanks-for-the-memory?ref=yardeniquicktakes.com) titled, "Thanks for the Memory." Their stock prices have continued to rise since. SK Hynix, Samsung, SanDisk, Micron, and Western Digital have all moved sharply higher (chart). As long as AI compute continues to outpace supply, we expect these names to remain strong. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-75.png) We also wrote about the photonics companies. Their stock prices have also continued to soar (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-78.png) Investors have clearly concluded that the Mag-7 isn't the only AI trade in town. Indeed, so far this year, almost every major semiconductor stock price (in the "AI-11") has beaten all the Mag-7 names, except Broadcom (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-77.png) Here is a quick review of how the AI-11 fits into the AI supply chain: (1) **Foundry and lithography (TSMC, ASML).** TSMC fabricates the leading-edge logic for everyone. ASML owns the EUV lithography chokepoint. (2) **Logic and custom silicon (AMD, Broadcom, Intel).** AMD is taking a significant share in AI inference. Broadcom is the custom ASIC partner for hyperscalers and the incumbent in networking silicon. Marvell rounds out its custom silicon, networking, and optical connectivity offerings. Intel is the foundry comeback story with CPU exposure to the AI server cycle. (3) **Memory (Micron, SK Hynix, Samsung).** Micron, SK Hynix, and Samsung supply the high-bandwidth memory that is the actual bottleneck for AI training. SK Hynix leads the HBM market globally. (4) **Enterprise NAND and storage.** SanDisk has emerged as the pure-play beneficiary of NAND and enterprise SSDs. Western Digital provides the HDD complement. Every dollar of hyperscaler capex for AI infrastructure flows through this supply chain before reaching a server rack. No wonder that high-tech now accounts for a record 55% of US capital spending (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-79.png) The Mag-7 still dominates the S&P 500 by every concentration metric, accounting for 30.6% of S&P 500 market capitalization, 25.1% of forward earnings, and 13.7% of forward revenues (chart). But the label may be outliving its cachet as discussed above. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-80.png) Mag-7 forward earnings growth is currently 25.4% versus 17.9% for the S&P 500 excluding Mag-7 (chart). That spread was wider a year ago. The S&P 493 is catching up in this growth derby. The premium the Mag-7 enjoyed on the basis of earnings growth scarcity is becoming less distinctive as growth broadens. The Mag-7 dominance is priced in. The marginal dollar of investor attention has moved on to what extends the AI trade beyond the original seven. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-10.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Productivity Booms As Labor Market Shows Signs Of Revival URL: https://www.yardeniquicktakes.com/productivity-booms-as-labor-market-shows-signs-of-revival/ Last updated: 2026-05-08T02:50:50.000Z When the labor market sneezes, ADP, Paychex, and ManpowerGroup catch colds. The stock prices of all three sold off sharply as hiring cooled starting early last year (chart). But on balance, the latest batch of labor market data suggests that employment conditions may be improving, and employment-related stocks may be bottoming (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-46-1.png) We disagree with the widely-held notion that AI is a net job killer. In our opinion, AI will create jobs on balance. Humans will use AI to achieve greater output at lower cost, creating a wealthier society that needs more and newer types of human labor. We agree with Jevons' Paradox: Making a production input more efficient lowers the cost of the final product, stimulates demand for it, and ultimately results in greater demand for the input itself, despite the productivity gain. _This post is for paying subscribers only._ ### Earnings-Led Meltup URL: https://www.yardeniquicktakes.com/earnings-led-meltup-2/ Last updated: 2026-05-07T02:09:16.000Z We have nothing to fear but nothing to fear. Stock investors have been fearless since the S&P 500 fell to the year's low on March 30, when war-related fears peaked. The index has soared 16.1% since then to a new record high. Yesterday, we explained our Buzz Lightyear Theory (BLT) of the stock market. Investors have concluded that, thanks to AI, demand for "compute" will increase to infinity and beyond, and so will the earnings of the S&P 500, including the hyperscalers and the semiconductor companies, particularly those that manufacture memory chips. Even more fearless is the consensus of industry analysts. They didn't flinch during March when the war in the Middle East was raging. They raised their earnings growth expectations for 2026 that month and continued to do so, up to 21.4% currently (chart). They’ve also been raising their expectations for the level of 2027 earnings, but the growth rate for next year has declined in recent weeks to 16.9% simply because this year's upward estimate revisions have been so strong! That's mostly because companies have beat their estimates during Q4-2025 and now Q1-2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-63.png) The analysts may be starting to get “Buzzed,” as their expected long-term earnings growth (LTEG) for the S&P 500 rose to 20.2% during the week of May 5 (chart). It rose even higher during the pandemic, when fiscal and monetary policymakers both were slamming on the accelerator. But LTEG now exceeds the 18.6% peak of the 2000 tech bubble. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-58.png) So the recent melt-up in actual and expected S&P 500 earnings has weighed on the index's forward P/E. The PEG ratio, which is the forward P/E divided by LTEG, is down to 1.03 (charts). The market looks cheap unless earnings growth expectations for the rest of the Roaring 2020s and the early Roaring 2030s get bashed, as they did after the Tech Wreck of 2000. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Consumers Still Doing What They Do Best URL: https://www.yardeniquicktakes.com/weekly-webcast-consumers-still-doing-what-they-do-best/ Last updated: 2026-05-06T13:00:02.000Z Consumer spending is the single biggest driver of US GDP growth, and its remarkable resilience despite lackluster income growth contributes mightily to the resilience of the US economy broadly. Today, Ed and Elias explain why consumer spending has seemed to defy economic gravity and why it should continue to do so. The short answer: our “gen-shaped economy,” shaped by generational dynamics as the Baby Boomers move through life’s phases. As retired Boomers chip away at their massive nest eggs while not earning a paycheck, they’re keeping consumption aloft and the saving rate falling. … Also: Three other consumption tailwinds are worth noting. So is one potential risk to our optimistic spending outlook: a prolonged period of triple-digit oil prices. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Artificial Intelligence: To Infinity & Beyond! URL: https://www.yardeniquicktakes.com/artificial-intelligence-to-infinity-beyond/ Last updated: 2026-05-06T03:38:32.000Z Before the Age of AI, economists were taught that there are only three factors of production, namely, Land, Labor, and Capital. The job of economists is to optimize the allocation of these scarce resources to maximize output (i.e., real GDP). Now, economists should recognize that there is a fourth factor of production, namely, Data. This resource is unlimited. But until AI, it wasn't very useful because it was very expensive to collect, process, and analyze. The Data Revolution that started in the mid-1960s was all about processing as much data as quickly and as cheaply as possible. A great deal of progress has been made in doing so since the IBM mainframe computer was introduced on April 7, 1964 until now, after OpenAI introduced ChatGPT on November 30, 2023\. As a result of this progress, the share of nominal capital spending in high-tech has increased from around 20% to a record 55% over this period (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-49.png) The Digital Revolution increases the incentive to create more Data (a.k.a. Information), especially now that AI tools can process so much more of it, increasing its value as a factor of production by boosting productivity. This is the story we've often told before, and it is the story the stock market is now discounting, especially in semiconductor stocks in general and in memory stocks in particular (chart). All the data increases the demand for "compute." It further increases the demand for memory because all data must be stored indefinitely unless it is voluntarily deleted. This is our Buzz Lightyear Theory (BLT) of AI, which is taking the Data Revolution "to infinity and beyond." That's even more exciting and bullish than our Roaring 2020s scenario. We recognize that our exuberance might be irrational. It might be a jinx. If China invades Taiwan tomorrow, then we will have made the top in the AI trade. Other than that event, we are struggling to figure out what else could go wrong with our BLT. (Also see our March 24, 2026 *QT* titled, "Thanks for the Memory.") ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-45.png) The AI trade helps to explain why the Russell 2000 is soaring to new highs. The Information Technology sectors of the S&P 400 and S&P 600 have considerably outperformed the Information Technology sector in the S&P 500 so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-52.png) We are also getting more exuberant about the US economy. So far, it is acing the latest stress test, i.e., the war in the Middle East. Q2 real GDP is tracking at 3.7% (chart). _This post is for paying subscribers only._ ### Bond Yields Heating Up URL: https://www.yardeniquicktakes.com/bond-yields-heating-up/ Last updated: 2026-05-05T02:15:38.000Z Today, the US launched Project Freedom, deploying 15,000 service members and over 100 aircraft to escort stranded commercial vessels through the Strait of Hormuz. The first two US-flagged merchant tankers were successfully escorted this morning. However, Iran struck the UAE's Fujairah energy hub and a UAE oil tanker and damaged residential areas in Oman. US forces destroyed six Iranian small boats and intercepted multiple missiles and drones. Tehran claimed to have struck a US warship, a claim the Pentagon flatly dismissed. Diplomatically, the two sides remain deadlocked. Trump rejected Iran's latest 14-point peace proposal, which sought an end to the blockade of Iran's ports in exchange for reopening the Strait. Four scenarios are now in play. There could be a prolonged stalemate, with the Strait remaining closed, while the US blockades Iran's ports. That could lead to a second scenario in which the two sides negotiate a deal. That's not very likely given the intransigence on both sides about whether Iran should be allowed to keep its nuclear program. The third alternative is that US forces open the Strait militarily, while continuing to blockade Iran. This could quickly lead to a fourth scenario in which a full-scale war restarts, causing much more damage to energy infrastructure around the Persian Gulf and resumed oil-price climbs. The launch of Project Freedom sent the price of Brent crude as high as $114 a barrel today (chart). That weighed on both the stock and bond markets today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-44.png) US Treasury yields and mortgage rates have been rising amid the jump in oil prices since the start of the war (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-16-1.png) The nominal 10-year Treasury bond yield has been pushed higher by the expected inflation rate embedded in the spread between it and the 10-year TIPS yield (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-40.png) Not surprisingly, the 10-year expected inflation rate is highly correlated with the price of crude oil since this price is a significant cost of doing business and therefore has a strong influence on the overall inflation rate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-37.png) The yield curve has bear-flattened since the start of the conflict (chart). The bond market is discounting higher inflation and a Fed that stays on hold or may even have to tighten. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-42.png) Indeed, the 2-year Treasury yield rose above the federal funds rate (FFR) around mid-March, when the war was raging (chart). It remains above the FFR. _This post is for paying subscribers only._ ### MARKET CALL: Up, Up & Away URL: https://www.yardeniquicktakes.com/market-call-up-up-away/ Last updated: 2026-05-04T00:00:47.000Z The stock market balloon is climbing higher, and the burners are firing. It isn't all hot air that is lifting stock prices. It's also earnings revisions, which are increasing for 2026 and 2027\. Growth stocks and the Magnificent-7 have reasserted leadership over the past month. Small caps and the Russell 2000 are at fresh record highs too. Investor sentiment remains surprisingly lackluster, leaving plenty of upside for the balloon. Even the soft spot in private credit is showing signs of stabilizing. The question is whether the balloon is actually a bubble. We don't think so. Consider the following: **(1) Stock prices.** The S&P 500 market-cap-weighted and equal-weighted indexes have rebounded significantly since they bottomed on March 30 (chart). The former has risen to a record high, and we expect the latter to follow suit. Both of their 200-day moving averages (dma) are trending higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-6.png) The Russell 2000 closed at a fresh record high on Friday, and its 200-dma is trending higher (chart). Small-cap stocks’ participation in the new-high record-setting is a positive confirmation of the sustainability of the rally. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-7.png) The performance derby shows the leaders and laggards since the March 30 low in the S&P 500 (chart). Value's early-year bounce has faded as Growth has decisively reasserted itself, driven by renewed conviction in the AI theme. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-2.jpg) Investors are starting to nibble on private credit ETFs (chart). The Virtus Private Credit ETF (VPC) and VanEck BDC Income ETF (BIZD) both have rebounded off their recent lows (chart). Commercial bank loans and leases continue to rise, reinforcing our Financials thesis that the stress in the credit market is localized rather than systemic. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-9.png) **(2) Earnings.** S&P 500 forward operating earnings has hit a fresh record high of $346.19 per share (chart). Consensus EPS estimates now stand at $327.87 for 2026 and $380.79 for 2027, and both appear still to be rising. Forward earnings is the single best leading indicator of stock prices, and it continues to point higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway.jpg) Q1's blended EPS growth rate jumped to 18.5% during the week of April 30 from 13.4% just a week earlier, with roughly 44% of S&P 500 companies reporting last week and broadly beating expectations (chart). This "earnings hook" is truly remarkable because analysts didn't turn as pessimistic about the quarter as they often have in the past just before earnings seasons, setting the stage for frequent upside hooks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-1.jpg) Revenue breadth is leading earnings breadth higher at 87.0% versus 82.6% (chart). There is still more upside for both. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-3.png) The S&P 500 LargeCap index is doing the heavy lifting in terms of absolute forward earnings, but the forward earnings of the S&P 400 MidCap and S&P 600 SmallCap indexes are also at record highs (chart). The earnings tailwind is broadening down the cap stack. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-4.png) The global bull market in stocks continues to be fueled by the record-setting forward earnings of the All Country World ex US MSCI and of the US MSCI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-5.png) **(3) Valuation.** US stocks are still cheaper than they were at the end of last year.The forward P/E of the S&P 500 is at 20.9, well below the 23.0 peak at year-end 2025\. MidCap’s forward P/E is at 16.3, and SmallCap’s is at 15.9\. Both are still cheap relative to their own histories. Even the Magnificent-7’s forward P/E of 26.1 is well off its peak of last October (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-38.png) Sector multiples confirm the valuation compression. Information Technology’s forward P/E has de-rated from 26.5 to 23.7 since year-end 2025, with Financials’ down from 16.4 to 14.8 (chart). Real Estate at 37.8 and Consumer Discretionary at 28.2 are relatively expensive. Financials and Energy at 14.8 and 15.3 remain relatively cheap. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-10.png) The IT sector’s forward P/E remains a long way from dot-com-era territory. The S&P 500 IT sector trades at 23.5 versus the S&P 500’s 21.0, a modest 2.5pt premium (chart). Investors are pricing the AI thesis with discipline that was absent during the tech bubble of the late 1990s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-11.png) **(4) Sentiment.** Our two favorite Bull/Bear Ratios (BBR) have recovered sharply from the depressed readings that informed our March 30 bottom call the evening of March 31 (chart). Investors Intelligence’s BBR is at 2.37 versus its 2.60 long-term average, and AAII’s is at 0.96 versus 1.19\. Both have lifted well off the lows, but neither is anywhere near readings that would flash a contrarian sentiment top. Rising-but-still-below-average sentiment is exactly the profile of a bull market with room to run. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-8.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: May 4-8 URL: https://www.yardeniquicktakes.com/economic-week-ahead-m-20-24/ Last updated: 2026-05-03T18:50:29.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/Screenshot-2026-05-02-at-1.02.42---PM.png) The week ahead is chock-full of labor market indicators. In addition, nine Talking Fed Heads on the Federal Open Mouth Committee are on the speaking circuit, with Williams, Bowman, and Goolsbee coming up twice. Despite the elevated oil prices, the stock market continues to levitate to new highs. The price of a barrel of West Texas Intermediate crude hit $110.10 intraweek and closed on Friday at $102.48\. Brent crude hit as high as $120.65 during the week and closed at $108.72\. The S&P 500 finished the week at another record high regardless. The Q1 earnings reporting season is going strong. Roughly 44% of S&P 500 companies reported results last week. Big names scheduled to report this week include Palantir, AMD, McDonald's, and Arm. The industry analysts' consensus forecast for S&P 500 companies’ aggregate earnings growth in 2026 has climbed to 19.8%, well above the 11.7% and 13.6% figures posted in 2024 and 2025 (chart). The double-digit marathon should continue in 2027, with the analysts collectively forecasting a 17.5% gain. They certainly are in sync with our Roaring 2020s narrative! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-36.png) With that said, let's take a look at the key releases most likely to shape investors' thinking on business activity, the state of the consumer, the labor market, and inflation this week: **(1) Employment.** April's employment report (Fri) is the headliner for the week. The unemployment rate is likely to tick down to 4.2% based on its relationship with initial unemployment claims (Thu), which have been falling in recent weeks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-25.png) Jobless claims also suggest that the Challenger measure of layoffs (Thu) remained low in April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-31.png) The ADP weekly employment report suggests that the monthly report (Wed) for April will show a solid increase in private industry payrolls (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-26.png) March JOLTS data (Tue) are unlikely to differ much from February's results (chart). We do expect to see more job openings and hiring activity in April based on the recent decline in jobless claims and increase in ADP weekly payrolls. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-32.png) **(2) ISM NM-PMI.** April's ISM NM-PMI (Tue) should remain solidly above 50.0, confirming the strength posted during February and March. Real services GDP grew 2.1% y/y in Q1, and the recent NM-PMI readings are consistent with continued expansion (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/image-34.png) **(3) Consumer credit.** March consumer credit (Thu) data are likely to show a strong increase in revolving credit, based on comparable weekly data for commercial banks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-29.png) **(4) Productivity and unit labor costs.** Q1-2026 nonfarm productivity (Thu) should show a weak increase close to the 1.8% q/q (saar) gain during Q4-2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-33.png) Real GDP rose 2.0% during Q1, while labor hours worked increased by much less (chart). That implies that productivity rose by less than 2.0%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-36.png) **(5) NY Fed inflation expectations.** The NY Fed's Inflation Expectations release (Thu) for April is likely to show a jump in the year-ahead measure closer to 4.0%, up from 3.4% in March (chart). That should reflect higher gasoline prices. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-35.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### The Roaring 2020s Express Train URL: https://www.yardeniquicktakes.com/the-roaring-2020s-express-train/ Last updated: 2026-05-03T04:00:39.000Z Why is the stock market continuing to make new highs? It's doing so because corporate earnings are doing the same, as the economy continues to speed along without stopping for a recession. The latest batch of data certainly drove the stock market higher today, confirming that we are still riding the rails on the Roaring 2020s Express. Nothing seems to stop or derail this train. **(1) GDP.** The US economy grew at an inflation-adjusted annual rate of 2.0% in Q1 (chart). Final sales to private domestic purchasers, the cleanest read on underlying demand, came in at a solid 2.5%. Business investment surged at its fastest pace in nearly three years, driven by spending on AI-related equipment and software. Exports jumped sharply. Consumer spending was up only 1.6%, probably because the weather was very bad during January and February. It should grow faster in Q2\. The big drag was imports. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-238.png) Our homemade real GDP growth model suggests that the pace of economic activity picked up in March and April, along with the growth rate of S&P 500 forward earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-1.png) **(2) Consumer Spending.** Real disposable personal income (DPI) dipped slightly in March as the energy price surge eroded nominal income gains (chart). Real DPI has been relatively flat over the past year. Yet inflation-adjusted consumer spending is still growing. We attribute this development to the retirement of Baby Boomers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-242.png) Because spending growth outpaced income growth in March, the saving rate fell to its lowest level since October 2022 (chart). Retired Baby Boomers are dipping into their record-setting retirement savings now that they are no longer receiving labor income. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-241.png) The details of real consumer spending in March reveal that goods spending led broadly while services stalled. Energy was the steepest decliner, consistent with higher gasoline prices weighing on demand. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-243.png) The Redbook Retail Sales Index shows that such spending continued to grow at a solid pace in April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-15-2.png) **(3) Capital Spending.** Capital spending indicators are red hot. Nondefense capital goods orders and shipments excluding aircraft hit fresh record highs in March, with both series in a strong uptrend since 2024 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-244.png) Intellectual property (including software) and business equipment investment (including semiconductors and servers) both hit record highs in Q1-2026\. They have been on strong uptrends since 2020, while structures continue to lag meaningfully behind (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-251.png) Software, information processing equipment, and R&D also reached fresh record highs in Q1-2026\. The pace of growth in information processing equipment steepened significantly recently amid the AI-driven investment boom (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-252.png) High tech's share of total nominal nonresidential capital spending surged to a record high of 55% in Q1-2026 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-245.png) **(4) Labor Market.** The labor market delivered a blockbuster reading this week. Initial unemployment claims dropped to the lowest level since 1969, confirming that layoff activity remains remarkably subdued. Continuing jobless claims are also falling (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway-2.png) The recent drop in initial jobless claims suggests that the unemployment rate likely fell in April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-229.png) The Q1 Employment Cost Index came in hotter than expected, but the composition is important. The acceleration was driven by a surge in benefits costs, specifically, employer-sponsored health insurance reflecting the expiration of ACA subsidies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-227.png) Both average hourly earnings and ECI wages & salaries have cooled significantly from their 2022 peaks and are now broadly converging near pre-pandemic norms (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-228.png) **(5) Inflation.** Headline PCED inflation spiked in March, driven by the energy price surge (chart). Importantly, core inflation is also moving further away from the Fed’s 2.0% y/y target. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-231.png) Goods inflation has re-accelerated sharply, reflecting the energy price shock and tariff pass-through, while services inflation remains stubbornly sticky (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-236.png) The re-acceleration in goods inflation is being led by nondurables, especially energy (chart). Durable goods inflation has also been moving higher since Trump's tariffs were imposed early last year. There is no sign that the tariff effect is dissipating so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-233.png) Housing services inflation continues to gradually cool, but services inflation ex-housing and ex-energy suggests little progress on the last mile to the Fed's inflation target (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-52.jpg) **(6) Miscellaneous.** US crude oil exports may be starting to take off to fill the supply gap caused by the blockades in the Arabian Gulf (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/05/gateway.png) The US economy is handling the energy shock better than the Eurozone economy according to their Citigroup Economic Surprise Indexes (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-248.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### No More Mr. Nice Guy URL: https://www.yardeniquicktakes.com/no-more-mr-nice-guy/ Last updated: 2026-04-30T03:01:57.000Z We will miss Jerome Powell's chairmanship of the Fed. He is a nice guy. He did the best that he could as Fed chair from February 5, 2018, through May 15, 2026, when his term as chair expires. Nevertheless, he said he intends to remain a Fed governor for now. He can do so until his term on the Board of Governors expires on January 31, 2028\. President Donald Trump doesn't share our affection for Powell. He certainly wasn't nice to Powell. In any event, Trump focused more of his wrath on Iran today. The President posted a message on Truth Social expressing frustration with the stalled nuclear negotiations. He urged Iran to "get smart soon" and explicitly wrote, "NO MORE MR. NICE GUY!" Reports from yesterday and today indicate that Trump has instructed his aides to prepare for an extended blockade of the Strait of Hormuz and Iranian ports. During a Situation Room meeting on Monday, he reportedly opted for this "prolonged squeeze" over more kinetic military options (like resuming bombing) or walking away from the conflict entirely. Secretary of State Marco Rubio noted earlier today that while the blockade is the current "safer" primary lever, the administration still has plans for "surgical" strikes in reserve should the deadlock continue. The prospect of a prolonged stalemate—albeit with a ceasefire and a possible resumption of the shooting war at any time—pushed oil prices higher to around $110 a barrel this evening. The stock market took it in stride with a 0.3% drop so far this week (chart). On April 21, we (belatedly) recommended overweighting the S&P 500 Energy sector as a hedge against a prolonged blockade of oil from the Arabian Gulf. XLE is up 5.7% since then. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-221.png) The bond market is starting to signal concerns that the energy shock might cause a more persistent, rather than transitory, inflation problem. The 10-year Treasury bond yield is up from 3.95% on February 27 (a day before the war started) to 4.25% this evening (chart). The widely used proxy for the 10-year expected inflation rate accounts for most of the increase. The Bond Vigilantes are starting to mutter: "No more Mr. Nice Guys." _This post is for paying subscribers only._ ### WEEKLY WEBCAST: The Oil Shock & Inflation URL: https://www.yardeniquicktakes.com/weekly-webcast-the-oil-shock-inflation/ Last updated: 2026-04-29T13:00:02.000Z Why hasn’t the price of Brent crude oil gone through the roof despite the closure of the Strait of Hormuz since February 28? Ed and Elias explain the anomalous price action. … Also: Why US oil producers aren’t pumped enough by higher energy prices to save the day. … And: How the energy supply crisis is likely to feed into inflation, not just via higher gasoline and fuel prices but higher food prices as well given constrained fertilizer supplies. Nevertheless, disinflationary wage and rent forces should prevail once inflationary pressures dissipate in coming months. … Finally, how the Fed is likely to react to higher inflation data near term. … Also: Dr Ed reviews “Michael” (+ +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Powell's Swan Song URL: https://www.yardeniquicktakes.com/powells-swan-song/ Last updated: 2026-04-29T03:03:34.000Z Tomorrow at 2:30 p.m., Jerome Powell will sing his swan song. That will be his last press conference after the latest FOMC meeting. The Senate Banking Committee is scheduled to confirm the nomination of Kevin Warsh to replace Powell tomorrow. The Senate could move to a final vote shortly thereafter. Powell will likely explain why the FOMC is unlikely to lower the federal funds rate any time soon. Warsh has been calling on the Fed to do so as soon as possible. Powell will stress that inflation risks have increased, while unemployment risks have decreased. On the inflation front, peace talks between the US and Iran have hit an impasse, causing Brent to surge back above $100 per barrel on Tuesday, with WTI crude close behind (chart). The longer negotiations remain stalled, the higher oil prices could go. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-51.jpg) The key question is whether persistently high, or even higher, oil prices will bleed into underlying inflation? The answer will largely depend on whether the current energy shock triggers a wage-price spiral as it did in 2022 when oil prices spiked after Russia invaded Ukraine (chart). The inflationary spiral was exacerbated by global supply chain disruptions and very stimulative fiscal and monetary policies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-215.png) Will it be different this time? We think so. For starters, global supply chain disruptions are likely to be less severe this time despite the blockade of the Strait of Hormuz (chart). Before the war, 80%-85% of the oil that passed through the Strait was going to Asian markets, with India and China together accounting for 52% of the oil sourced from the Arabian Gulf. They are both getting more oil from Russia now. _This post is for paying subscribers only._ ### GLOBAL CALL: Why Are Stock Prices Rising Around The World? URL: https://www.yardeniquicktakes.com/global-call-why-are-stock-prices-rising-around-the-world/ Last updated: 2026-04-28T03:05:01.000Z Stock markets around the world sold off sharply after the US and Israel attacked Iran on February 28\. Despite the blockade of the Strait of Hormuz since the war began, global stock prices have rebounded since the end of March. That is surprising, given that many countries' economies are vulnerable to stagflation and even recessions if oil prices remain elevated and oil shortages occur. Even more surprising is that industry analysts have raised their forward earnings expectations to record highs for the All Country World (ACW) ex-US MSCI in recent weeks, and at a faster pace (chart). They are either all delusional or correctly betting on the resilience of the global economy. That resilience might be partially attributable to technological innovations that are boosting profit margins worldwide. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-207.png) In any event, we continue to favor a Go Global investment posture. In early December last year, we recommended underweighting the US and overweighting the rest of the world in global stock portfolios. We did so because the US accounted for 65% of the ACW MSCI's market capitalization (chart). We had favored a Stay Home posture since 2010\. We reckoned it was time to rebalance overseas, especially since stocks are cheaper overseas. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-210.png) It's true that the US has accounted for about 54% of the ACW MSCI's forward earnings over the past couple of years (chart). But now, the Emerging Markets MSCI is starting to show a rising forward earnings share. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-211.png) On a technical basis, the ratio of the US MSCI to the All Country World ex-US broke below its long-term uptrend line, which began in 2010, late last year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-209.png) The comparable ratio comparing the US to other developed economies has been moving sideways since early 2025 (chart). _This post is for paying subscribers only._ ### MARKET CALL: Devil-May-Care URL: https://www.yardeniquicktakes.com/market-call-58/ Last updated: 2026-04-27T02:24:29.000Z In the autumn of 1956, Egypt's Gamal Abdel Nasser nationalized the Suez Canal. Britain, France, and Israel invaded. The canal closed for five months. Two-thirds of Western Europe's oil moved through it, and the price of crude doubled in dollar terms before the year was out. The Dow Jones Industrial Average fell about 10% from its July high to its October low. Tankers were forced to reroute. By the following spring, with the canal reopened, the DJIA had recovered and reached a new high. With the exception of the 1970s, geopolitical oil supply shocks have tended to be buying opportunities for stocks. Investors reached the same conclusion again, this time on March 31\. The fact that the Strait remains closed hasn't stopped the extraordinary stock market rally since then. Interestingly, the S&P 500 Energy and Information Technology sectors are now more overvalued relative to their 200-day moving averages than they were at the market's January 27 peak (chart). This suggests that many investors may have a barbell position across these two sectors, in case everything goes right (so IT wins) or wrong (so Energy wins). That makes sense to us since we are recommending a market weight in IT and an overweight in Energy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-196.png) This evening, the price of a barrel of Brent crude is up a couple of bucks because neither the US nor Iran showed up for another round of peace talks in Islamabad over the weekend. This morning, President Donald Trump said, "If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines." For now, the ceasefire is holding, but so are the US blockade of Iranian ports and the Iranian blockade of the Strait of Hormuz. This could be the new status quo for a while. Our base case from here is that the S&P 500 chops around 7,000 while the stalemate holds, then grinds higher in the second half of this year toward our 7,700 year-end target. That's assuming a deal by mid-year. Midterm elections drama might make the ride bumpy during the second half of this year. We think the March 30 low was the year's low. There's no shortage of uncertainty, but it is quite certain that Kevin Warsh will be the next Fed chair, now that the Department of Justice has dropped its criminal investigation of Jerome Powell over the Fed headquarters renovation overrun. Polymarket puts the odds of Kevin Warsh’s confirmation by May 15 at roughly 87%. Also relatively certain is that the economy and corporate earnings remain resilient: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: April 27-May 1 URL: https://www.yardeniquicktakes.com/economic-week-ahead-april-27-may-1/ Last updated: 2026-04-25T21:24:47.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9139-2.jpeg) This is one of the busiest weeks of the year on the economic calendar. Five major central banks meet: the Fed, the Bank of Japan, the Bank of Canada, the European Central Bank, and the Bank of England. Five mega-cap tech names report earnings: Alphabet, Amazon, Meta, Microsoft, and Apple. Wednesday brings the advance Q1-2025 GDP report, and Thursday the March PCED, which will show how much of the oil shock has hit the Fed's preferred inflation gauge. There will also be plenty of fresh survey data, with regional business surveys complementing Friday's national M-PMI print, plus the Conference Board's April Consumer Confidence Index, all on tape. The blockade of the Strait of Hormuz by *both* the US and Iran remains the overriding issue. Both the US and Iran declined to meet in Islamabad this weekend. The price of a barrel of Brent crude closed at $105.33 on Friday, almost $20 above last week's low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-190.png) With that said, let's take a look at the key releases most likely to shape investors' thinking on growth, inflation, and the central bank reaction function this week: (1) *FOMC and the global central bank docket.* All five central banks are expected to remain on hold, leaving their policy rates roughly where they've been since late 2025 (chart). As is usually the case when the rate decisions themselves are foregone conclusions, investors will be reading the official commentary closely. Fed Chair Jerome Powell's press conference on Wednesday is the main event. The pronouncements of the other central bankers all will be parsed for how they frame the oil shock, the growth slowdown, and inflation pass-through. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-47.png) (2) *GDP.* Q1-2025 GDP (Wed) is likely to be up 1.2% according to the Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model. We are still blaming bad weather in January and February for the weakness (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-193.png) (3) *Inflation*. March PCED (Thu) is the first clean read on how much of the oil shock is reaching the Fed's preferred inflation gauge. Headline PCED inflation was 2.8% y/y in February (chart). The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model projects headline inflation to rise to 3.39% y/y in March (0.59% m/m). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-50.png) The core PCED inflation rate is tracking at 3.10% y/y and 0.23% m/m (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-59.png) (4) *Unemployment*. Initial jobless claims (Thu) rose to 214,000 for the week of April 17, with the four-week moving average edging up to 210,800 (chart). Continuing claims ticked up to 1,821,000, though the four-week moving average continues to trend lower (chart). The labor market likely remained resilient during the second half of April. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-48.png) (5) *Manufacturing surveys*. Along with Friday's national M-PMI, business surveys will be released by the Dallas Fed (Mon), Richmond Fed (Tue), and Chicago PMI (Thu). The April regional composite already sits at 15.9 based on the three available surveys (chart). That suggests another solid reading for April's M-PMI. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-195.png) (6) *Consumer Confidence*. April's Consumer Confidence Index survey (Tue) might follow April's Consumer Sentiment Index lower (chart). While sentiment matters, consumers are still spending for now. The latest CCI survey might find that employment indicators are showing some signs of life, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-191.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### INFORMATION TECHNOLOGY: Creative Destruction On Speed URL: https://www.yardeniquicktakes.com/information-technology-creative-destruction-on-speed/ Last updated: 2026-04-26T04:00:44.000Z We lowered the S&P 500 Information Technology and Communication Services sectors from overweight to market weight on December 7, 2025\. We did so because the two sectors together accounted for 45% of the S&P 500's market capitalization (chart). We were also concerned about the mounting uncertainties regarding the rate of return on hyperscalers' massive AI investments. Since then, investors have concluded that the hyperscalers are also profitable semiconductor companies. Amazon, Google, and Tesla have been moving in that direction for a while. AI uncertainties have been repressed by the two sectors' record-setting forward earnings, which together account for a record 42% share of S&P 500 forward earnings. In any event, we are sticking with our advice to market-weight the two sectors simply because we still believe in diversification across sectors. It's much easier to overweight Energy (as we recommended on April 20), which accounts for only 3.3% of the S&P 500's market cap. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-38.jpg) Focusing now on the S&P 500 Information Technology sector, it is up 8.0% ytd. However, there is an unusually large spread between the winners and the losers (chart). The former are all IT hardware industries that stand to benefit from rapid AI adoption, while the latter include IT software and services that face existential risks from AI replacement. It's a classic example of Joseph Schumpeter's creative destruction model of capitalism. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-185.png) Let's have a closer look at the sector's latest dynamics: (1) High-tech accounts for a record 53.8% of nominal capital spending (chart). When the Digital Revolution began in the mid-1960s with the introduction of IBM mainframe computers, this percentage was just below 20%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-176.png) (2) Tech's fundamentals remain the strongest in the index. Forward earnings per share is up 55.0% y/y, and forward revenues per share is up 32.8% y/y through the week of April 16\. Both are the highest growth rates of any S&P 500 sector by a wide margin (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-188.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-189.png) (3) The sector's forward profit margin is 31.7%, also a sector-leading figure and the highest on record for IT (chart). The sector's underperformance this year has nothing to do with deteriorating fundamentals. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9101.png) (4) The S&P 500 Semiconductors industry now accounts for a record 41.9% of the S&P 500 Information Technology market cap, up from roughly 15% a decade ago. Further, its share of IT forward earnings has moved even higher, to 47.1% (chart). Within a few quarters, half of every dollar of IT profits could come from chips! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-184.png) (5) Analysts' consensus 2026 earnings growth forecast for S&P 500 Semiconductors has been revised up to 86.5% from 65.0% at the start of this year (chart). The 2027 growth estimate is at 44.3% and climbing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-43.png) Revenue growth forecasts tell the same story, with 2026 at 55.7% and 2027 at 34.0% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-44.png) (6) Despite that heady earnings outlook, the S&P 500 Semiconductors forward P/E is currently 20.9, slightly below the S&P 500 P/E at 21.1 (chart). This multiple exceeded 35.0 in 2024\. The industry most beneficially exposed to AI, the defining growth theme of the Roaring 2020s, is trading at a discount to the market! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-46.png) (7) The unhappier side of IT tells the opposite story. The S&P 500 Application Software forward P/E has compressed to 23.4, the lowest reading since 2014, and is roughly half the 2021 peak of 53.7 (chart). The industry's forward revenues, earnings, and profit margin all are at record highs. Investors are anticipating that these fundamentals all will deteriorate as AI adoption becomes more widespread. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-42.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Stock Market Rally Isn't Running Out of Fuel. US Economy Still Acing Stress Tests. URL: https://www.yardeniquicktakes.com/stock-market-rally-isnt-running-out-of-fuel-us-economy-still-acing-stress-tests/ Last updated: 2026-04-26T04:56:25.000Z President Donald Trump may have to write a sequel to his 1987 book, "Trump: The Art of the Deal." It's hard to make a deal if you kill your opponent. He said that about Iran today again: "They’re all messed up. They have no idea who their leader is... We took out, really, three levels of leaders... So they have a hard time figuring out who the hell can speak for the country." Reports surfaced today that Mohammad Bagher Ghalibaf, the Speaker of the Iranian Parliament and Tehran's lead negotiator, has resigned from the negotiating team. He allegedly did so due to persistent interference from the hardliners in the Islamic Revolutionary Guard Corps. As a result, Brent is back up to $100 a barrel this evening. However, the futures market is still signaling a sharp decline over the next 12 months (chart). That's certainly a possible outcome, but why isn't the price of oil much higher today since the Straight of Hormuz has been effectively shut to navigation since February 28, when the war started? Oil is leaving the Middle East via pipelines and oil truck convoys. Also, Russia is supplying more oil to both China and India. Japan is buying oil from Mexico. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-173.png) Apparently, the US stock market can live with $100 oil for now. Indeed, sentiment has turned more positive as can be seen in the latest readings of our two favorite Bull/Bear Ratios (chart). They aren't high enough to give us pause about the stock market rally that started on March 31. _This post is for paying subscribers only._ ### Warsh, Rinse, Repeat URL: https://www.yardeniquicktakes.com/warsh-rinse-repeat/ Last updated: 2026-04-26T04:56:38.000Z We are Fed Watchers. In his Senate Banking Committee hearing yesterday, Kevin Warsh suggested that under his leadership, we might have less to watch. He advocated ending current "forward guidance" practices, which means no more quarterly Summary of Economic Projections, including the Dot Plot (chart). He suggested that a press conference after FOMC meetings should only be held when there is "important news" to deliver, rather than as a mandatory, periodic routine. He implied that the volume of current Fed speaking engagements may be excessive and counterproductive to clear policy signals. Under his leadership, the Talking Fed Heads on the Federal Open Mouth Committee will talk less. Woe with us! What are we going to do for a living? ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-36.jpg) (1) *Warsh on inflation*. At least Warsh didn't call for abandoning the 2% inflation target in his "regime change" (chart). But he argued for a "stricter approach" to inflation targeting and a "new inflation framework" to replace the current regime. Warsh heavily criticized the "Flexible Average Inflation Targeting" (FAIT) framework adopted under Jerome Powell in 2020\. He described it as a "fatal policy error" because it intentionally allowed inflation to run above 2%, which he argued led to the post-pandemic price surge. He advocated for narrowing the Fed's focus back to its "core mandate" of price stability, implying a return to a more rigid interpretation of the target. Instead of changing the inflation target, Warsh wants to move the Fed away from using the PCED inflation rate. He explicitly stated a preference for "trimmed averages" and "median measures." However, they tend to understate inflationary pressures. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Debating Warsh URL: https://www.yardeniquicktakes.com/weekly-webcast-debating-warsh/ Last updated: 2026-04-26T04:56:46.000Z Kevin Warsh, the probable next Fed chair, wants to lower the federal funds rate sooner rather than later. Few FOMC members agree with him. Ed and Elias don’t either. Today, they explain why Warsh’s case for lower rates is fundamentally flawed. It rests on the economic dogma that, because the labor share of National Income is declining amid an AI-fueled productivity boom, the theoretical neutral federal funds rate, R\*, is also declining. On the contrary, explain Ed and Elias, the productivity boom raises R\* for reasons unique to the current economic backdrop. That leaves little room for the aggressive rate cuts Warsh envisions without risking speculative bubbles and a financial crisis. Also, the Bond Vigilantes would probably resist Fed easing, as they have since 2024\. … Ed reviews “Anniversary” (++). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Power Vacuum In Iran Isn't Fazing US Economy URL: https://www.yardeniquicktakes.com/power-vacuum-in-iran-isnt-fazing-us-economy/ Last updated: 2026-04-26T04:36:28.000Z What if the US won the war, but Iran can't surrender because no one is in charge over there? To make a deal, President Donald Trump needs someone to deal with. He was hoping to strike a deal this week in Islamabad, but the Iranians declined to meet because they are too busy fighting among themselves. Indeed, Trump, today, said that he extended the ceasefire because "the Government of Iran is seriously fractured, not unexpectedly so," a reference to US-Israeli assassinations of many of the country's leaders. That seems to explain why President Donald Trump decided to extend the ceasefire indefinitely today. So, the US continues to blockade Iran's ports, while the Islamic Revolutionary Guard Corps continues to effectively close the Strait of Hormuz. The Iranian's figure Trump is setting them up for another surprise attack. They might be right. Or else, Trump may view the current situation as an acceptable status quo for now. If so, that means that oil prices will remain higher for longer than Trump predicted. On the home front, higher-for-longer gasoline prices could raise concerns about consumer spending and the sustainability of the stock market rally. Nevertheless, we remain optimistic about the resilience of the economy and corporate earnings. Consider the following: (1) *Consumer spending.* Today's retail sales report showed a solid 1.7% m/m gain in March (chart). But it was fueled by a 15.5% jump in gasoline prices. The retail sales control group rose 0.7%, up from 0.6% in February. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-35.jpg) The Redbook Retail Sales Index of same-store sales for the week ending April 18 showed a solid gain of 6.7% y/y (chart). The index does not include gasoline sales. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-152.png) (2) *GDP.* After adjusting retail sales for inflation, the Atlanta Fed's GDPNow model raised the real personal consumption expenditures estimate for Q1 from 0.9% to 1.4%, and real GDP was revised up from 0.9% to 1.2% (chart). Both numbers are relatively weak. However, we believe that unusually severe winter weather depressed consumer spending and the economy during January and February. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-158.png) The Weekly Economic Index (WEI) is a high-frequency tracker designed to provide a real-time "nowcast" of the US economy. It was originally developed by the New York Fed in 2020 to monitor the rapid shifts of the pandemic. WEI has been relatively steady around 2.5% for the past year (chart). It rose to 2.8% during the week of April 10. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-160.png) (3) *Employment*. ADP data for the four weeks ending on April 4 showed private sector employers adding an average of more than 54,000 jobs per week, the best pace so far this year (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-163.png) INDEED job postings have been trending higher since late last year (chart). Contrary to popular belief, job postings for software developers are soaring! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-161.png) A recent ZipRecruiter [report](https://www.ziprecruiter-research.org/annual-grad-report?ref=yardeniquicktakes.com) states: "Despite the challenging conditions, the share of recent grads who landed a role within three months of graduating rose from 63.3% a year ago to 77.2% today, reflecting the work they’re putting in to break into the labor market." (4) *Tax refunds vs gasoline spending.* Our in-house analysis shows that the increase in income tax refunds from the One Big Beautiful Bill Act more than offsets the rise in gasoline spending since the outbreak of the war (chart). We estimate that the refund tailwind exceeds the gasoline headwind by more than $20 billion as of early April. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-162.png) Americans spent only 1.9% of their consumption on gasoline during February (chart). That's the lowest reading since the pandemic! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-154.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ENERGY: A Buying Opportunity URL: https://www.yardeniquicktakes.com/energy-a-buying-opportunity/ Last updated: 2026-04-21T02:53:56.000Z We gave up on the S&P 500 Energy sector a couple of years ago. It has been underperforming the S&P 500 since late 2022 (chart). As a result of the latest war in the Middle East, it has been an outperformer since the beginning of this year through Friday, March 27\. The sector has been underperforming again since then, when President Donald Trump suggested that the war would end soon. We are inclined to use the recent selloff to overweight the sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-146.png) That's because we reckon that the price of a barrel of Brent crude oil will fluctuate between $75 and $95 once the war ends. We don't think it will fall back to the pre-war range of $55-$75 anytime soon (chart). Importantly, physical damage to energy infrastructure in the countries around the Arabian Gulf, combined with fundamental changes in maritime insurance and transit confidence, means that even a full reopening of the Strait of Hormuz would not immediately restore normal flows. The supply shock is likely to have a long tail. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/47XDHBC.jpg) Of course, if the war isn't over, then overweighting the S&P 500 Energy sector makes even more sense. The current two-week ceasefire is scheduled to end on Wednesday evening, April 22\. Iran refuses to engage in another round of negotiations unless the US ends the blockade of Iran's ports. Let's consider the implications of a $75-$95 oil price to the US economy, the domestic oil industry, and oil stock prices: (1) *US economy*. The US economy is far better equipped to absorb oil price shocks than it was many years ago. The ratio of US petroleum products supplied (a measure of physical demand) to US real GDP has been in a secular downtrend since the early 1990s (chart). The economy now requires roughly half as many petroleum inputs to generate the same unit of output as it did in the early 1990s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-139.png) (2) *US oil industry.* The US energy sector has undergone a quiet structural revolution over the past four decades. The active rig count peaked in the early 1980s and has never come close to those levels since, reflecting a fundamentally leaner and more technologically advanced industry that today wrings far more production from each well than at any prior point in history. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-141.png) US domestic production has climbed relentlessly, exceeding domestic petroleum consumption in 2023 (chart). This has reduced US vulnerability to geopolitical supply shocks. US production is best measured as oil field crude output (currently 13.6 mbd) plus natural gas plant liquids and renewable fuels (currently 10.0 mbd). _This post is for paying subscribers only._ ### MARKET CALL: Animal Spirits Are Back URL: https://www.yardeniquicktakes.com/market-call-animal-spirits-are-back/ Last updated: 2026-04-20T02:29:23.000Z When Kaiser Wilhelm II's Germany and Tsar Nicholas II's Russia squared off in the summer of 1914, the London Stock Exchange closed for five months. The New York Stock Exchange shut for four months. Investors assumed a continental war would be a calamity. World War I was a calamity for sure. However, by 1915, the NYSE had reopened, and the DJIA more than doubled by late 1916\. Last week, we wrote that the financial markets may be learning to live with the war in the Middle East, much as they learned to live with the war between Ukraine and Russia. We will get a test of that notion on Monday, given that crude oil prices are up around $5 a barrel this evening amid renewed tensions in the Strait of Hormuz. The S&P 500 is up 12.3% to a new record high over the past three weeks since it bottomed on March 30\. The leader board reads like a risk-on checklist (chart). Leading the way have been Growth and Momentum stocks that fell hardest during the pullback from January 27 to March 30\. DJTA is up 24.4% since March 30\. LargeCap Pure Growth is up 20.6%. The Magnificent-7 is up 20.0%. SmallCaps and MidCaps are participating too. This is a broad melt-up. For now, animal spirits are back in the stock market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-30.jpg) The Nasdaq 100 Relative Strength Index (RSI) has seen the fastest oversold-to-overbought transition in its 40-year history over this period (chart). The war may not be over, but the stock market is trading as though it will be soon. We agree. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-33.jpg) We called the bottom after the strong close on March 31, and now our 7,700 target for the S&P 500 looks achievable by the end of this year, if not sooner. But, again, let's see how the market trades on Monday. For now, we are back to 60% odds for our Roaring 2020s base case, 20% for a Meltup, and 20% for a Meltdown. Now, let's look under the hood at the resilient earnings fundamentals which are powering this bull market: (1) While the Magnificent-7 have led the rally since the March 30 bottom, stock market breadth should broaden, given that earnings breadth remains strong. The share of S&P 500 companies with positive 12-month forward revenue growth is 86.6%, and the share with positive forward earnings growth is 81.8% (chart). Both readings are near previous cycle highs. _This post is for paying subscribers only._ ### INDUSTRIALS: Earnings & P/E Multiples Boosted By Booming AI, Onshoring & Defense Spending URL: https://www.yardeniquicktakes.com/industrials-earnings-p-e-multiples-boosted-by-booming-ai-onshoring-defense-spending/ Last updated: 2026-04-19T04:00:30.000Z We continue to recommend overweighting the Industrials sectors in the S&P 500, the S&P 400, and the S&P 600\. Granted, their valuation multiples are high, but so are their earnings growth rates. The sector's three major indexes all remain on solid uptrends that started in 2022 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-113.png) The S&P 500 Industrials sector is up 11.9% ytd, the third-best performing sector behind Energy and Materials (chart). Thursday's March industrial production report showed a 0.5% m/m decline. However, the decline was driven by weather-related utility output and a drop in motor vehicle production, which should rebound in April since auto sales were strong in March. The index remains near its all-time high and is up 0.7% y/y. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-131.png) Onshoring, supply-chain diversification, defense rearmament, and the energy infrastructure demands of AI are creating a multi-year capex boom that the sector hasn't seen in decades. It's no coincidence that the S&P 500’s three best-performing sectors so far this year are Energy, Materials, and Industrials. The structural story is compelling. Consider the following: (1) The forward earnings per share of the S&P 500 Industrials sector has been rising at a faster pace since the beginning of the year to fresh record highs (chart). No wonder that the sector's forward P/E has been doing the same. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-127.png) The sector's forward revenues per share has been rising to record highs since last year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-121.png) Furthermore, the forward profit margin of the sector has also been making new highs since late last year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-122.png) (2) The sector's forward P/E has increased from roughly 16.0 in late 2022 to 25.5 today, compared with 20.9 for the broader index currently (chart). Industrials has historically traded in line with or below the broader market multiple, so the 4.6ppt premium is unusual. The sector has been repriced as a structural play on AI, onshoring, and domestic capacity investment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-114.png) (3) The stock price indexes of most of the sector's major industries are soaring: Construction Machinery & Heavy Trucks industry is up 31.7% ytd, Electrical Components & Equipment is up 20.5%, and Air Freight & Logistics is up 17.2% (chart). They are the onshoring and electrification trades. The drop in oil prices late last week gave a big boost to Transportation, led by Passenger Airline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-130.png) (4) The forward earnings of the Construction Machinery & Heavy Trucks industry index (comprising CAT, CMI, PCAR, WAB shares) has been rebounding strongly to record highs since spring 2025, which has boosted the forward P/E from under 15 to over 25 (chart). This industry has been propelled by the data center and manufacturing building booms. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-128.png) (5) The S&P 500 Electrical Components & Equipment (AME, EMR, ETN, GNRC, HUBB, ROK, VRT) index tells a similar story: AI needs lots of power. Forward profit margins have surged to 17.8%, more than doubling since the Great Financial Crisis. This industry is the picks-and-shovels play on the AI data center buildout and power grid modernization. The market is paying a hefty multiple, 28.7 times forward earnings, for the structural growth story (chart). (There was a one-time reset of the industry’s forward earnings when Vertiv was added during quarterly reindexing in March.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-124.png) (6) Industrial Machinery (DOV, FTV, IEX, IR, ITW, NDSN, OTIS, PH, PNR, SNA, SWK, XYL) rose to record forward earnings in mid-April as both forward revenues and the forward profit margin (at 16.0) hit record highs (chart). The forward P/E is currently 22.2. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-126.png) (7) Aerospace & Defense (AXON, BA, GD, GE, HII, HWM, LHX, LMT, NOC, RTX, TDG, TXT) now has a forward P/E of 32.5, well above its historical 15-20 range (chart). Geopolitical conflicts are boosting defense spending, driving up forward revenues and earnings. The forward profit margin remains relatively low at 8.6% currently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-132.png) (8) Air Freight & Logistics (CHRW, EXPD, FDX, UPS) has been in a downward trend since 2022\. That may be over, as the industry's stock price is rising on a recent rebound in forward earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-125.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: April 20-24 URL: https://www.yardeniquicktakes.com/economic-week-ahead-april-20-24/ Last updated: 2026-04-22T03:54:58.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/Screenshot-2026-04-18-101235.png) The week starts with the Strait of Hormuz still the key risk for financial markets. Today, Iranian state media said the Strait has been closed again because the US “did not fulfill their obligations.” Iran had declared it was open on Friday. A renewed US diplomatic push could send senior officials back to talks as early as Monday, but no date has been finalized, and the situation remains fluid. In the US, the average pump price remained above $4.00 during the week of April 13 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-119.png) Adding to the week’s suspense, the probable next chief of the Federal Reserve, Kevin Warsh, testifies before the Senate at his confirmation hearing on Wednesday. The markets will be listening to how he views the Fed’s independence, the Fed's dual mandate, and the Fed's sequencing of rate decisions given the current economic backdrop. Earnings season adds another layer of complexity, with expectations remaining remarkably resilient despite the war in the Middle East (chart). Guidance is likely to be focused on geopolitical uncertainty. This week’s economic data and the corporate tape arrive simultaneously, and together they will do more to set the near-term vibe for equities than any Fed speaker except perhaps Warsh himself. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9019.jpeg) With that said, let’s take a look at the key US economic releases most likely to shape investors' thinking on the labor market, business activity, and sentiment this week: (1) *Retail sales.* March retail sales (Tue) will be the first hard data on consumers since the war started. Despite winter storms, February's category breakdown was unambiguously strong with health & personal care up 2.3%, clothing up 2.0%, and motor vehicles up 1.2%. Only furniture & furnishing stores and food & beverage stores were down that month (chart). The latter's weakness was probably weather related. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9038.jpeg) The weekly Redbook Retail Sales index suggests that the pace of consumer spending at retail stores remained solid during March and April (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9037.png) (2) *Unemployment.* Initial jobless claims fell to 207,000 for the week of April 10, with the four-week moving average edging up slightly to 209,800 (chart). Continuing claims ticked up to 1,818,000, though the trajectory still suggests that the duration of unemployment is shortening. Despite geopolitical uncertainties, most employers are not cutting their headcounts. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9036.png) (3) *Flash PMIs.* The April flash PMIs (Thu) might hint at some war-related effects. March's final readings showed that manufacturing and non-manufacturing PMIs held comfortably above 50.0 at 52.7 and 54.0, respectively, and Thursday's flash will be the first April read on whether that resilience is holding (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9041.png) (4) *Consumer sentiment.* The University of Michigan will report its final April Consumer Sentiment Index reading on Friday. The preliminary print came in at 47.6, with current conditions at 50.1 and expectations collapsing to 46.1—levels last seen during the Great Financial Crisis (chart). Soaring gasoline prices are doing the damage. The revisions will tell us whether the preliminary read was peak anxiety or the beginning of a more persistent deterioration in sentiment. Given recent events, we wouldn't be surprised to see an uptick in sentiment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_9039.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Stock Market Highs Confirm US Economy Is A Winner URL: https://www.yardeniquicktakes.com/stock-market-highs-confirm-us-economy-is-a-winner/ Last updated: 2026-04-17T01:58:05.000Z The message from the stock market is clear: The US economy is passing another stress test. Both domestic and foreign investors have shifted their attention from the risks of military escalation in the Middle East back to the remarkably consistent resilience of the US economy. The results are all-time highs in equities and a fresh wave of buying by both domestic and foreign investors. Even Michael Burry is reportedly buying the dip in software stocks after the AI-fueled sell-off (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-104.png) Contrary to the popular view, foreign investors continue to be net buyers of US stocks and bonds. The monthly Treasury International Capital System (TICS) data show net capital inflows from abroad remain robust. Private and official accounts combined purchased $1.35 trillion in US securities during the 12 months ended with February (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-28-1.png) Over this same period, net purchases of US bonds and equities by private foreign investors totaled $828.9 billion and a near-record $716.7 billion, respectively (chart). _This post is for paying subscribers only._ ### The Champagne Glass Is More Than Half Full URL: https://www.yardeniquicktakes.com/the-champagne-glass-is-more-than-half-full/ Last updated: 2026-04-16T02:40:33.000Z Happy days are here again! The S&P 500 and Nasdaq rose to record highs today, which just happens to be tax day. What's all the excitement about? The AI bubble hasn't burst, so far. Instead, hyperscaler stocks are leading the charge since the stock market bottomed on March 30 (chart). The private credit bubble may be losing some air, but it isn't bursting, while banks are still lending. Real GDP slowed during Q4-2025 and Q1-2026, but some of that was related to bad weather. As Chauncey Gardiner correctly predicted, "There will be growth in the Spring." In any event, S&P 500 earnings rose at a faster pace during the past two quarters to fresh record highs. And investors fear missing out on peace (FOMOOP) in the Middle East. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-100.png) Before the war started, we anticipated a stock market pullback because our two favorite Bull-Bear Ratios were too bullish (chart). At the end of the day on March 31, we said the market bottomed on March 30, partly because these two contrarian indicators had turned too bearish. They both rebounded over the past week, but remain relatively bearish, which is bullish, from a contrarian perspective. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: On US Profits, Consumers & Inflation URL: https://www.yardeniquicktakes.com/weekly-webcast-on-us-profits-consumers-inflation/ Last updated: 2026-04-15T13:00:03.000Z With the US economy producing record-breaking earnings and margins, Dr Ed and Elias wouldn’t be surprised to see employment pick up despite AI adoption and other factors holding it back. … They also expect consumer spending to remain resiliently robust even though income growth isn’t keeping up, which is depressing the saving rate. But not even a negative saving rate—which may occur—would tank consumer spending in today’s environment, they maintain. The spending of retired Baby Boomers would keep it afloat. … Also: CPI inflation historically runs higher than PCED inflation; lately, the reverse is true. That’s mostly because rent inflation, which is moderating rapidly, carries more weight in the CPI. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Mr. Market Says The War Is Over URL: https://www.yardeniquicktakes.com/mr-market-says-the-war-is-over/ Last updated: 2026-04-15T03:17:32.000Z The S&P 500 is now up 1.3% since Friday, February 27, the day before Gulf War III started (chart). So as far as the stock market is concerned, the war is over until further notice. The index will be at a new record high tomorrow if it increases by more than 11.22 points! It has been yet another V-shaped buy-the-dip recovery in the S&P 500\. It has also been another buying opportunity arising from a geopolitical crisis, as we previously observed when we called the March 30 bottom the following day. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-99.png) It has also been another momentum-led rebound, similar to last year's explosive rally that started on April 9, when President Donald Trump postponed his Liberation Day tariffs (chart). The S&P 500 equal-weighted index has underperformed the S&P 500 market-weighted index so far. Since the latest pullback bottomed on Monday, March 30, the former and the latter have risen 6.1% and 9.8%, respectively. Over this same period, the MAGS ETF is up 14.8%, while the XMAG ETF is up 8.1%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-97.png) Interestingly, Wall Street's investment strategists didn't flinch. At the end of last year, they predicted, on average, that the year-end S&P 500 would be 7,555\. Now, the average is about the same at 7,459\. We are still at 7,700 (chart). _This post is for paying subscribers only._ ### ROARING 2020s: Wall Street's Analysts Even More Bullish On Earnings Than Us! URL: https://www.yardeniquicktakes.com/roaring-2020s-wall-streets-analysts-even-more-bullish-on-earnings-than-us/ Last updated: 2026-04-14T02:05:44.000Z The US economy remains resilient, and so do corporate earnings. The US economy has passed several stress tests in recent years. The war in the Middle East is proving to be the latest stress test for the US economy, which seems to be passing it, so far. The macroeconomic data released in recent weeks confirms this resilience. The pre-war growth trajectory was solid enough that we were on the verge of raising our already bullish earnings estimates for 2026 and 2027\. The war stopped us from doing that. It seems Wall Street analysts haven't received the memo about the war. Their consensus estimates for S&P 500 revenues and earnings for this year and next year have been rising noticeably in recent weeks. We thought our pre-war estimates were bullish. The analysts are even more bullish. For now, we are sticking with our pre-war earnings forecasts, which support our 7,700 forecast for the S&P 500 by the end of this year. It could be higher if the analysts' estimates hold. Consider the following: (1) *RPS*. The analysts' consensus estimates for 2026 and 2027 revenues per share (RPS) are very optimistic, with gains of 8.5% and 7.6% projected (chart). The average annual growth rate of RPS since 1993 is 4.3%, though that includes expansions and recessions. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-91.png) (2) *EPS*. The analysts are similarly bullish about S&P 500 operating earnings per share (EPS). The consensus currently has 2026 EPS at $323.73 versus our estimate of $310\. For 2027, the analysts’ current estimate is $377.94 versus our estimate of $350 (chart). They expect EPS to increase by 19.3% this year and 16.7% next year. The average annual growth rate of actual EPS since 1993 is 8.8%, including booms and busts. _This post is for paying subscribers only._ ### MARKET CALL: Yogi Was Right: 'The War Ain't Over Till It's Over' URL: https://www.yardeniquicktakes.com/market-call-57/ Last updated: 2026-04-13T02:09:06.000Z In his seminal work, *On War* (1832), Carl von Clausewitz famously wrote: "War is the continuation of politics by other means." The US and Iran agreed to a ceasefire in their war and to talks seeking a diplomatic solution. However, their talks failed, and now they are both resuming the war. On Sunday, US Central Command said the Navy will blockade all maritime traffic entering and exiting Iranian ports on Monday at 10 a.m. ET. The markets reacted swiftly on Sunday: The prices of Brent and WTI crude oil jumped by about $8 a barrel each, putting them a bit north of $100\. The dollar firmed slightly. Gold fell about $100 an ounce. Futures prices for the DJIA/S&P 500/Nasdaq fell a little over 1%. The financial markets may be learning to live with the war in the Middle East, as they have with the war between Ukraine and Russia. China imports lots of Iranian oil. The White House clearly is leaning on China to pressure Iran to end the war, and also threatened today to impose a 50% tariff on China if Beijing sends advanced defense equipment to Tehran. President Donald Trump offered to facilitate the sale of cheaper oil from Venezuela to China. The unusual negative spread between the Brent and WTI prices suggests that traders believe that foreign demand for US crude oil is increasing as an alternative to oil supplied by Arabian Gulf producers (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-13.jpg) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: April 13-17 URL: https://www.yardeniquicktakes.com/economic-week-ahead-april-6-10-2/ Last updated: 2026-04-12T23:53:10.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/Screenshot-2026-04-12-175500.png) The unresolved Middle East conflict will remain center stage this week. It is having an immediate impact on energy prices in the United States. The US blockade of the Strait of Hormuz will push prices up again at the start of the week. The impact on the US inflation pipeline remains the dominant macroeconomic theme, ahead of Tuesday's March PPI release. A relatively quiet week on the economic data front means attention will also fall heavily on the Talking Fed Heads, including Barr, Barkin, Collins, Goolsbee, Bowman, Williams, and Waller, as the blackout period for public speaking approaches. ECB President Lagarde speaks on Tuesday and BoE Governor Bailey on Wednesday, adding an international dimension to the central bank narrative. Here are the key US economic releases most likely to shape investors' thinking on inflation, the labor market, and business activity this week: (1) *PPI.* The March PPI report (Tue) will show that the headline and core inflation rates of this measure of producer prices heated up significantly last month. They were already heating up during February before the war started (chart). Both are likely to rise to 4.0% y/y. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-82.png) The ISM prices-paid indexes rose sharply in March, indicating that inflationary pressures on the PPI will build over the next six months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-83.png) (2) *Unemployment.* Initial jobless claims (Thu) ticked up to 219,000 for the week of April 3, with the four-week moving average rising to 209,500, its first uptick in several weeks (chart). Continuing claims fell to 1,794,000, with the trajectory suggesting that the duration of unemployment may be shortening (chart). This week's data are likely to confirm that the labor market remains resilient; the energy shock has yet to hit it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_8909.png) (3) *Industrial production.* Industrial production (Wed) stood at 102.6 in February, with manufacturing at 97.6, still below their pre-pandemic highs (chart). However, both have been trending higher since early 2025 while manufacturing hours worked have been relatively flat, suggesting that productivity is growing. We expect more of the same in March, with strong gains in output of information technology hardware and defense. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-18.jpg) (4) *Business & regional surveys.* April's regional Fed surveys will be the first forward-looking reads on business conditions since the war started, with the NY Fed (Wed) and Philly Fed (Thu) surveys due. Both tend to be very volatile (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-85.png) The March NFIB Small Business survey (Tue) will offer insights on how small businesses are responding to the war. The NFIB Optimism Index stood at 98.8 in February, just above its long-run average of 97.9 (chart). It dropped sharply during the energy shock in 2022\. It is likely to do so again. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_8908.png) We will also be watching the labor market indicators in the NFIB survey for indications that the war is depressing hiring plans (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-84.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### FINANCIALS: Private Credit Fears Creating Attractive Values URL: https://www.yardeniquicktakes.com/financials-private-credit-fears-creating-attractive-values/ Last updated: 2026-04-12T04:00:31.000Z The big money center banks will report their Q1 earnings this coming week. They are included in the S&P 500 Financials sector, which has been the worst-performing one in the S&P 500 this year to date, down 7.3% through April 10, compared with a broadly flat market over this period (chart). One of the major culprits is the gathering storm in private credit. It has rattled investor confidence in the sector, dragging everything from asset managers to consumer lenders along. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-65.png) Nevertheless, the stock market is not pricing a systemic financial problem into stock prices. Regional Banks are up 2.6% ytd while Consumer Finance is down 17.2%, a significant spread within a single sector (chart). Diversified banks are off just 2.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-67.png) The sector has participated in the stock market rally that started on March 31 and remains on a solid upward trend (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-81.png) Furthermore, while there are cracks in the "shadow" banking system, commercial banks are actually increasing their lending (chart). There's no sign of a credit crunch in the Fed's weekly bank loan data. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/IMG_8877.png) Of course, investors have other concerns about the banks, including the cap on credit card rates Washington has proposed; the increase in consumer delinquencies, worsened by higher energy prices; and the possibility that the Fed might have to raise interest rates if inflation proves persistent rather than transitory (again). Nevertheless, the Fed's weekly data on banks' allowances for loan losses remain relatively low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-69.png) Forward earnings, calculated from the weekly consensus estimates of analysts who cover the sector, has continued to rise to record highs, led higher by S&P 500 Diversified Banks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-73.png) The S&P 500 Financials sector has a forward profit margin of 21.5%, the second highest in the S&P 500\. The S&P 500 Diversified Banks forward profit margin is currently 26.9. If the economy continues to grow, as we expect, the forward P/E of the S&P 500 Financials, currently 14.6, is a relatively attractive valuation multiple (chart). The consensus is that the sector's earnings rose 17.8% y/y in Q1, the second-highest among the 11 S&P 500 sectors, behind only Information Technology. With the sector trading at a 27% discount to the broader market, the bar for an upside re-rating is not high. To us, it's a constructive setup. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-76.png) The private credit stress is real and localized, concentrated in direct-lending vehicles with genuine structural issues, including liquidity mismatches and mark-to-model valuations. But the reflexive de-rating of the entire Financials sector isn’t warranted; it unduly conflates the problem in the shadow banking system to a problem for the health of regulated banks, insurers, and diversified lenders—none of which are seriously exposed to the private credit stress. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### How Transitory Is The Inflation Problem Ahead? URL: https://www.yardeniquicktakes.com/how-transitory-is-the-inflation-problem-ahead/ Last updated: 2026-04-10T03:14:48.000Z This evening, Reuters reports that ship traffic through the Strait of Hormuz was well below 10% of normal volumes on Thursday, despite the US-Iran ceasefire. Tehran asserted its control by warning ships to remain within its territorial waters as they passed through the Strait to avoid mines. As we've noted previously, geopolitical crises tend to provide buying opportunities in the stock market. Sure enough: Following a 9.1% pullback from January 27 through March 30, which occurred mostly in March because of the war, the S&P 500 is up 7.6% through today's close, led by a 9.6% rise in the Magnificent 7. Stock investors are clearly betting that the hot war will continue to cool off. That's been our bet since late Tuesday, March 31, when we wrote that the market probably bottomed the day before. On the other hand, we think that bond investors should be more concerned that inflation was heating up just before the war, and now will continue to do so, probably through the end of this year. We are still counting on productivity to offset the war's inflationary consequences. But we are on alert. Here's why: **Pre-War Inflation** During January and February, the two months before the war, the CPI inflation rate was slightly cooler than expected at 2.4% y/y in both months. However, both the headline and core PPI inflation rates were hotter than expected. So was import price inflation, which was expected to moderate as the effects of Trump's 2025 tariffs wore off. Today we learned that the headline and core PCED price indexes both rose 0.4% m/m in February. On a year-over-year basis, both measures stopped falling and stalled around 3.0% (above the Fed's 2% inflation target) over the past year as Trump's tariffs boosted goods prices, especially durable goods prices (chart). Services inflation continued to moderate, led by cooling shelter inflation. _This post is for paying subscribers only._ ### As Yogi Said: 'It Ain't Over Till It's Over' & 'It's Déjà Vu All Over Again' URL: https://www.yardeniquicktakes.com/as-yogi-said-it-aint-over-till-its-over-its-deja-vu-all-over-again/ Last updated: 2026-04-09T03:03:54.000Z The fog of war has been replaced by the fog of the ceasefire between the US and Iran. Negotiators for the two countries will meet in Islamabad on Friday. They met many times before without averting the war. The pounding of Iran by the US and Israel has failed to topple Iran's regime, which still seems to have firm command and control of the country despite the decapitation of its leadership during the first day of the war. The Islamic Revolutionary Guard Corps remains intact, capable of firing missiles and drones, and has effectively taken over the Strait of Hormuz. The American negotiators will still insist that Iran abandon its nuclear program and surrender its stash of enriched uranium. But now they also need to get the Iranian regime to reopen the Strait as a free passageway for navigation in accordance with international law. Given all the above, today's latest relief rally in the stock market might have reflected more short covering than outright buying. Still, it was impressive to see the S&P 500 rebound back above both its 200-dma and 50-dma (chart). Moreover, during the 9.1% pullback since January 27, the 50-dma has remained above the 200-dma. We still think that the S&P 500 bottomed on Monday, March 30, at 6343.72\. It is up 6.9% since then and down only 2.8% from its record high on January 27. At the start of this year, we expected the stock market to be choppy in the first half, though we didn't anticipate the war. It is likely to remain choppy until ships can sail freely through the Strait. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Anatomy Of The US Labor Market URL: https://www.yardeniquicktakes.com/weekly-webcast-anatomy-of-the-us-labor-market/ Last updated: 2026-04-08T13:00:00.000Z Last week's employment report was widely interpreted as good because jobs growth rebounded and the unemployment rate dropped. Dr Ed and Elias disagree. Our inflation-adjusted Earned Income Proxy fell as inflation surged, a bad sign. Moreover, the jobs growth required to keep unemployment stable (the "breakeven rate") has collapsed, so a dropping unemployment rate must be evaluated in that context. Both labor supply and labor demand have contracted in recent months but remain roughly in balance. In sum, it's too simplistic to evaluate payroll reports against the old benchmarks. Folks who do are likely to draw the wrong conclusions. Also noteworthy: Retiring Baby Boomers are weighing on real disposable income while simultaneously bolstering consumer spending. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Apocalypse Now, Not! Lowering Recession Odds. URL: https://www.yardeniquicktakes.com/apocalypse-now-not-lowering-recession-odds/ Last updated: 2026-04-08T03:35:32.000Z Two hours before his latest deadline, President Donald Trump canceled Obliteration Day. He agreed tonight to a two-week ceasefire with Iran. The deal was brokered by Pakistan. Trump confirmed the US had received a 10-point proposal from Iran as a basis for negotiating a permanent peace agreement. Israel separately agreed to suspend its bombing during negotiations. The market reaction was swift. Crude oil prices tumbled, while S&P 500 and Nasdaq 100 futures climbed. Bond yields edged lower. The dollar weakened, and gold moved higher. The ceasefire confirms our call last week on Tuesday night that the S&P 500 had bottomed on Monday. Our favorite stock market sentiment indicator remained bearish this week, which is bullish from a contrarian perspective (chart). However, a two-week pause is not a resolution. Financial markets will remain sensitive to any breakdown in talks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-55.png) Let's consider the consequences on the home front. As we signaled last week, we are lowering the risk of a recession back down to 20% from 35%. Recently released data suggest the US economy was on a resilient growth path heading into the latest oil price shock and even through March when the war was raging. The labor market seems to be improving by some measures. _This post is for paying subscribers only._ ### Oil Price Shock Boosts March Prices-Paid PMIs URL: https://www.yardeniquicktakes.com/oil-price-shock-boosts-march-prices-paid-pmis/ Last updated: 2026-04-07T02:37:25.000Z Tomorrow night at 8:00 p.m. is the deadline by which Iran must accept President Donald Trump's ultimatum to reopen the Strait of Hormuz or face a US attack on its power plants and bridges. There is no way to predict the outcome. We can't rule out that Iran will cave in. Or, Trump may postpone the deadline again, explaining that negotiations are making progress. Or the war will escalate. The fog of war remains thick. Nevertheless, we expect that one way or another, Trump will declare victory in two to three weeks. If so, then the US economy should continue to grow, with a brief period of higher inflation. That's the initial verdict of the March national Purchasing Managers Indexes for both the manufacturing (M-PMI) and non-manufacturing (NM-PMI) sectors of the economy. Consider the following: (1) *Inflation in the PMIs.* The sum of the prices-paid indexes for the M-PMI and NM-PMI is back to its level at the end of 2022 (charts). It tends to lead both the PPI and CPI inflation rates by about six months. So, both inflation rates are likely to rise in the coming months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-45.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-46.png) (2) *M-PMI & the Economy*. The manufacturing sector is likely to benefit from defense and energy spending resulting from the war. So it is no surprise to see that M-PMI rose in March to 52.7, the highest level since 2022, marking the third consecutive month of expansion following about three years of readings mostly below 50.0 (chart). Production posted its fifth straight month in expansionary territory, and new orders held comfortably in growth territory for a third consecutive month. Employment stayed in modestly contractionary territory. _This post is for paying subscribers only._ ### MARKET CALL: The Tug Of War Between P/E And E URL: https://www.yardeniquicktakes.com/market-call-56/ Last updated: 2026-04-06T13:14:04.000Z Last Monday saw the S&P 500 down 9.1% from its January 27 high, which we believe marks the trough of the latest pullback, for now. That was our call on Tuesday. The next two days could make or break our call. Today, President Donald Trump issued a final, profanely worded ultimatum, setting a firm deadline for what he is calling "Power Plant Day." He specified on Truth Social that Tuesday will be "Power Plant Day, and Bridge Day, all wrapped up in one." He warned the Iranian regime that they would be "living in Hell" if the blockade of the Strait of Hormuz isn't lifted by 8:00 p.m. Today, Trump also told Israeli media (Channel 12) and the *Wall Street Journal* that the US is currently engaged in "deep" negotiations and that there is still a "good chance" a deal could be reached before the Tuesday night deadline. Our call of a market bottom doesn't come with a money-back guarantee, of course. However, history offers some reassurance: The S&P 500 has been higher two years after the start of four of the six major US military engagements since World War II, with gains of 31% to 44% following the Korean War, the Iraq War, the Gulf War, and World War II (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-35.png) We think there is good value in the stock market at current levels. The forward P/E of the S&P 500 peaked last year at 23.0 on October 27 (chart). It fell 17.8% to 18.9 through Monday of last week (chart). Over that same period, S&P 500 forward earnings rose 12.7%, reaching record-high territory (chart). The valuation multiple initially dropped due to concerns about AI companies' profitability, then fell more quickly amid fears that the war would trigger a global recession. However, industry analysts didn't blink and continued to raise their collective earnings outlook. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: April 6-10 URL: https://www.yardeniquicktakes.com/economic-week-ahead-april-6-10/ Last updated: 2026-04-05T18:08:05.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/Screenshot-2026-04-05-120005.png) This week will continue to be dominated by developments in the Middle East, though a heavy slate of data releases—including the FOMC March Minutes, February personal income, and March CPI—will compete for attention. President Trump confirmed Wednesday night that the United States could conclude its involvement in the Iran War within two to three weeks, providing an exit ramp from a conflict that has roiled energy markets since late February. Yet, oil prices remain stubbornly elevated, reflecting concerns about the Strait of Hormuz, which Trump said the US would leave to other countries to reopen. Then again, this weekend, Trump warned Iran that unless the Strait is opened immediately, Monday will be Obliteration Day, when the US will bomb Iran's electric power plants. The March 17-18 Fed Minutes (Wed) will offer a direct window into how Fed policymakers were thinking about the early stages of the conflict. The March CPI (Fri) will provide the first look at how the surge in gasoline prices has fed through to consumer prices. Here are the key US economic releases most likely to shape investors' thinking on economic growth, inflation, and the monetary policy path this week: (1) *GDP.* Thursday's final Q4-2025 GDP revision is expected to come in at 0.7% (saar), a backward-looking number that is unlikely to move markets. It was depressed by the government shutdown. The more important story is Q1-2026\. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) model has drifted down to 1.6% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-36.png) We think that bad weather in December, January, and February contributed to the recent weakness in real GDP growth. During those three months, there was a significant increase in the number of workers who either did not go to work or worked part-time due to worse than usual winter weather (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-5.jpg) (2) *CPI.* The March CPI report (Fri) is the most consequential release of the week. The Cleveland Fed Inflation [Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) estimates that the headline and core inflation rates rose m/m by 0.84% and 0.20%, or y/y by 3.25% and 2.60%, up from 2.40% and 2.50% y/y in February (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-31.png) The historical relationship between oil prices and headline CPI makes the March jump entirely predictable; every major spike in crude oil prices has been followed by a corresponding move higher in headline inflation (charts). We expect oil prices to peak in the next two months; though this, of course, would depend on a speedy resolution in the Middle East. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-24.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-37.png) (3) *Unemployment.* Friday's payroll employment report surprised to the upside, offering reassurance on the near-term health of the labor market. Initial jobless claims (Thu) have continued to trend lower, with the four-week moving average at 207,800 (chart). So far, there is no evidence in the claims data that the war is weakening the labor market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-39.png) (4) *Consumer Sentiment*. The preliminary University of Michigan Consumer Sentiment survey for April is expected to edge down to 52.0 from 53.3 in March, with expectations already at a depressed 51.7 (chart). Conference Board consumer confidence surprised to the upside last week at 91.8, suggesting sentiment may have more resilience than the consensus implies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/image-26.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Stocks: Was That The Bottom On Monday? URL: https://www.yardeniquicktakes.com/stocks-was-that-the-bottom-on-monday/ Last updated: 2026-04-05T04:01:03.000Z On Tuesday night, we suggested that the S&P 500 might have bottomed on Monday, with a pullback of 9.1% (i.e., just under a 10% correction) from its January 27 record high. Tuesday's strong equity rally was triggered by reports that the US had found an exit ramp from its war with Iran. Wednesday night, President Donald Trump confirmed that the US would exit in two to three weeks. Stocks opened lower today as oil prices rose on fears that the US would exit the war without opening the Strait of Hormuz. Stocks then recovered during the day on reports that Iran and Oman are in the "final stages" of drafting a new joint protocol for the Strait of Hormuz. However, this is not an agreement to "open" the waterway in the traditional sense; rather, it is a move to formalize a new, restrictive navigation regime. Apparently, traders interpreted the "protocol" as a sign that a framework for managed transit is at least being discussed. Our stock market bottom call is also based on the sharp declines in our two favorite sentiment indicators (chart). Their low readings tend to provide buy signals from a contrarian perspective. They worked like a charm last year when the market bottomed on April 8\. In fact, in our April 7, 2025 *QuickTakes* titled, "Looking For A Stock Market Bottom In Fundamentals & Technicals," we wrote: "The latest reading of the AAII Bull/Bear Ratio, at 0.35, is as depressed as during previous bear markets. The same can be said about the Investors Intelligence Bull/Bear Ratio, which was 1.00 during the April 1 week. From a contrarian perspective, that's bullish." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-15.png) The S&P 500 was 9.0% overbought relative to its 200-dma on January 27, when the index rose to a record high (chart). It is now 0.9% below its average. More importantly, three of the largest sectors of the S&P 500 are selling well below their 200-dma: Consumer Discretionary (-7.0%), Financials (-5.8%), and Information Technology (-3.6%). These three have led the rebound from Monday's low and should continue to do so. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-20.png) The Middle East conflict is the latest test of the US economy's resilience. If the war wraps up within the President's 2-3-week timeline, the economy should pass its latest test. Consider the recent batch of upbeat economic data: (1) Initial unemployment claims dropped last week to 202,000, confirming that layoff activity remains at historically low levels (chart). The four-week moving average fell to its lowest reading since the start of the year. Continuing claims edged higher, but the four-week moving average declined to the lowest since September 2024. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-19.png) The 4-week moving average of jobless claims suggests that the unemployment rate might have dropped during March from February's 4.4% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-17.png) (2) According to the Challenger layoffs report, US employers announced 60,620 planned job cuts in March, up from 48,307 in February but down a striking 78% from the 275,240 recorded a year ago (chart). Of the announced planned cuts, 25% cited artificial intelligence as the reason, up sharply from just 7% in January. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/4g7ONbU.png) (3) The recent streak of better-than-expected economic indicators has pushed the Citigroup Economic Surprise Index into solidly positive territory since the start of this year. Economic activity was strengthening, not weakening, when the war began. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-11-1.png) (4) But what about the Atlanta Fed's latest downward revision in Q1's real GDP growth rate to only 1.6% (chart)? We blame it on the weather. February 2026 was arguably the worst February we’ve seen in at least a decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-21.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### POTUS Sees An Exit Ramp Up Ahead URL: https://www.yardeniquicktakes.com/potus-sees-an-exit-ramp-up-ahead/ Last updated: 2026-04-02T02:52:30.000Z **I. The War and the President's Speech** Yesterday, we concluded that the S&P 500's pullback bottomed on Monday, just shy of a 10% correction. The S&P 500 fell on Monday to 6343.72, down 9.1% from its January 27 record high. That low could be retested, but we think that yesterday's big rally, combined with the recent drop in bullish sentiment, marked the bottom on Monday. Stocks rebounded yesterday and today on news that the US will end the war soon. In his speech tonight, President Donald Trump confirmed that the United States could conclude its involvement in the Iran war within the next two to three weeks. He said negotiations are still underway, but threatened once again to obliterate Iran's electric power grid if there is no deal. He also said that if US satellites detect that Iran is rebuilding its nuclear program, American missiles will once again wipe out its efforts. He also stated the US will leave it to other countries to reopen the Strait of Hormuz. In response to Trump's speech, Brent crude oil rose about $4 a barrel to $105\. US stock futures fell 0.8%. The White House announced on March 25 that Trump's trip to China was rescheduled to May 14\. That was a tip-off that the administration was planning to end the war soon. **II. The US Economy and the War** _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Bond Vigilantes Are Mobilizing Globally URL: https://www.yardeniquicktakes.com/weekly-webcast-bond-vigilantes-are-mobilizing-globally/ Last updated: 2026-04-01T13:00:07.000Z The unprecedented oil-supply shock caused by war in the Middle East has crushed investors’ former expectations for subdued inflation and dovish central banks’ actions. The Bond Vigilantes are repricing yield curves worldwide, especially at the short end, in some economies more than others. Today, Dr Ed and our new contributing editor Elias Griepentrog analyze what global yield-curve spreads imply about investors’ new expectations, opining that the front end of the US curve may be oversold. … Also: The three stages of a negative oil-supply shock. The US economy is still in Stage 1, anticipating a more hawkish Fed and a bear-flattening of the yield curve. But where it goes next depends on the course of the war. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Relief Rally Ends Correction Risk URL: https://www.yardeniquicktakes.com/relief-rally-ends-correction-risk/ Last updated: 2026-04-02T19:25:55.000Z Today's powerful relief rally in the stock market was fueled by news that President Donald Trump intends to declare victory in the war with Iran, according to an article in this morning's *Wall Street Journal*. Around noon, the market moved higher still on a report that the President of Iran said his country is ready to end the war if the US agrees to its 5-point peace plan. Then, after the market closed, around 6:30 pm EST, Trump told reporters that the US would be leaving the war zone in 2-3 weeks. His press secretary announced that the President will deliver a formal Address to the Nation Wednesday night at 9:00 pm. He certainly won't be accepting the Iranian plan, and he seems ready to withdraw without Iran accepting his 15-point plan, which includes opening the Strait of Hormuz. If Trump is declaring mission accomplished, then so are we regarding our stock market correction call. We will probably lower our recession odds from 35% back to 20% once we have a better handle on whether the conflict in the Persian Gulf is actually over. We reserve the right to change our minds as often as the President does. Nevertheless, we have maintained our 7700 S&P 500 year-end target and our commitment to our Roaring 2020s base case. The S&P 500 jumped 2.91% today, and the Nasdaq soared 3.82% (chart). The former experienced a 9.1% pullback from its January 27 record high, while the latter fell 13.2% from its October 29, 2025 record high. The significant valuation-led sell-offs in both were moderated by the ongoing strength in corporate earnings expectations, as we've frequently observed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/04/gateway-4.png) _This post is for paying subscribers only._ ### The War, The Yield Curve, The Fed, Private Credit, and Gold URL: https://www.yardeniquicktakes.com/the-war-the-yield-curve-the-fed-private-credit-and-gold/ Last updated: 2026-03-31T02:32:44.000Z **I. The War** Carl von Clausewitz, the Prussian general and military theorist, famously observed that "war is a mere continuation of politics by other means." He argued that war is never an end in itself. Instead, it is a tool used by states to achieve a specific political objective. Therefore, the military strategy must always be subordinate to the political goal. If the political aim changes, the military effort must adapt accordingly. The US seems to be adapting to the war with Iran by amassing 50,000 American soldiers in the war zone to free the Strait of Hormuz and perhaps to occupy Kharg Island. President Donald Trump seems to hope that this latest show of force will convince the Iranians to accept his 15-point peace plan. He says progress is being made toward a deal, but the Iranians deny communicating with the US at all. I**I. The Yield Curve** As a result, Brent and WTI crude oil prices remained firmly just below $110 per barrel today. Yet, the US Treasury yield curve edged lower, with the 2-year Treasury note and 10-year Treasury bond yields down 8 bps and 7 bps, respectively. Pre-war market expectations shifted from one Fed rate cut over the next 12 months to a rate hike late last week to none-and-done today(chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/3X9r5VJ-2.png) **III. The Fed** Fixed-income investors welcomed dovish remarks by Fed Chair Jerome Powell today. He said, "Inflation expectations do appear to be well anchored beyond the short term." According to the March Consumer Sentiment Index survey, the five-year-ahead expected inflation rate is 3.2% (chart). That's high relative to the Fed's 2.0% inflation target, and it hasn't been very well anchored since the pandemic. _This post is for paying subscribers only._ ### MARKET CALL: Stock P/Es Discounting Higher-For-Longer Oil Prices & Interest Rates URL: https://www.yardeniquicktakes.com/market-call-stock-p-es-discounting-higher-for-longer-oil-prices-interest-rates/ Last updated: 2026-03-29T21:28:34.000Z The fog of war is getting thicker because of the likelihood of US boots on the ground (the "bog of war"). The US Department of War has deployed 15,000 troops to the war zone, raising the risks of a longer war and more American casualties, which will cause an uproar in the US. On Tuesday, March 3, we wrote: "We've been expecting a pullback due to excessive bullish sentiment, but now we expect a 10% correction from the high. It's hard to imagine that the IRGC won't use drones and speed boats to maintain their effective blockade of the Strait. If they are successful in doing so, the correction could be closer to 15%." On March 8, we raised the odds of a recession and a bear market in stocks from 20% to 35%. We also warned that we can't rule out a bear market "until ships can sail freely through the Strait." The S&P 500 is down 8.7% from its record high on January 27 (chart). It fell below its 200-day moving average last week. A 15% correction would take the index down to 5930.81\. The S&P 500 equal-weighted index slipped just below its 200-dma on Friday. (The dotted lines on the chart mark the 15% and 20% correction thresholds for the market-cap weighted index.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-198.png) On Thursday, President Donald Trump postponed his threat to "obliterate" Iran's power plants and energy infrastructure until Monday, April 6, at 8:00 pm EST. It was the second extension of his Obliteration Day ultimatum. While Israel is playing Whac-A-Mullah, the US is trying to find someone in Iran's regime with whom to negotiate a peace plan. The risk is that even if Trump's people are in discussions with Iranian officials, they might not have the power to make a deal that won't be violated by renegade groups within the IRGC, which is nothing more than professional terrorists who have taken over Iran. No wonder investors went into fetal positions last week. The good news is that sentiment is getting very bearish, which is bullish from a contrarian perspective. However, the fog of war will have to lift for the stock market to move higher. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: March 30-April 3 URL: https://www.yardeniquicktakes.com/economic-week-ahead-march-30-april-3/ Last updated: 2026-03-29T17:03:03.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-29-at-10.07.26---AM.png) This week will continue to be dominated by developments in the Middle East. On Friday, the US and Israel struck Iranian nuclear and steel facilities, with Iran retaliating across the Persian Gulf, while President Trump pushed back a deadline for Tehran to reopen the Strait of Hormuz or face further attacks on its power infrastructure. The escalation marked a sharp shift in tone from earlier in the week, when the financial markets had stabilized following Trump’s walk-back of threats targeting Iran’s energy infrastructure. Oil markets have responded accordingly. WTI crude closed at $99.64 a barrel, up roughly 18.7% from Tuesday’s low of $83.96 and marking its highest weekly close since the conflict began, while Brent finished at $112.57, up about 16.6% from its weekly low of $96.52 (chart). The speed and magnitude of the move underscore how quickly energy markets are repricing geopolitical risk, challenging earlier efforts to keep both oil and bond markets anchored, and reinforcing the risk of sustained disruption in the Strait. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-199.png) As a result, this week’s data will take on added significance. A heavy slate of releases, including consumer confidence, PMIs, and the March employment report, will provide the first meaningful read on how higher energy prices and heightened uncertainty are feeding through to the real economy. The key question is whether the US economy’s resilience can withstand this shock, or whether cracks begin to emerge across activity, sentiment, and the labor market. As the conflict drags on and energy prices remain elevated, rate hikes increasingly are being priced back into the outlook, further weighing on equity valuation multiples (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-43.png) Here are the key US economic releases most likely to shape investors' thinking on the labor market, growth outlook, and monetary policy path this week: (1) *Employment*. The March payrolls report (Fri) will take on added significance following February’s unexpected decline of 92,000 and the rise in the unemployment rate to 4.4%. The median Bloomberg estimate is for a 60,000 increase, with no forecasters expecting outright job losses, suggesting that the labor market remains resilient despite a less certain macro backdrop. We’ll also get additional signals from ADP (Wed), Challenger (Thu), and weekly jobless claims (Thu), which should help clarify whether February’s weakness was a one-off or the start of a broader slowdown. Payroll growth has already shown signs of losing momentum, with monthly gains becoming more uneven and the three-month average trending lower (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-39.png) (2) *Consumer confidence*. Consumer confidence will be closely watched this week as one of the first quantifiable readings on how the surge in energy prices is affecting households. National average gasoline prices have jumped from $2.98 on February 26 to $4.10 per gallon on March 23, a roughly 38% increase that is likely to weigh on consumer perceptions (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-200.png) Since July, headline confidence has been trending lower, and expectations have weakened considerably (chart). This should likely continue. We will be particularly focused on expectations given the likelihood that elevated gasoline prices persist in the months ahead. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-25.png) (3) *PMIs*. Manufacturing data will be in focus this week, with Chicago PMI, final S&P 500 PMIs, and ISM manufacturing due. With uncertainty elevated by rising oil prices and a repricing of the Fed policy path, forward-looking components will be key. March regional surveys have remained soft relative to the still-expansionary ISM, highlighting a divergence between weakening local activity and more resilient national readings (chart). If the ISM begins to converge toward weaker regional readings, it may suggest that manufacturing momentum is losing traction after a period of resilience. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-38.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Eurozone's Latest Energy Crisis URL: https://www.yardeniquicktakes.com/eurozones-latest-energy-crisis/ Last updated: 2026-03-29T04:00:26.000Z **NEWS FLASH:** President Donald Trump postponed Obliteration Day again today, until Monday, April 6 at 8:00 pm EST. He said he is granting a request from the Iranian government to extend the pause on potential airstrikes on Iran's power plants by an additional 10 days. That will prolong uncertainty and volatility in the financial markets. It also means oil prices will remain elevated for at least another 10 days, unless there is a deal, exacerbating stagflationary pressures worldwide. Today, let's review developments in the Eurozone: The latest energy crisis is hitting the countries of the European Monetary Union (EMU, or the Eurozone). In 2025, roughly 12% and 8% of the European Union's petroleum and gas imports originated in the Persian Gulf. Unlike the United States, which is an oil and gas exporter, the countries of the EMU are major energy importers. So a spike in energy prices hits the region harder, with higher inflation and weaker growth. Now, the Eurozone economy is likely to experience a stagflationary bout similar to what happened in 2022 after Russia invaded Ukraine in February of that year, causing energy prices to soar back then too. Before the war, which began at the end of February, the Composite PMI was 51.9 (chart). It fell to 50.5 in March, according to S&P Global. The Services PMI accounted for the decline, while the Manufacturing PMI continued to rise. Supply delays were reported by manufacturers more widely than at any time since October 2022\. Average input costs rose at the fastest rate for 10 months. Higher costs were passed on to customers, resulting in the largest rise in selling prices in over three and a half years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-180.png) Eurozone consumer confidence dropped sharply in March (chart). An index of German consumer sentiment fell to its lowest in two years this month, and similar surveys in France and Italy also show growing unease. At the petrol stations, where the oil shock is felt most immediately by consumers, the cost of a 50-litre tank of diesel in Germany has risen by over €21 compared to the week before the war. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-185.png) The March reading of Germany's Ifo Business Climate Index fell, led by a sharp drop in expectations (chart). Deutsche Bank has cut its German growth forecast for 2026 from 1.5% to 1.0%, warning that surging energy prices will weigh on the trade balance, dampen consumer spending, and exacerbate existing competitiveness challenges for the German industry, which already faced structurally uncompetitive energy costs before the oil-price shock. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-25.jpg) Other available economic indicators are pre-war. The Eurozone's real GDP rose 1.3% y/y through Q4-2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-186.png) The European Central Bank (ECB) had cut its official deposit rate eight times since June 2024, bringing it to 2.00%, and further easing was likely this year (chart). The ECB has made clear that it won't let a new energy-led spike in inflation take root in the Eurozone, strongly hinting at interest-rate hikes in the coming months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-183.png) Now the ECB—which has only one mandate, i.e., to stabilize inflation around 2.0%—is expected to raise interest rates to subdue the inflationary energy price shocks resulting from the war. The ECB probably intends to mitigate the severe inflationary consequences of the current energy price shocks, as occurred during 2022 and 2023 following Russia's invasion of Ukraine (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-187.png) The ECB's new staff projections see headline CPI inflation averaging 2.6% in 2026, revised up 0.7ppt from December. Real GDP growth has been cut to just 0.9%, down from 1.2% in 2025, reflecting stagflation's drag on real incomes, investment, and confidence. Financial markets now are pricing in one to two 25bps ECB rate hikes through the remainder of 2026, a significant reversal from expectations of further easing just a few weeks ago. As a result, the EMU MSCI stock price index in euros is down 8.7% from its record high on February 25, but may find support at its 200-day moving average (chart). The share of investors overweighting European stocks dropped sharply from 35% to 21%, according to Bank of America's latest European fund manager survey. Stagflation is now "the consensus expectation" for the macro regime in the coming months, with the percentage of respondents expecting stagflation surging from 15% to 50% m/m, and expectations for European core inflation at their highest since 2022\. The sectoral rotation shows that fund managers are rotating out of industrial stocks, previously seen as a key winner from Europe's reindustrialization ambitions, and into the more defensive basic materials and healthcare stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-188.png) The euro has dropped from 1.1778 to 1.1457 against the dollar, making energy imports even more expensive for eurozone buyers (chart). An MSCI scenario analysis estimates that European equities could fall by as much as 16% in a sustained stagflationary shock. That would be a steeper drop than for US equities, reflecting Europe's structurally greater reliance on imported energy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/4e526cg-1.png) The key variable now is time. If the disruption in the Strait of Hormuz proves short-lived, the ECB can hold off on raising interest rates. If trouble persists, the ECB faces its most difficult policy dilemma since the 2022 energy crisis, this time with far less fiscal and monetary room to respond. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Gold, Oil, Stocks & Bonds In The War URL: https://www.yardeniquicktakes.com/gold-oil-stocks-bonds-in-the-war/ Last updated: 2026-03-25T22:37:41.000Z President Donald Trump must believe that the war will be over soon. The White House announced today that he will meet with Chinese President Xi Jinping in Beijing on May 14 and 15\. The Iranians responded to Trump's 15-point peace plan today with a list of five conditions, according to Press TV, including reparations, sovereignty over the Strait of Hormuz, and no more assassinations. Interestingly, they didn't claim a right to nuclear enrichment or ballistic missiles. Let's review how the financial markets have been reacting to the war so far: **I. Gold** Everyone is wondering why the price of gold plunged 16% from its record high on Monday, March 2, a couple of days after the war started, through March 23 (chart). It should have gone up on the worsening inflation outlook and mounting geopolitical risks. These are usually bullish developments for gold and should remain so. Perhaps traders perceived that the war would boost global weapons spending, but weapons makers invoice in dollars, euros, and other currencies, not in gold. The war also boosted the dollar's foreign-exchange value, making it a better safe haven than gold. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: From Powell To Warsh URL: https://www.yardeniquicktakes.com/weekly-webcast-from-powell-to-warsh/ Last updated: 2026-03-25T12:59:59.000Z Kevin Warsh, President Trump’s nominee to replace Fed Chair Powell, no doubt will lean toward dovish policy-making, under pressure from the President to convince the rest of the FOMC to err on the side of easing. But the timing of Warsh’s confirmation is uncertain. Today, Dr Ed along with our new contributing editor Elias Griepentrog take us on a thought experiment: Under three alternative scenarios for the length of the Iran war, they project the economic impacts and associated ramifications for monetary policy under Warsh’s leadership versus that of Powell. … Also: They share eight takeaways from the FOMC’s March meeting. ... And Dr Ed reviews “The Secret Agent” (- – -). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### 'Obliteration Day' Was Postponed. Time To Buy Stocks? URL: https://www.yardeniquicktakes.com/obliteration-day-was-postponed-time-to-buy-stocks/ Last updated: 2026-03-25T02:09:05.000Z Stocks rallied on Monday because President Donald Trump postponed his 48-hour ultimatum on Saturday to "obliterate" Iran's power plants if the country doesn't fully open the Strait of Hormuz. Yesterday, he extended the deadline by five days, until Friday, while talks with Iran continue. Investors and traders recall that stocks soared on April 9, 2025, an hour before the stock market closed after Trump postponed his Liberation Day tariffs. That morning before the stock market opened, Trump tweeted, "THIS IS A GREAT TIME TO BUY!!!DJT." It was great advice. On Monday, Iran denied that any talks were underway. Trump responded: "I’m not sure what \[the Iranian media\] is talking about... we had discussions last night, and there could be a deal with Iran in five days or sooner... You're going to see those oil prices fall soon, they're already coming down, and they're going to keep falling." That could turn out to be timely advice again! Tonight, oil prices fell by about $5.00 a barrel after Trump reiterated this afternoon that Iran agreed that it will never have a nuclear weapon. Meanwhile, the US and Israel didn't stop obliterating Iran today. In addition, the Pentagon announced that approximately 3,000 elite paratroopers from the 82nd Airborne Division are deploying to the war zone. These "Global Response" forces are designed for rapid entry and can be on the ground in under 24 hours. That's in addition to the 2,200 Marines who will arrive on Friday. Interestingly, defense-related ETFs have been down slightly during the war (chart). That might imply that investors expect a short war. Or else, they figure that spending millions of dollars on weapons that can be destroyed by cheap drones isn't a good idea. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-168.png) On the home front, the odds of a US recession remains around 35%, according to Polymarkets.com, despite the huge jump in gasoline prices, which might depress consumer spending (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-160.png) In any case, the Redbook Retail Sales weekly index rose solidly by 6.7% y/y during the week of March 20 (chart). So far, consumers are still spending in line with this index. _This post is for paying subscribers only._ ### Thanks For The Memory URL: https://www.yardeniquicktakes.com/thanks-for-the-memory/ Last updated: 2026-03-24T02:33:22.000Z **We are taking a break from the war. We may wait until Friday to update our views on its likely impact on the global economy and financial markets. This morning, President Donald Trump triggered a relief rally in the stock market by postponing his threatened attack on Iran's power plants, scheduled for today, until the end of the week. He added that the US is negotiating with Iran. If so, it's not clear that anyone is actually in control of Iran since so many of its leaders have been assassinated. In any event, government officials and media in Iran denied that talks are taking place. A bunch of US Marines will arrive in the war zone by the end of the week.* **We will devote more of our research efforts to identifying potential buying opportunities arising from the war. Today, we focus on the memory industry.* The AI-driven semiconductor rally has been remarkable during the current bull market, which started on October 12, 2022\. It received a big boost when ChatGPT was introduced on November 30, 2023\. Memory chips have been a major driver of this rally, reflecting tight supply and rising content requirements across AI systems. As AI workloads scale, performance is increasingly determined not just by compute but by memory. High-bandwidth memory (HBM) and advanced dynamic random access memory (DRAM) both are essential for AI training and for AI inference. In the past, memory was one of the most cyclical segments of the semiconductor industry, characterized by sharp boom-bust dynamics driven by excessive capacity expansion during booms, thus setting the stage for busts. The key question now is whether this cycle might be less pronounced due to the high demand for memory driven by AI infrastructure spending. Demand for memory is expected to remain elevated into 2027–28 before normalizing as supply catches up. Hyperscaler orders placed well in advance have effectively pulled forward demand visibility, while long lead times for fabs and equipment limit the speed of supply responses. This dynamic is already reflected in market leadership, with memory chip stocks among the strongest performers globally as AI-driven demand continues to tighten supply (chart). Sandisk is a striking example, having successfully raised money with an IPO just 13 months ago, the stock has risen 1,836% from its IPO price, including a remarkable 158% ytd. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-20.png) This strength is also showing up at the macro level. South Korea’s equity market, heavily exposed to memory and semiconductor exports, has rallied sharply in both local currency and US dollar terms, up 96% in the last year (chart). Notably, Samsung Electronics and SK Hynix alone account for roughly 43% of the iShares MSCI South Korea ETF (EWY), underscoring how the AI buildout is now influencing entire equity markets rather than just individual companies. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: March 23-27 URL: https://www.yardeniquicktakes.com/economic-week-ahead-march-23-27/ Last updated: 2026-03-23T02:21:01.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-23-at-9.36.32---AM.png) The week ahead is all about oil prices. As the Iran war enters its fourth week, the soaring price of crude has rapidly upended economic forecasts and shifted expectations for central bank policy. Nowhere more so than at the Fed. In barely a week, bond traders have swung from expecting rate cuts to pricing in roughly a 50% probability of a tightening move by October. In Europe, the financial markets are now pricing in as many as three ECB rate hikes by year-end. The growing risk of a protracted Middle East conflict has put global monetary policy hawks firmly back in the ascendancy. Following last week's Federal Open Market Committee meeting, Fed Chair Jerome Powell reiterated that further evidence of easing inflation is required before the Fed considers injecting liquidity into the economy. "If we don’t see that progress, then you won’t see the rate cut," he said. The federal funds futures market now implies no rate cuts over the next 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/3X9r5VJ-1.png) In a relatively light week for major data, the financial markets will pay close attention to comments from Fed officials hitting the podium. Scheduled speakers include Governor Michael Barr (Tue, Thu) on the economic outlook, Stephen Miran (Wed, Thu) on digital assets and the Fed’s balance sheet, and Lisa Cook (Thu) on financial stability. They are joined by Governor Philip Jefferson (Thu), with San Francisco Fed President Mary Daly (Fri) and Philadelphia Fed President Anna Paulson (Fri) rounding out an already crowded slate of Fed commentary. The war will remain front and center. Any further escalation involving the Strait of Hormuz, Iranian attacks, potential US boots on the ground, and attacks on energy and water infrastructure could drive significant market volatility. Over the weekend, tensions escalated further after US President Donald Trump, posting at 7:44 pm EST on Saturday, issued a 48-hour ultimatum for Iran to reopen the Strait of Hormuz, warning that the US would "obliterate" Iranian power plants if it failed to comply. So Apocalypse Now might or might not happen at 7:44 pm EST on Monday. The price of Brent is relatively flat this evening, around $111 per barrel. The price of gold continued to decline to $4,325 per ounce at 8:52 pm, more than $200 below Friday's close. Here are the US economic releases most likely to influence Fed thinking on the fallout from the war and the rate outlook this week: (1) *Consumer sentiment.* The University of Michigan will report its final March consumer sentiment index (Fri). The previous reading showed sentiment falling to 55.5 from 56.6 (chart). This week's update should show that surging gas prices are unnerving households around the country. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-16.png) (2) *Import/export prices*. The February import price data (Wed) follows January's 0.1% m/m decline (chart). This is a pre-war report, so it won't reflect the jump in commodity prices during March. Q4 productivity and labor cost data (Tue) should confirm that both were disinflationary last year. We expect to see more of that in 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-17.png) (3) *Business surveys.* At a moment when Fed officials are scrambling to keep up with economic zigs and zags, regional surveys should garner extra attention (chart). We'll hear from the Chicago Fed (Mon), the Richmond Fed (Tue), and the Kansas City Fed (Thu). Also, S&P Global releases its March purchasing managers' indexes (Tue) for both manufacturing and services. The impact of the war on the economy may become observable. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-156.png) (4) *Jobless claims.* Weekly unemployment insurance claims remain upbeat, as claims continue to moderate (chart). Any reading in the neighborhood of last week's 205,000 level would confirm that layoffs remain low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/image-19.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: Odds Of A Longer War Increasing As Trump Set To Declare Victory URL: https://www.yardeniquicktakes.com/market-call-odds-of-a-longer-war-increasing-as-trump-set-to-declare-victory/ Last updated: 2026-03-22T17:55:01.000Z Is the fog of war thinning or thickening? President Donald Trump has suggested that he is getting ready to declare victory. However, the Iranians have been at war with the US and Israel for 47 years and are showing no signs of ending it. On Friday night, Trump posted on Truth Social that the US is "getting very close to meeting our objectives" and is considering "winding down our great Military efforts" against what he termed the "Terrorist Regime of Iran." Paradoxically, earlier that same day, he told reporters, "I don't want to do a ceasefire. You don't do a ceasefire when you're literally obliterating the other side." He seems to prefer a unilateral conclusion where the US stops because it has "won," rather than a negotiated truce. Even as he mentions an exit, the Pentagon is reportedly deploying about 2,500 additional Marines and three amphibious assault ships to the Gulf. The President may or may not order the Marines to take over Kharg Island or to stop the Iranian blockade of the Strait of Hormuz. Saturday night, Trump threatened to "obliterate" Iran's power plants if Tehran does not fully reopen the Strait of Hormuz within 48 hours. That might require a proof of concept to work. The war ain't over till it's over. Iran continues to block the Strait of Hormuz effectively and selectively. It is allowing tankers loaded with Iranian oil for China and India to pass through the Strait. Iran is also extorting tolls from vessels passing through the Strait. The Iranians are probably monitoring Polymarkets.com, which shows that the Democrats will win a majority in the House in November's midterm elections (charts). The Republicans might even lose the Senate. The Iranians must figure that if they can keep oil prices elevated through the US midterm elections, the Republicans will lose at least the House if not the Senate as well. They must hope that the Democrats might cut off funding for the war. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-21.jpg) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-153.png) Now, let's review the impact that the war is having on the energy and financial markets: _This post is for paying subscribers only._ ### Why Is Gold Melting? URL: https://www.yardeniquicktakes.com/why-is-gold-melting/ Last updated: 2026-03-22T04:00:35.000Z There's plenty of geopolitical risk today, along with higher global inflation and larger US federal budget deficits ahead. Yet, the price of an ounce of gold is down sharply today. It fell to an intraday low of $4508 per ounce at 9:02 am EST, down from a recent closing high of $5311 on Monday, March 2, two days after the start of the current war in the Middle East (chart). This decline coincides with the escalation of the war and mounting concerns that it might not be short. In a press briefing at the Pentagon this morning, Secretary of Defense Pete Hegseth addressed reports that the Pentagon is seeking $200 billion in additional funding for the ongoing conflict with Iran. While he did not officially "ask Congress" for that specific amount today, he confirmed that the Pentagon is seeking supplemental funds and that the $200 billion figure is a potential target. He said, "It takes money to kill bad guys." He emphasized that the funds are needed to replenish munition stockpiles and support "Operation Epic Fury." What gives? The always-reliable quick answer is: profit-taking following a meteoric rise. Perhaps investors in the Middle East are selling gold to buy the US dollar, which has strengthened during the war, even though both are considered safe havens. Rising bond yields might also explain gold's recent meltdown. The probability of further Fed rate cuts is falling as inflation heats up. Technically speaking, gold's price dropped below a short-term uptrend line this week (chart). The next uptrend support line could be tested closer to $4000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-136.png) Another technical explanation is that the gold price rose too far, too fast since early last year, jumping above its ascending channel this year (chart). We are still targeting gold at $6,000 by the end of this year and $10,000 by the end of 2029\. However, we are considering lowering our year-end target back to $5,000 if gold continues to defy our expectations that it should be rising on unsettling geopolitical developments, rising inflation, and mounting US government debt. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-137.png) From a sentiment perspective, the recent drop in GLD's stock price on high volume suggests panic selling. From a contrarian perspective, that could soon make a bottom in the recent selloff (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-16.jpg) The recent strength of the dollar might explain some of the weakness in the gold price (chart). However, the US dollar index (DXY) has mostly moved sideways over the past year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/45m95cZ-2.png) Our upbeat story for gold is premised on our Roaring 2020s scenario, driving the S&P 500 to 10,000 by the end of the decade. Along the way, stock investors should rebalance into other assets, including gold (chart). In addition, we expect that central banks will continue to buy gold and so will Chinese investors, who have been hard hit by the bursting of China's property bubble and whipsawed by the Chinese stock market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-15.jpg) The recent ascent of gold is similar to the move that occurred when Jimmy Carter was president (chart). The price peaked when President Ronald Reagan was elected. President Donald Trump has been bullish for gold, and he has another three years in the White House. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-140.png) Of course, another explanation for gold's weakness is that investors are taking profits to offset recent losses in the stock markets of South Korea and Japan. There have also been losses in some areas of the US stock market. The good news from a contrarian perspective is that stock market bearishness is mounting, as evidenced in the US by the two Bull/Bear Ratios we monitor (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-141.png) Meanwhile, initial unemployment claims fell sharply during the week of March 13 (chart). Layoffs are low and declining. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-132.png) The average of the New York and Philadelphia Fed business survey indexes suggests that manufacturing continued to improve during March (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-133.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Did Powell Trigger A Taper Tantrum In The Stock Market Today? URL: https://www.yardeniquicktakes.com/did-powell-trigger-a-tapering-tantrum-in-the-stock-market-today/ Last updated: 2026-03-19T03:39:22.000Z The fog of war is back. Oil prices jumped today after Israel attacked Iran's largest gas processing facility. Iran's Revolutionary Guard threatened to strike oil facilities in Saudi Arabia, the United Arab Emirates, and Qatar. Qatar then reported that Iranian missile strikes had damaged a key liquefied natural gas export facility. Early this morning at 2:17 a.m. EST, the price of a barrel of Brent crude oil was around $100\. It rose to about $110 by 2:00 pm, just as the FOMC announced that the federal funds rate would remain unchanged. Thirty minutes later, Fed Chair Jerome Powell started his press conference. He was neither hawkish nor dovish. The odds of two widely expected rate cuts this year declined, while the odds of a rate hike increased, according to the [Atlanta Fed’s Market Probability Tracker](https://www.atlantafed.org/research-and-data/data/market-probability-tracker?ref=yardeniquicktakes.com). We remain in the none-and-done camp. The S&P 500 fell 91.39 points today, with 57.42 points of that decline occurring after 2:00 pm, leaving the index slightly below its 200-day moving average (chart). The combination of war and Fed news triggered a taper tantrum in the stock market as investors concluded that monetary policy may be limited in its ability to address the war's economic consequences. Indeed, Fed Chair Jerome Powell barely mentioned the war. Notably, he opined that the economy and labor markets are in good shape and that core inflation is likely to moderate in the coming months, implying the Fed will remain on pause for the foreseeable future. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-129.png) In his presser, Powell did not mention that today's February PPI report showed a 0.7% m/m increase, the third consecutive hotter-than-expected reading (chart). March's PPI will be even hotter due to the war. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-126.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Is Less Dire Strait Easing Market Fears? (with special guest Eric Wallerstein) URL: https://www.yardeniquicktakes.com/weekly-webcast-is-less-dire-strait-easing-market-fears/ Last updated: 2026-03-18T13:00:01.000Z The energy and financial markets are taking the war in the Middle East remarkably well, all things considered. Investors seem to believe that the war will be short-lived and perhaps are focusing on the bright side: The lost physical supplies of oil are maybe half as much as they could have been, partly because Iran is still allowing tankers from friendly nations to pass through the Strait of Hormuz. Today, Dr Ed reviews the current state of affairs, concluding that the blockade of the Strait might not be as dire a development as widely feared, including by us. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Oil Shock Is Latest Test Of US Economy's Resilience URL: https://www.yardeniquicktakes.com/oil-shock-is-latest-test-of-us-economys-resilience/ Last updated: 2026-03-18T02:12:54.000Z The latest crude oil price spike has drawn comparisons to previous similar spikes (charts). There were six of them before the current one, since 1970\. The first five coincided with recessions. The two during the 1970s caused two recessions and boosted inflation, resulting in a lost "stagflationary" decade for the stock market. The previous spike in 2022 coincided with a bear market in stocks, but there was no recession back then. We concluded that the economy had once again demonstrated its resilience. It has been doing that since the start of the decade, when the pandemic hit, supply chains were disrupted, inflation soared, the Fed tightened, three banks failed, tariffs were imposed, and payroll employment gains dwindled. The economy's resilience means that oil price shocks cause far less persistent inflation and much less severe growth disruptions than in the past. Oil shocks are less likely to trigger the kind of sustained stagflation seen in the past, particularly during the 1970s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-110.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-123.png) The US economy now requires significantly less energy per unit of GDP than in earlier decades, reflecting efficiency gains and a shift away from manufacturing toward services (chart). As a result, oil price spikes are less inflationary and do less damage to real economic activity than in the past when energy intensity was much higher. (Of course, energy intensity may increase unless data centers can be run more efficiently, as we expect will happen.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-111.png) Consumers are similarly more shock-proof. Gasoline and energy products, as a share of personal consumption expenditures, have trended lower over time and are historically low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-122.png) On the supply side, the US is energy-independent, a situation that was not the case in the 1970s. The production of US crude oil and other petroleum liquids has consistently exceeded total domestic demand for them since 2023 (chart). _This post is for paying subscribers only._ ### A Break In The Weather URL: https://www.yardeniquicktakes.com/a-break-in-the-weather/ Last updated: 2026-03-17T02:12:45.000Z Forecasting the weather is easier than forecasting the timeline and outcome of a war. The expression "the fog of war" is a bit confusing because fog often lifts within hours. Wars last much longer. Today, we had "a break in the weather." The war is ongoing, but there were sighs of relief in the energy and financial markets. That's because some tankers are getting through the Strait of Hormuz, especially those heading for China and India. We said we needed to see that happen to lift the stock market (and our spirits). We've often observed that geopolitical crises are buying opportunities in the stock market. We were expecting a 10%-15% correction in the S&P 500, but the 5% decline from the January 27 record high through Friday's close might be the extent of the damage. Also uplifting is this week's cover story of *The Economist* titled "An Attack on the World Economy." For contrarian investors, a bearish cover story is a very bullish signal. Our recommendation to Go Global might make a comeback sooner rather than later. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-16-195850.png) Financial markets were mixed today as investors weighed easing oil prices against renewed enthusiasm for the AI buildout: (1) The S&P was up for what feels like a nice change, rising 1.01% today. It rebounded off its 200-day moving average (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-106.png) According to Polymarkets.com, the odds of a recession this year edged down to 31.0% today (chart). The S&P 500 tends to be inversely correlated with this series. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: March 16-20 URL: https://www.yardeniquicktakes.com/economic-week-ahead-march-16-20/ Last updated: 2026-03-16T02:54:44.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-15-203640.png) This week, many of the world’s top central banks have their first crack at responding to skyrocketing oil and gas prices driven by the war in the Middle East. Along with hearing from the Fed (Wed), we’ll get rate decisions from the European Central Bank (Thu), the Bank of Japan (Thu), the Bank of England (Thu), the Bank of Canada (Wed), the Swiss National Bank (Thu), Sweden’s Sveriges Riksbank (Wed), and the Reserve Bank of Australia (Tue). Though surprises are always possible, none of these monetary authorities is expected to adjust official rates. The preference is to wait and see how the war in Iran develops. Any signs that the conflict might drag on for some time, or that the resulting surge in oil prices is accelerating, could change the interest-rate calculus in the coming weeks and months. News on Friday, for example, that US forces struck military targets on the vital Kharg Island and threatened to extend attacks to Tehran’s energy infrastructure might not sound promising to investors betting on a short conflict. With oil prices above $100 per barrel, any developments that affect transit through the Strait of Hormuz are likely to be big market movers. In the interim, markets will pay closer attention to central bank statements and press conferences. Especially at the Fed, where Chair Jerome Powell will preside over his second-to-last Federal Open Market Committee (FOMC) meeting in his term. The Fed will release updated projections of FOMC participants' future expectations for rates, inflation, and the labor market. Here are the economic releases most likely to affect the Fed’s next move — and when: (1) *PPI*: January's hotter-than-expected producer price inflation rate (Wed) was a head-turner for Wall Street. Following that 0.5% m/m (3.6% y/y) jump amid higher service costs, economists expect a somewhat tamer 0.3% increase in February (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-97.png) (2) *Industrial production*. Fed officials on the lookout for signs the economy is holding its own found them in January's industrial production (+0.7% m/m) and capacity utilization (76.2%, the highest since July) data. The February data (Mon) should confirm that industrial production remains on a modest uptrend (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-8.jpg) (3) *Fed regional business surveys*. The regional Fed business surveys could offer timely reality checks on where the economy stands. The New York Fed survey (Mon) starts the week, followed by the Philly Fed (Thu). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-9.jpg) (4) *Weekly claims*. For all the handwringing about the slowing US labor market, the stability of weekly initial unemployment insurance claims (Thu) continues to show that layoffs aren’t surging as markets had feared. Should the latest data, for the week ended March 13, stay near last week’s 213,000 level, it would bolster the argument for steady Fed policy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-98.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: The War Is Getting Foggier URL: https://www.yardeniquicktakes.com/market-call-the-war-is-getting-foggier/ Last updated: 2026-03-15T04:00:33.000Z Why has the stock market held up so well since the start of the war? The S&P 500 is down only 4.96% from its record high on January 27 and 3.59% since the start of the war on February 28 (chart). It fell to its 200-day moving average on Friday and held it. The obvious explanation is that the market is discounting a short war. That was our initial assessment, but three days after the war began, we concluded it might last longer, leading to a 10%-15% correction, and warned that we could not rule out a bear market. That's what happened in 2022 after Russia invaded Ukraine, sending oil, gas, and grain prices soaring. Back then, we bet on the economy's resilience and called the October bottom of the S&P 500 in early November. That all worked out well. The bear market was attributable to widespread fears of a recession, which we did not share. Despite soaring oil prices and the closing of the Strait of Hormuz, recession fears seem more muted now than they were in 2022\. We raised our odds of a recession from 20% to 35% a few days after the war started, when we concluded it might be longer than widely expected. More recently, we've become concerned that a weakening US economy might exacerbate the cracks in the US private credit market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-95.png) The apparent resilience in the S&P 500 is attributable to the increasing bullishness of industry analysts' consensus estimates for earnings per share in 2026 and 2027 (chart). Apparently, they did not get the memo about the possible negative consequences of a protracted war and closure of the Strait. So S&P 500 companies’ aggregate forward earnings rose to a record high last week of $328.80 per share. At Friday's close, that implied a forward P/E of 20.2, which is down from 22.0 on January 27\. The 1.8% increase in forward earnings per share offset some of the 6.8% decline in the valuation multiple, resulting in the 5.0% decline in the S&P 500. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-6.jpg) So far, the war appears to have had no adverse impact on analysts' earnings-per-share estimates for each of this year's four quarters (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-4.jpg) The same can be said about the forward earnings per share of the S&P 400 MidCaps and the S&P 600 SmallCaps (chart). Both have been rising in recent weeks and are back at record highs despite the war and rapidly rising oil prices. All three forward earnings estimates dipped in 2022 as analysts grew more concerned that soaring oil prices would trigger a recession. That could happen again this year if the war persists. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/3Yoc00W.png) The war has strengthened the dollar's foreign exchange value (chart). It should continue to do so if oil prices remain elevated, since the US exports both oil and gas. European nations, Japan, and many emerging market economies (EMs) are importers of oil and gas and are more vulnerable to an energy crisis, which helps explain the weakness in the euro, the yen, and many EM currencies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/45m95cZ-1.png) The war upended our switch on December 7, 2025 from recommending a Stay Home investment approach to Go Global (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-92.png) The US is the second-best-performing MSCI stock price index since the war started (chart). It might continue to outperform until the war is over, the Strait is open, and oil prices come tumbling down. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-93.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### DEEP DIVE: Between Iran and A Hard Place URL: https://www.yardeniquicktakes.com/deep-dive-between-iran-and-a-hard-place/ Last updated: 2026-03-14T12:00:12.000Z **This is an excerpt from our March 9, 2026 Morning Briefing for institutional investors.* **US Strategy I: Roaring 2020s Vs Stagflating 1970s Redux.** In last Tuesday’s *QuickTakes*, reacting to the latest Middle East war, we wrote: “We’ve been expecting a pullback due to excessive bullish sentiment, but now we expect a 10% correction from the high. It’s hard to imagine that the IRGC \[the Islamic Revolutionary Guard Corps\] won’t use drones and speed boats to maintain their effective blockade of the Strait \[of Hormuz\]. If they are successful in doing so, the correction could be closer to 15%.” The day before, a senior adviser to the IRGC’s commander-in-chief warned, “If anyone tries to pass … the navy will set those ships ablaze.” Since then, the Iranian navy has been largely destroyed. However, as long as the IRGC can fly drones, the Strait will remain straitjacketed. President Donald Trump has authorized the US Navy to escort ships through the Strait, but that operation may take a while to implement and may not completely succeed at thwarting Iranian drone attacks. Meanwhile, on Saturday, the *New York Post* [*reported*](https://nypost.com/2026/03/07/world-news/drone-strike-torches-oil-tanker-in-strait-of-hormuz-as-irans-blockade-halts-global-shipping/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=408320383&%5Fhsenc=p2ANqtz-980ICGFEg1U7YNSVxZ7I%5FPVCVVHIphjwofcs5mk6tonDcd3rnA3xA0lWxHdKYpeTT5CWVb2b2KbJFKVUki4h-JmQwbng&%5Fhsmi=408320383), “A commercial oil tanker was set ablaze in the Strait of Hormuz after it was struck by an Iranian suicide drone, the country’s Islamic Revolutionary Guard Corps said Saturday, with a US Navy mission to safeguard ships through the region possibly still weeks away.” Military historians have debated whether air power alone can decisively win a war. Most have concluded that it is rarely sufficient on its own to achieve total victory and lasting political change. Air power is exceptional at destroying things—infrastructure, supply lines, and concentrated armor. However, it cannot “hold” a street corner, search a basement for insurgents, or administer a local government. It also can’t eliminate drones. On Saturday, the President refused to rule out boots on the ground, though he did rule out using Kurdish forces as a proxy for a ground invasion of Tehran, calling the war “complicated enough” without them. He said that ground forces would only face an adversary “so decimated that they wouldn’t be able to fight at the ground level.” Meanwhile, here on the home front, Friday’s employment report for February was much weaker than widely expected. Also on Friday, January’s retail sales report was weak. As a result, the Atlanta Fed’s [*GDPNow*](https://www.atlantafed.org/research-and-data/data/gdpnow?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=408320383&%5Fhsenc=p2ANqtz-980ICGFEg1U7YNSVxZ7I%5FPVCVVHIphjwofcs5mk6tonDcd3rnA3xA0lWxHdKYpeTT5CWVb2b2KbJFKVUki4h-JmQwbng&%5Fhsmi=408320383) model lowered the projected Q1 real GDP growth rate to 2.1% (saar), down from 3.0%. The US economy and stock market are stuck between Iran and a hard place currently. So is the Fed. If the oil shock persists, the Fed’s dual mandate would be stuck between the increasing risk of higher inflation and rising unemployment. Here are a few of the consequences of the war for our economic and financial market outlooks: _This post is for paying subscribers only._ ### Dire Strait & The Home Front URL: https://www.yardeniquicktakes.com/dire-strait-the-home-front/ Last updated: 2026-03-13T01:24:58.000Z Stock and bond prices fell today as oil prices rose back to around $100 per barrel. The US and Israel continue to pound Iran from the air, but Iran's regime continues to launch missiles and drones at Gulf nations and vessels, and Israel too. The *WSJ* reported today that "Israeli officials assess Iran's ruling regime is unlikely to fall soon, as its rulers remain in control and conditions aren't ripe for an uprising." The stock market may be starting to discount the possibility that the war won't be short and that the Strait of Hormuz may remain effectively closed for some time. The S&P 500 is now down 4.4% from its record high on January 27\. The Nasdaq is down 6.4% from its record high on October 28\. We are still expecting a 10%-15% correction in both. Adding to the stock market's woes are rising bond yields. The 10-year US Treasury bond yield bottomed at 3.95% on February 27, a day before the war started, and is at 4.26% this evening. The financial markets are starting to discount that the war might be stagflationary. Let's briefly review the latest batch of US economic indicators, which are all pre-war: (1) *CPI.* The bond market is starting to anticipate that the decline in inflation over the past couple of years, through February of this year, is about to be reversed by rising energy prices because of the war, rising food prices because of a shortage of fertilizer, and higher airfares as a result of more expensive jet fuel. Many other prices will also increase in the coming months because of the spike in oil prices. That's too bad because the CPI is almost down to the Fed's 2.0% inflation target (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-89.png) Excluding shelter, the CPI is up only 2.1% y/y (chart). The CPI's measure of rent of primary residence rose 3.2% y/y last month, well above the Zillow Rent Index (2.2%) and the ApartmentList Rent Index (-1.5%). That was the pre-war situation, which is no longer relevant. _This post is for paying subscribers only._ ### FINANCIALS: Black & Blue Owl URL: https://www.yardeniquicktakes.com/financials-black-blue-owl/ Last updated: 2026-03-12T02:07:44.000Z Today, the 32-member countries of the International Energy Agency unanimously approved a coordinated emergency oil release of 400 million barrels, the largest in its 52-year history. The effective closure of the Strait of Hormuz has removed approximately 20mbd of oil from the global market. That implies the IEA is providing 20 days' worth of relief oil supplies and that the group expects a short war. The price of a barrel of Brent crude oil is up about $6.50 this evening to $98.68, suggesting the market doubts a short-war scenario. We started to doubt a short-war narrative three days after the war began. We are now starting to worry more about the stability of the private credit market if the oil shock persists and weakens the US economy. By some estimates, at a sustained crude oil price of $100 per barrel, the "Oil Tax" would wipe out the increase in tax refunds attributable to last year's One Big Beautiful Bill Act (OBBBA). As of March 2026, the private credit market has reached approximately $2 trillion in assets under management. While institutional demand remains the bedrock, retail wealth channels (via semi-liquid "evergreen" funds and BDCs) now account for nearly a third of the US direct lending market. While defaults remain low, they are rising and getting media attention. As a result, withdrawals are also increasing among retail investors, raising the risk of a credit crunch. Market jitters are increasing with warnings from people such as Lloyd Blankfein and Jamie Dimon. In a series of interviews this month, including appearances on Bloomberg’s *Big Take* podcast and CBS *Sunday Morning*, Blankfein has said that the market is due for a "reckoning." He has also compared it to the pre-2008 period. In one of his most widely quoted recent warnings, Dimon addressed the sudden defaults of several private-credit-backed firms (like Tricolor and First Brands): "My antenna goes up when things like that happen. I probably shouldn't say this, but when you see one cockroach, there’s probably more." _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Between Iran & A Hard Place URL: https://www.yardeniquicktakes.com/weekly-webcast-on-irans-chaos-strategy-owls-woes-038-laser-guns/ Last updated: 2026-03-11T14:52:31.000Z With the US suddenly thick in the fog of war, Dr Ed discusses the collateral effects on the US economy and stock market. Spiking oil prices may precipitate a stock market correction rather than a bear market, but the latter is possible. The Roaring 2020s remains Dr Ed’s base-case outlook for the rest of this year with subjective odds unchanged at 60%. But there’s now much less chance of a Meltup (with odds of just 5%) and greater odds of a Meltdown (35%). For the rest of the decade, he sees either a continuation of the Roaring 2020s (85%) or a new scenario, the Stagflating 1970s Redux (15%). If investors start expecting stagflation, a bear market is more likely. Markets should stabilize once the Strait of Hormuz reopens to safe navigation. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Buying Time Till Iran Surrenders URL: https://www.yardeniquicktakes.com/buying-time-till-iran-surrenders/ Last updated: 2026-03-11T03:51:27.000Z Tomorrow, the 32 countries that are members of the International Energy Agency (IEA) will vote on an IEA proposal to tap their strategic petroleum reserves to bring down oil prices, which have been boosted by the latest war in the Middle East. The release would exceed the oil that IEA countries released after Russia invaded Ukraine in 2022\. The IEA members hold 1.8 billion barrels in reserves, which include 600 million barrels in commercial inventories. That would offset about 124 days' supply trapped on the wrong side of the Strait of Hormuz. This news came out this evening and had no impact on Brent and WTI crude oil prices because it was expected after the G7 Finance Ministers and Central Bank Governors held an emergency virtual meeting yesterday. They issued a joint communiqué stating they "stand ready to take necessary measures," specifically mentioning a coordinated release of strategic petroleum reserves. Reports suggest the group is weighing a release of 300 million to 400 million barrels—a move that would dwarf the 240-million-barrel release following the 2022 invasion of Ukraine. Earlier today, oil prices dropped on news that Secretary of Energy Chris Wright claimed in a social media post that the US Navy had successfully escorted a tanker through the Strait of Hormuz. The White House quickly said that Wright was wrong, causing the stock market's rally to fade this afternoon. Both the S&P 500 market-weight and equal-weight indexes remain just above their 200-day moving averages during the current pullback (chart). That's impressive under the circumstances. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-3.jpg) The stock market should react positively tomorrow morning to the IEA news and to Oracle's better-than-expected results after the close. The company's stock surged in after-hours trading on a 22% y/y increase in revenue led by a 44% jump in cloud revenues, and a 21% gain in earnings. Most remarkable is the 325% jump in remaining performance obligations (RPOs). Management attributed this almost entirely to large-scale AI contracts. Could it be that AI isn't a bubble after all? That's been our position. _This post is for paying subscribers only._ ### Policymakers Trying To Cap Gushing Oil Fears URL: https://www.yardeniquicktakes.com/policymakers-trying-to-cap-gushing-oil-fears/ Last updated: 2026-03-10T02:52:37.000Z Oftentimes, when the financial markets are hit by bad news, policymakers scramble to calm them. That happened today in response to last night's soaring oil prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-53.png) (1) *G7 response*. To address the market turmoil following the escalation of the conflict in the Middle East, the G7 Finance Ministers and Central Bank Governors held an emergency virtual meeting today. The group's primary strategy was to signal a "managed urgency" to prevent a sustained global energy shock. They issued a joint communiqué stating they "stand ready to take necessary measures," specifically mentioning a coordinated release of strategic petroleum reserves (SPR). Reports suggest the group is weighing a release of 300 million to 400 million barrels—a move that would dwarf the 240-million-barrel release following the 2022 invasion of Ukraine. While they haven't pulled the trigger on the release today, the mere official discussion of it has successfully cooled the market. Brent and WTI, which had spiked toward $120 overnight, retreated back toward the $100 mark following the statement. The intraday easing in energy costs helped stocks recover from their worst pre-market levels. This evening, Brent and WTI are back down to about $89\. That's an incredible reversal! (2) *Trump bump*. President Donald Trump also calmed the financial markets today with assurances that all will be well. He reiterated that the US Navy will soon provide escorts for oil tankers and other commercial vessels moving through the Strait of Hormuz. He again stated the US government would provide political risk insurance and financial guarantees to shipping companies. He described the current gasoline price hikes as a "very small price to pay for U.S.A., and World, Safety and Peace," arguing that prices will "drop rapidly" once the "nuclear threat" is neutralized (chart). The stock market rebounded from its nasty plunge in the morning. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-50.png) Trump told CBS News that the military operation—Operation Epic Fury—is actually "very far ahead of schedule," hinting that the conflict might be "pretty much complete" much sooner than the initial 4-5 week estimate. After initially downplaying the need for the Strategic Petroleum Reserve (SPR) over the weekend, he signaled today that he is "conscious of prices" and could tap the reserve if necessary. (3) *Mission accomplished?* Trump clearly aligns his policy initiatives with the stock and bond markets and acts to mitigate their downsides if initial market reactions are negative. That happened last year when he postponed his Liberation Day tariffs on April 9\. The "Trump Put" might be harder to implement in wartime unless he declares victory and lands on one of our aircraft carriers, festooned with a large banner reading "Mission Accomplished." If he does so, what happened to the idea of "unconditional surrender?" (4) *Not so fast.* In effect, Trump said that the mission is almost accomplished. Not so fast, according to Secretary of Defense Pete Hegseth. In recent briefings at the Pentagon, he has shifted from his initial "short war" rhetoric. He recently stated that while the US is "winning decisively," the military will take "all the time we need" to ensure success. Specifically, he noted the timeline could stretch to six or eight weeks—nearly double the President's initial 4-week estimate—depending on how quickly they can achieve "uncontested airspace" over Iran. Secretary of State Marco Rubio has also been more cautious about the "endgame." He recently emphasized that the mission is about "denying Iran the ability to use ballistic missiles," a goal that requires a sustained campaign of "finding, fixing, and finishing" mobile launchers that are difficult to track. He suggested this process would be ongoing rather than a one-time strike. (5) *Recession odds*. According to Polymarkets.com, the odds of a recession this year jumped to a three-month high of 34% on Friday from 21% on Wednesday, February 25, just before the war started. Thanks to the rapid response by the G7 ministers and the US President, the odds of a recession fell today to 28% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-52.png) (6) *Feelings.* We feel better than we did over the weekend, sort of. We would feel much better (and more bullish) if we saw some ships sail through the Strait of Hormuz without getting attacked by Iranian suicide drones. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: March 8-12 URL: https://www.yardeniquicktakes.com/economic-week-ahead-march-8-12/ Last updated: 2026-03-09T02:25:37.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-08-214630.png) This promises to be a nerve-racking week of developments in the Middle East. In the nine days since the US and Israel launched attacks on Iran, the conflict has embroiled various neighboring countries. Tehran’s moves to effectively shut the Strait of Hormuz are causing sharp spikes in oil and gas prices – and sending economic forecasters back to the drawing board. This evening, Brent crude topped $100 a barrel. As such, this week’s reports from OPEC and the International Energy Agency (IEA) on shocks to seaborne energy from the Persian Gulf could be major market movers. Especially after the United Arab Emirates and Kuwait reduced oil production because they've run out of storage. Naturally, all eyes are on any signs of escalation and their potential impact on inflation expectations. Already, investors are scaling back expectations for interest-rate cuts this year. This includes the Federal Reserve, heading toward its March 17-18 policy meeting. Many Federal Open Market Committee members are unhappy with the gradual pace of returning inflation to its 2% comfort zone. Indeed, the minutes of the January FOMC revealed that "[*several*](https://www.marketwatch.com/story/fed-minutes-reveal-discussion-of-a-possible-rate-hike-if-inflation-doesnt-cool-6b0580bd?ref=yardeniquicktakes.com)" participants felt rate hikes could even be appropriate. Hence, this week’s reports on consumer prices (Wed) in February and PCE inflation (Fri) in January could pack more punch than usual for bond markets already on edge. The PCE data – the Fed’s preferred price trend barometer — could be particularly market-moving. It’s remained stuck near 3%. The days ahead will bring updates on global inflation dynamics from China, India, Brazil, and Mexico. We’ll also get reality checks on the effects of President Donald Trump’s tariffs from the Eurozone (industrial production), Japan (GDP), Canada (trade and employment), and the UK (monthly GDP). Here are the US data releases most likely to influence the financial markets this week, though they are likely to be overshadowed by developments in the Middle East: (1) *PCE inflation*. Following a 2.9% y/y reading in December, the Cleveland Fed’s [*Inflation Nowcasting*](https://www.yardeniquicktakes.com/r/50a3262c?m=1456dfb6-7674-4896-874c-60ac9c641109)[ ](https://www.yardeniquicktakes.com/r/50a3262c?m=1456dfb6-7674-4896-874c-60ac9c641109)model projects the headline PCE to ease to 2.8% y/y in January (chart). That might comfort the Fed doves. But given fast-changing inflation dynamics, most officials might look past any good news in the short run. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-43.png) (2) *CPI*. After dipping to 2.4% y/y in January — and a 2.5% core rate — many expect consumer prices to hold largely steady in February (Wed). That includes the Cleveland Fed’s model, which forecasts a roughly 0.2% m/m increase for both headline and core CPI. Of course, this, too, could be the calm before the inflationary storm to come. (3) *Housing data*. This week’s flurry of housing data and surveys could offer important insights into US confidence as both bond yields and the economic outlook gyrate. We’ll get news on February existing home sales and housing affordability (Tue) and January housing starts (Thu) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-44.png) (4) *JOLTS and claims*. News that US job openings dropped to the lowest level in more than five years in December fits with more recent signs of slowing labor markets. Markets will pay close attention to January JOLTS data (Fri) for any hints of further deterioration (chart). Meanwhile, trends in initial weekly jobless claims (Thu) — coming in at 213,000 in the previous week — continue to indicate a stable labor market with low layoffs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-45.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Oil Price Going Straight Up As Strait Of Hormuz Remains Closed URL: https://www.yardeniquicktakes.com/market-call-oil-price-going-straight-up-as-strait-of-hormuz-remains-closed/ Last updated: 2026-03-09T01:46:03.000Z This evening, the prices of a barrel of Brent and WTI crude oil are up about $15 to $107\. The price of gold is falling because the dollar's foreign exchange value is rising. The 10-year bond yield is up to 4.195%. The S&P 500 and Nasdaq futures are down by more than 1.7%. The Nikkei is down 4.5%. This chaos in the financial markets is all about the Strait of Hormuz, where a tanker was reportedly hit by an Iranian suicide drone on Saturday morning. This oil shock won't end until ships can sail freely through the Strait. Until then, the financial markets are likely to become increasingly concerned about a 1970s-style stagflation scenario; back then, the period of stagflation included two recessions. According to Polymarket.com, the odds of a recession this year jumped to a three-month high of 34% on Friday from 21% on Wednesday, February 25, just before the war started. We started to see trouble ahead last week on Tuesday, when we predicted a 10%-15% correction in the S&P 500 because of the war. Now we can't rule out a bear market and even a recession. It all depends on how long the Strait will be closed, obviously. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-37.png) _This post is for paying subscribers only._ ### Straitjacket: Iran's Chaos War Strategy URL: https://www.yardeniquicktakes.com/straitjacket-irans-chaos-war-strategy/ Last updated: 2026-03-08T05:00:30.000Z On Tuesday, we warned: "We've been expecting a pullback due to excessive bullish sentiment, but now we expect a 10% correction from the high. It's hard to imagine that the IRGC won't use drones and speed boats to maintain their effective blockade of the Strait. If they are successful in doing so, the correction could be closer to 15%." When the war started, our initial thought was that it might be a short one, given that Iran's government had been decapitated during the first hour of the war. On Tuesday, we had second thoughts about the length of the war. The Iranian regime had prepared for the war by adopting a chaos strategy, launching missiles and drones not just at US and Israeli targets, but at its neighbors as well. The strategy includes shutting down the Strait of Hormuz to all shipping. By causing all this pain, Iran's regime hopes that it will pressure its adversaries to negotiate a ceasefire that keeps the regime in power. Today, we read a Bloomberg [article ](https://www.bloomberg.com/opinion/articles/2026-03-05/us-iran-conflict-tehran-can-make-the-persian-gulf-a-minefield?utm%5Fsource=website&utm%5Fmedium=share&utm%5Fcampaign=email)by James Stavridis, a retired US Navy admiral, titled "Iran Can Turn the Persian Gulf Into a Minefield." The Admiral noted that Iran has hundreds, if not thousands, of the small "fast mover" speedboats that can harass civilian shipping. In addition, he stated that Iran "has been planning a Strait of Hormuz closure operation for decades and probably has more than 5,000 mines; just one hit can severely damage a thin-skinned tanker." The US and its allies have minesweepers, but not enough of them. Oil prices rose again this morning on a report that Iran had struck an oil tanker with a missile in Iraqi territorial waters. Stock prices fell on this news. In addition, the Trump administration dropped a bombshell on the semiconductor industry today. According to a Bloomberg report released this afternoon, the administration has drafted sweeping new regulations that would give Washington unprecedented control **over the** global sale**s** of AI chips from companies like Nvidia and AMD. Soaring oil prices have driven up US bond yields since the war started (chart). The longer the war lasts, the more it will straitjacket the Strait of Hormuz, increasing the risk of stagflationary economic outcomes in the US and other countries. In this scenario, the Fed would be in a straitjacket too, unable to cut rates because of rising inflation, even if the economy weakens. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-26.png) So far, the increase in the 10-year Treasury bond yield has been relatively small because the rise in oil prices hasn't boosted inflation expectations. However, in the past, there has been a strong correlation between the two variables (chart). If oil prices continue to rise, they are likely to boost inflationary expectations and the bond yield. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-27.png) The only hedge against the war so far has been energy stocks and commodities (chart). Gold hasn't worked because the war has boosted the dollar's foreign exchange value, as the US economy is likely to be more resilient to rising energy prices than most other countries. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-35.png) Foreign stock markets are down more than the US stock market since the start of the war (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-30.png) Rising oil prices are weighing on emerging market economies that import oil. The rising dollar is also weighing on the stock prices of emerging economies (chart). In our opinion, this should prove to be a buying opportunity if the war ends soon, with shipping returning to normal in the Strait of Hormuz. That's still a likely scenario given the damage that Iran is experiencing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-32.png) Meanwhile, back home in the US, today's initial and continuing unemployment claims, as well as February's layoff announcements, suggest that the labor market is at least stabilizing if not improving (charts). Tomorrow morning's February employment report could show a better-than-expected payroll employment gain and another drop in the unemployment rate, as in January's report. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/4g7ONbU.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/4cUWFee.jpg) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-28.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-29.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Dire Strait Versus Home On The Range URL: https://www.yardeniquicktakes.com/dire-strait-versus-home-on-the-range/ Last updated: 2026-03-05T18:32:19.000Z Oil prices stabilized today, so stock prices rose. We expected a pullback in the S&P 500 in early 2026\. The S&P 500 fell 2.3% from its record high of 6987.60 on January 27 through Wednesday's close. It was up 0.77% today. Is the pullback over? If so, that's quite remarkable, suggesting investors believe Iran has lost the war and that oil will be flowing through the Strait of Hormuz very soon. As of today, March 4, 2026, the data confirms that shipping traffic through the Strait of Hormuz has essentially collapsed. While the waterway is not actually closed, the threat of military action has created a de facto blockade. Iranian officials have stated they will "set ablaze" any ship attempting to cross the Strait, claiming total control of the passage. President Donald Trump offered to provide maritime insurance and US naval escorts yesterday. While the situation remains dicey over there, over here it feels like home on the range, where seldom is heard a discouraging word about the latest economic indicators. Consider the following: (1) *Purchasing managers' survey of business activity* The manufacturing PMI stabilized at 52.4 in February (down from 52.6 in January). The PMI survey suggests that factory activity is finally improving. That message aligns with the latest Fed *Beige Book*, which reported today that manufacturers in eight of the Fed's twelve districts reported increases in new orders, and employment levels were generally stable. (See our new AI tool, [Beige Book Monitor.](https://yardeni-research.vercel.app/tools/beige-book?ref=yardeniquicktakes.com)) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-18.png) The services sector continues to lead the economy. The non-manufacturing PMI registered a very solid 56.1 in February (chart), with production and new orders the highest since 2024\. Given that services account for the majority of US economic output, the strength of the index suggests the broader economy remains resilient despite pockets of uncertainty reported in the *Beige Book*, including more price-sensitive consumers and some pullback in lower-income spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-19.png) (2) *Purchasing managers' survey of prices* Inflation pressures picked up in manufacturing during February, according to the manufacturing prices-paid index, which rose sharply to 70.5 (chart). That's up from 59.0 in January and the highest level since June 2022, reflecting rising input costs for materials such as aluminum and steel. Meanwhile, the non-manufacturing prices-paid index eased to 63.0 (chart). That's consistent with the *Beige Book's* observation that firms expect prices to rise at a somewhat slower pace in the near term. Even so, both price-paid indices remain well below the extreme levels reached during the pandemic. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-20.png) (3) *ADP employment* February's ADP report showed that private payrolls increased by 63,000, beating expectations (chart). Hiring strength was concentrated in services, particularly education and health services, which added 58,000 jobs. Construction employment continues to pick up, reflecting the data center buildout, while manufacturing employment declined modestly. Professional & business services payrolls fell by 30,000\. Job growth was driven primarily by small businesses, which added 60,000 jobs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/3YoQZUl.png) (4) *Bank loans* The Fed's latest senior loan officer opinion survey shows that the severe tightening in lending standards during 2022–23 has eased across all major loan categories (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-23.png) Bank lending continues to expand, with commercial banks' loans and leases rising 6.7% y/y (chart). This suggests traditional banks are expanding their lending despite concerns about stress in the private credit markets. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-22.png) (5) *Software stock prices* Recently, equity investors have been concerned that AI coding could disrupt the software industry. However, software ETFs appear to have found technical support during the latest bout of market volatility (chart). Despite the broader market's selloff on geopolitical fears, several major software ETFs stabilized and bounced yesterday and today, suggesting investors are done rerating the software stocks and regaining some confidence in their longevity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-25.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Another Regime Alteration URL: https://www.yardeniquicktakes.com/weekly-webcast-another-regime-alteration/ Last updated: 2026-03-04T13:00:01.000Z Saturday’s military attack on Iran by the US and Israel that killed Iran’s leader and 40 top officials is likely to push oil prices higher this week. However, in our short-war scenario, oil prices should fall in the coming weeks after a ceasefire. In any event, the attack also incapacitated Iran’s navy, so the threat of a blocked Strait of Hormuz has been greatly reduced. This is potentially a positive development from economic and investment perspectives, greatly reducing geopolitical risk in the Middle East once the war ends. If oil prices drop in the coming weeks following a ceasefire, US inflation and gasoline prices will decline, boosting US consumer spending and benefiting global economies and stock markets. The weekend’s Middle East developments make us even more confident in our Roaring 2020s scenario. ... Also: Dr Ed reviews “Mercy” (+). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### On The Fog Of War & Having Second Thoughts URL: https://www.yardeniquicktakes.com/on-the-fog-of-war-having-second-thoughts/ Last updated: 2026-03-05T18:33:20.000Z Our initial reaction to the latest war in the Middle East was that it isn't likely to last long. However, wars are hard to predict. The fog of war can be very disorienting. The US and Israel killed the top leaders of Iran's regime during the first day of their attacks on the country. So we thought that might set the stage for a short war. However, the regime's Islamic Revolutionary Guard Corps (IRGC) is still fighting to protect the Islamic Republic from both external threats and internal ones (including the regular army and a popular revolution). It is a branch of Iran's armed forces established shortly after the 1979 Islamic Revolution. It is one of the most powerful and influential institutions in Iran. The United States designated the IRGC as a Foreign Terrorist Organization (FTO) in April 2019 — the first time the US had made such a designation against a government entity. These terrorists are likely to be hard to eradicate with just air power. Their threats to attack ships sailing through the Strait of Hormuz have effectively closed the sea lane through which vital oil and gas supplies are shipped around the world. President Donald Trump today responded to soaring oil prices by ordering the United States Development Finance Corporation to provide maritime risk insurance and said that the US Navy will begin escorting tankers through the Strait "if necessary." Brent crude oil, which traded above $85 a barrel this morning, fell to $79 and closed above $81 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-8.png) Rapidly rising oil prices have a history of causing recessions and bear markets in stocks (chart). That was not the case in 2022, when oil prices spiked, and the economy continued to grow, yet there was a bear market. The longer the war lasts, the more likely it is that the oil price shock results in stagflation. The Fed would be frozen as the risks of higher inflation and higher unemployment both increase. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-9.png) The S&P 500 fell sharply this morning and then rebounded, but still closed down by almost 1.0% and slightly below its 50-day moving average (chart). It is only 2.3% below its record high on January 27\. We've been expecting a pullback due to excessive bullish sentiment, but now we expect a 10% correction from the high. It's hard to imagine that the IRGC won't use drones and speed boats to maintain their effective blockade of the Strait. If they are successful in doing so, the correction could be closer to 15%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-16.png) There may also be a short-term reversal in the domestic and global rebalancing trade that we predicted on December 7\. It was working, but it is already being upended by the war. If recession fears start spreading, the Magnificent-7 could outperform the rest of the S&P 500, as they did today (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-11.png) Also, our Go Global rebalancing act might be upended for a while until a credible ceasefire is reached. Overseas stock markets have been hard hit by the war. For starters, the war shows that the US dollar remains the safe-haven currency of choice (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/45m95cZ.png) An energy crisis is likely to be less severe in the US than in many other countries that import oil and gas. The US is an exporter of both (chart). During the 1970s, high gasoline prices and shortages depressed consumer confidence and spending. This time, shortages are unlikely in the US. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-13.png) European consumers are already facing the prospect of soaring natural gas prices (chart). A similar situation, which depressed European economies, occurred after Russia invaded Ukraine in 2022\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-15.png) Many emerging economies are also importers of oil. So they are vulnerable to the latest oil shock. Since the war started, the US MSCI stock price index is down less than the MSCI indexes for all the other countries and regions we follow (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-12.png) Notwithstanding our increasing caution about the war's length and economic impact, we still expect it to last weeks rather than months. We are still targeting 7700 on the S&P 500 by the end of this year. We are sticking with our Roaring 2020s base case. We don't expect a rerun of the Depressing 1970s. For now, we are also troubled by the latest high reading of our favorite Bull/Bear Ratio at 3.61 this week (chart). We will probably turn more bullish when investors turn more bearish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-17.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### SWEET & SOUR: Iran, China, M-PMI, & PPI URL: https://www.yardeniquicktakes.com/sweet-sour-iran-china-m-pmi-ppi/ Last updated: 2026-03-03T02:52:24.000Z I. *Hot war with Iran and cold war with China* We remain in the short-war camp on the outlook for the current conflict in the Middle East. The stock market seems to agree, since it barely budged today, though defense stocks rose significantly (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-7.png) Geopolitical crises tend to create buying opportunities in the stock market (chart). The problem is that everyone knows that, which diminishes the magnitude of opportunities! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/4aFEjfR.png) Following the assassination of Supreme Leader Ali Khamenei on February 28, Iran has activated a constitutional transition mechanism known as the “Interim Leadership Council” (or “Council of Three”). They represent the political, judicial, and clerical power centers and must nominate a new Supreme Leader. The new chosen one had better be ready to follow the commands of the White House or meet the same fate as his predecessor. Iran's foreign minister admitted that the country's attacks on neighboring countries are literally out of control: Soldiers in the field have no command structure and are just following the last orders they received before their top commanders died. America's recent military actions in Latin America and Iran are designed to check China's ambitions to dominate these regions. China imports lots of oil from Venezuela and Iran and has invested significantly in both countries. A stable Middle East would allow the US to position more of its military might in the Pacific and frustrate China's plans to invade Taiwan. II. *US manufacturing showing more signs of life* Here at home, the US economy has been remarkably resilient in recent years despite weakness in manufacturing, which is finally showing signs of revival. The ISM Manufacturing PMI (M-PMI) has found its footing after a long stretch of sluggishness. The most recent reading f**or** February 2026 came in at 52.4%, following a very strong January reading of 52.6% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-5.png) III. *US PPI inflation hotter than expected* January's PPI report showed core inflation at 3.6% y/y (chart), up 0.8% m/m, compared to the expected 0.3%. The headline inflation rate was 2.9%. Both PPI inflation rates have moved sideways in recent months rather than continuing to decline, suggesting that the disinflation trend has stalled. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway.aspx-1.png) Much of the stickiness is concentrated in services inflation. Supercore readings remain in the low-to-mid-3% range (chart). We expect strong productivity gains to keep unit labor costs subdued this year, gradually easing services inflation. Furthermore, once the war in Iran ends, we expect oil prices to fall. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/3U3fOnG.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: March 2 - 6 URL: https://www.yardeniquicktakes.com/economic-week-ahead-march-2-6/ Last updated: 2026-03-02T04:13:55.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/Screenshot-2026-03-01-215422.png) Nothing upends the economic game board like a sudden war few had in their bingo cards a week ago. Granted, the coordinated US-Israel attack on Iran over the weekend wasn’t a complete surprise. But the scale of the bombardment that killed Supreme Leader Ayatollah Ali Khamenei was impressive. Tehran’s wave of retaliatory missile and drone attacks aimed at US bases and allies around the region, and threats to close the Strait of Hormuz, have economists scrambling to calculate the fallout. As traders assess what all this means for energy and other commodity prices, this week features a couple of key data reports that could influence the timing of any future Federal Reserve rate cuts, namely, February employment (Fri) and January retail sales (Fri). We’ll hear from Fed Governor Michelle Bowman (Thu) [*speaking*](https://www.federalreserve.gov/monetarypolicy/fomc.htm) on the economy and innovation. New York Fed President John Williams also speaks (Tues). Other voting Federal Open Market Committee members [*scheduled*](https://www.marketwatch.com/economy-politics/calendar?ref=yardeniquicktakes.com) to make comments include Minneapolis Fed President Neel Kashkari (Tue) and Cleveland Fed President Beth Hammack (Fri). This will be a busy week on the international front. China’s annual “Two Sessions” meeting begins (Wed) and will unveil its 2026 GDP target — likely abound 4.5%. We’ll get updates on Japanese unemployment (Tue) and Eurozone inflation (Tue). And, of course, global markets will be on the lookout for any news on the latest zigs and zags in the AI trade. Here are the economic data releases most likely to affect Fed policymakers’ views on whether another rate cut is needed: (1) *Employment*. We expect a 60,000 increase in February payrolls (Fri). The data takes on increasing significance since last month’s surprisingly robust increase of 130,000 and 4.3% jobless rate. Another healthy jobs report could close the door on Fed rate cuts for the foreseeable future. We’ll also get February employment data from ADP (Wed) and Challenger (Thu), as well as initial jobless claims (Thu), which suggests that the jobless rate probably fell again last month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway.png) (2) *Retail sales*. The January retail sales report (Fri) will be an important reality check following a flat December reading. Most forecasts center on a roughly 0.2% m/m drop last month. Still, with employment holding its ground and the stock market near record highs, spending patterns should hold up as well, as confirmed by the weekly Redbook Retail Sales index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-1.png) (3) *PMIs*. The Institute of Supply Management reports its February manufacturing purchasing managers' index (Mon), which expanded in January to 52.6\. The non-manufacturing PMI (Wed) follows. It, too, came in well above 50.0 the previous month, at 53.8\. The regional business surveys suggest that M-PMI remained above 50.0 last month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/gateway-2.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: The Implications Of The War In The Middle East URL: https://www.yardeniquicktakes.com/deep-dive-the-implications-of-the-war-in-the-middle-east/ Last updated: 2026-03-05T18:33:55.000Z **This is an excerpt from our latest Morning Briefing, which we are sharing with our QuickTakes community.* Iran's Supreme Leader Ali Khamenei was killed on Saturday along with 40 other top Iranian leaders when the US and Israel launched a military campaign against Iran’s Mullah regime. In a February 28 post on *The Free Press*, historian Niall Ferguson observed that President Donald Trump’s approach to dealing with America’s adversaries in Latin America and the Middle East isn’t regime change but regime alteration: “Indeed, regime alteration is the practical consequence of the approach laid out in Trump’s [*National Security Strategy*](https://substack.com/redirect/f4b72891-51db-4977-a95b-5d90a310aa45?j=eyJ1Ijoiemg3ZSJ9.bFaSF3RhvxBTMg1l6xUJTnDiJ99qFd6fM8U7tQbqkoc&utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) published late last year. The strategy rules out the deployment of American ground forces, except for special forces. It requires a short time frame for military operations. It will disappoint those who want to fast-track Venezuela and Iran to democracy. But the lesson of Iraq has not been lost on Trump.” So no boots on the ground. In Venezuela at the beginning of the year, Trump snatched President Nicolás Maduro and replaced him with Delcy Rodríguez, leaving the structure of the regime in place but requiring her to follow Washington's commands, including on the country’s oil production and exports ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F1.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_1.png) Figure 1 Trump seems to be angling for a regime alteration in Cuba by cutting off the country’s access to oil from Venezuela. In Iran, Trump’s goal is to force the next regime to end the previous regime’s ambitions of building nuclear weapons, destroying Israel, and dominating the Middle East by supporting terrorist organizations around the region. Now that the “Axis of Evil” has lost Iran and Venezuela, what will be the impact and reaction of its other three members, China, North Korea, and Russia? Losing Iran is a big blow to Russia, which received military equipment, especially drones, from Iran. China imports lots of oil from Iran and has invested significantly in the country. In North Korea, Little Kim is probably scrambling to fortify his bunker. China has seen America’s military might in action twice in Iran and once in Venezuela since the start of Trump’s second term. China’s leaders might now consider postponing any planned invasion of Taiwan. In the Middle East, the terrorist proxies of Iran’s Mullahs in Gaza (Hamas), Lebanon (Hezbollah), and Yemen (Houthis) have already been decapitated once by the Israelis. Now they’ve lost their puppet master in Tehran. The Abraham Accords are likely to be expanded to include more Arab countries. The Israeli stock market has been discounting this scenario for the past two years ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F2.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_2.png) Figure 2 For the financial markets, the immediate issue is whether Iran’s decapitated regime will block the Strait of Hormuz. We are not military experts, but it seems to us that if that were going to happen, it would have happened by now. The probable reason it hasn’t is that the US and Israel have incapacitated Iran’s navy. At the same time, it is very unlikely that the two allies would have done any damage to Iran’s oil production and export facilities ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F4.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). As in Venezuela, Trump probably expects to be running Iran’s oil business from the White House soon. Of course, in the next few days, oil prices could spike higher. Indeed, Reuters reported that Brent crude jumped 10% to about $80 a barrel over the counter on Sunday, according to oil traders, while analysts predicted that prices could climb as high as $100 ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F4.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). Most tanker owners, major oil companies, and trading houses have suspended crude oil, fuel, and liquefied natural gas shipments via the Strait of Hormuz, trade sources said, after Tehran warned ships against moving through the waterway. More than 20% of global oil is moved through the Strait of Hormuz. Meanwhile, on Sunday, Iranian Foreign Minister Abbas Araghchi said that a new supreme leader could be chosen within days. He also said that Iran has no intention of closing the critical shipping lane at present nor any plans to do “anything that would disrupt navigation at this stage.” That might be because reports indicate that a total of nine Iranian naval ships have been destroyed and sunk since the operation began on Saturday. Some of these are described as relatively large and important vessels. Trump also announced that the Iranian Naval Headquarters had been “largely destroyed” in a targeted strike. In any event, oil prices are likely to fall in the coming months, assuming this war is short, as it’s bound to be. That should help to bring US headline inflation down to the Fed’s 2.0% y/y target. Lower gasoline prices will boost consumers’ purchasing power in the US and around the world ([*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F5.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). Both US and global economic growth should benefit from lower oil prices. After an initial negative reaction to the war, stock markets around the world should resume setting record highs, especially in oil-importing countries throughout Asia ([*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F6.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). So most emerging economies’ stock markets should continue to outperform ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F7.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_5.png) Figure 5 We’ve held back on overweighting the S&P 500 Energy sector because we expect ample global supplies to offset near-term jitters about the outcome with Iran ([*Fig. 8*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F8.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). Events over the weekend suggest that the recent weeks’ energy stock rally might continue for a few more days and then fizzle in our short-war scenario. **Geopolitics II: What About Interest Rates?** On Friday, despite mounting evidence that another conflict in the Middle East was imminent, the 10-year Treasury bond yield fell below 4.00% ([*Fig. 9*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F9.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). That happened even though January’s PPI inflation rate was hotter than expected ([*Fig. 10*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F10.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). Furthermore, the January 27-28 FOMC [*minutes*](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20260128.pdf?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112), released on February 18, were relatively hawkish, with some members of the monetary-policy committee explicitly raising the possibility of rate hikes assuming that there are no clear indications that disinflation is firmly on track. At the time of the meeting, the bond yield was at 4.25%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_9.png) Figure 9 Despite the decline in the yield since then, it remains at the bottom of a relatively tight range that has persisted for the past three years ([*Fig. 11*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F11.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). In the happy-go-lucky scenario we outlined for the Middle East and oil prices, the yield may continue to fall, as it has often tracked oil prices in the past, except for the past few weeks ([*Fig. 12*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F12.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). A faster decline in inflation because of falling oil prices might help incoming Fed Chair Kevin Warsh (assuming he is approved by the Senate) convince FOMC members to lower the federal funds rate ([*Fig. 13*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F13.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). We think that would increase the likelihood of bubbles inflating in financial asset markets. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_11.png) Figure 11 However, the US Treasury bond market may be signaling that the clear and present danger of financial bubbles lies in the private credit markets, as evidenced by the falling prices of ETFs that invest in private credit lenders. FOMC officials might be persuaded to lower the federal funds rate to avert a financial crisis starting in that market. Of course, if something significant breaks in the private credit market, the Fed will rapidly create an emergency liquidity facility and lower the federal funds rate. The Fed has lots of experience doing so from its previous Whac-A-Mole play during the Great Financial Crisis, the Great Virus Crisis, and the Mini-Banking Crisis ([*Fig. 14*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F14.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). **Geopolitics III: What About the Price of Gold?** Of course, the US Treasury bond yield may also be falling because of safe-haven demand. The price of gold is likely to rise this week for the same reason, especially if the price of oil spikes. However, the latest developments in the Middle East over the weekend suggest that geopolitical risks are likely to decrease rather than increase, as discussed above. That’s assuming that the Iranian regime doesn’t rise from the dead. But that’s not very likely now that so many of its top leaders have been martyred and are presumably having lots of fun in the afterlife. For now, we are still targeting $6,000 per ounce for the price of gold by year-end and $10,000 by the end of the decade ([*Fig. 15*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F15.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). But we would be inclined to book some trading profits in the event of a big jump to the upside in the prices of gold and oil, especially in the latter since we don’t believe a jump would be sustainable. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_15.png) Figure 15 **Geopolitics IV: The Roaring 2020s & Beyond.** We’ve been considering whether to revise our subjective probabilities for our three economic and stock market scenarios for the rest of this year. We’ve decided to leave them as is, notwithstanding the latest developments in the Middle East. In fact, these developments, and the happy outcome we discussed above gives us more confidence in them: (1) *Our Roaring 2020s base-case scenario remains at 60%*. If the postwar outcome of our short-war scenario plays out, oil prices will be lower. Consumer confidence, purchasing power, and spending will get a boost from lower oil prices and greater stability in the Middle East. The odds of a recession and a bear market would remain low. Corporate earnings would continue to rise as both the US and global economies benefit from lower oil prices ([*Fig. 16*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F16.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). Our Roaring 2020s targets for the S&P 500 remain intact at 7,700 by the end of this year and 10,000 by the end of 2029 ([*Fig. 17*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F17.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). The Roaring 2020s would be followed by the Roaring 2030s. (2) *Our Meltup scenario remains at 20%*. We have been thinking about lowering the odds of our Meltup scenario given the weakness in the stock market so far this year, as the air is coming out of the AI stocks. However, we are encouraged to see that the decline in the forward P/Es of the Magnificent-7 has been mostly offset by rising valuation multiples among the Impressive-493 ([*Fig. 18*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F18.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) and [*Fig. 19*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F19.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112)). A happy outcome of the latest turmoil in the Middle East could certainly drive stock prices higher around the world. Arguably, there was a stock market meltup last year in the S&P 500 Information Technology and Communication sectors, particularly the Magnificent-7\. The stock market action so far this year shows that this excess is being cured by investors rebalancing to other sectors and to overseas stock markets ([*Fig. 20*](https://yardeni.com/wp-content/uploads/tc%5F20260302%5F20.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=406326112&%5Fhsenc=p2ANqtz-9Lii1bO5W3ejHf0cIbWvhrCsewg2TRBxtJPQmk3tJ%5FCp%5FrAhN-qFMal9YxAXYi8R61qjK41oqetHN%5FTFoSctVHQw-2%5Fw&%5Fhsmi=406326112) below). A meltup doesn’t have to set the stage for a meltdown, and certainly not one that triggers an economic recession. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/03/tc_20260302_20.png) Figure 20 (3) *Our Meltdown scenario remains at 20%*. We have previously identified the two biggest risks to the two bullish scenarios above as a geopolitical crisis, particularly in the Middle East, and a financial crisis, particularly in the US private credit market. Now we are thinking that the risks of the former are declining (in a short-war scenario) and that the risks of troubles in the private credit markets are increasing. If the private credit market seizes up, the Fed will most likely respond rapidly with an emergency liquidity facility and cuts in the federal funds rate, as mentioned above. In other words, a meltdown scenario is likely to offer lots of good buying opportunities as the Roaring 2020s roar into the Roaring 2030s! Of course, we could be wrong about the length of the war and the spike in oil prices. During the 1970s, the two oil shocks in the Middle East boosted inflation and interest rates and depressed stock markets worldwide. For now, we are still assigning a 20% subjective probability to our risk bucket of everything that could go wrong. Stay tuned. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Record High For S&P 500 Equal-Weight Stock Price Index URL: https://www.yardeniquicktakes.com/market-call-55/ Last updated: 2026-03-01T05:00:33.000Z We started writing our Market Call on Friday. Saturday morning, we woke up to the news of the joint military campaign by the US and Israel against Iran's evil Mullah regime. It appears that the two allies have complete air superiority. In a video statement posted to social media, US President Donald Trump vowed to destroy Iran's missile program and navy, and ensure that the country can "never" have a nuclear weapon. Iran's defenses were already badly degraded by last year's attacks by Israel and the US. So we doubt that the Iranian regime will be able to block the Strait of Hormuz, as it has threatened to do in response to being attacked. If that’s the case, then increased production by the rest of OPEC is likely to limit any rise in oil prices due to a decline in Iran’s oil exports during the current conflict. Furthermore, the oil market might start to anticipate that if the Mullahs are toppled, then Iran will export even more oil. We wouldn’t be surprised if any rally in the S&P 500 Energy sector on Monday morning fades by the afternoon. We wouldn’t be surprised if any selloff in the S&P 500 on Monday morning turns into a rally, driven by expectations of lower oil prices once the latest Middle East war ends. The price of gold might also round-trip on Monday. Bond yields might fall due to both safe-haven demand and post-war prospects for lower oil prices. Now back to our regularly scheduled programming: (1) *Performance*. RSP (the S&P 500 equal-weight ETF) rose to a new record high on Friday, while SPY (the S&P 500 market-weight ETF) fell 0.4% (chart). The former is up 7.0% ytd, while the latter is up just 0.6%. In early December of last year, we recommended rebalancing out of the Magnificent-7 and into the Impressive-493\. So far, so good, as the former has outperformed the latter. We expected that the stock market might be choppy during the first half of the year. That's half true, as RSP has risen to record highs, while SPY has churned below 700, just as the S&P 500 market-weight stock price index has been choppy below 7000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-18.jpg) The worst performing sector of the S&P 500 ytd has been the Financials sector (chart). On February 12, we wrote: "We are dropping our overweight recommendation on Financials to market weight, while maintaining our overweights on Health Care, Industrials, and Materials (as of yesterday). We are glad that we advised underweighting the Magnificent-7 and overweighting overseas stocks in early December last year." Financials were hard hit this year by President Trump's proposal to cap credit card rates at 10%, by fears of a private debt crisis, and by concerns that AI will disrupt many of their business models. On Friday, the sector was hit hard again by January's hotter-than-expected PPI inflation rate. That reduced the likelihood of Fed rate cuts in the coming months. We remain in the none-and-done camp, for now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-266.png) Not surprisingly, the worst (best) performing S&P 500 sectors so far this year have the highest (lowest) percentages of stock prices down ytd (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-264.png) The Magnificent-7 continue to underperform the Impressive-493, as they have since late October 2025 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-271.png) (2) *Earnings*. We remain bullish on the S&P 500 with our target of 7700 by the end of this year because we remain bullish on the outlook for S&P 500 earnings. Industry analysts are bullish, too. They are currently expecting earnings per share to rise to $314.62 this year (from a projected $273.61 last year) and leap to $364.54 next year (chart). We are still at $310 and $350 for this year and next, but will likely raise our targets soon after we get the final results for Q4-2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-17.jpg) The breadth of positive 12-month percent changes in both S&P 500 forward revenues and forward earnings continues to improve (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-265.png) (3) *Valuation*. The Great Rotation of the Roaring 2020s started late last year, just as we predicted on December 7\. That's clearly visible by comparing the forward P/Es of the 11 sectors of the S&P 500 now and at the end of 2025 (chart). The valuation multiples of last year's outperformers have come down, while those of last year's laggards have increased. As a result, the forward P/E of the S&P 500 is only down to 21.6 from 22.2. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-269.png) (4) *Credit*. The prices of private credit ETFs continue to fall (chart). This is certainly weighing on the S&P 500 Financials sector. It is a problem, but we don't think it has the potential to cause an economy-wide credit crunch, a recession, or a bear market. But we are on guard. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-267.png) (5) *Global equities*. Go Global continues to outperform Stay Home so far this year as it did last year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-268.png) (6) *Employment.* In addition to private credit concerns, investors are worried that AI will destroy jobs. Friday's stock market weakness was partly attributable to Block announcing a 4,000-worker cut (more than 40% of its workforce) due to AI. The stock prices of employment-related companies continued to plunge on the news (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-272.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View All QuickTakes](https://www.yardeniquicktakes.com/) ### GEOPOLITICS: The Clock Is Ticking In The Middle East URL: https://www.yardeniquicktakes.com/geopolitics-the-clock-is-ticking-in-the-middle-east/ Last updated: 2026-02-27T18:23:34.000Z The US has assembled its largest military presence in the Middle East since 2003, including two aircraft carriers and F-22 stealth fighters. Indirect talks in Geneva between US envoys (Steve Witkoff and Jared Kushner) and Iranian officials ended Thursday without a breakthrough. The Trump administration has warned of "drastic consequences" if Iran does not make significant nuclear concessions. Israel has opened bomb shelters and warned Lebanon that its infrastructure will be targeted if Hezbollah intervenes in a US-Iran conflict. The State Department has authorized the departure of non-emergency personnel and families from the US Embassy in Israel as of today, February 27\. Similar orders were issued for the embassy in Beirut, Lebanon, on February 23\. Reports also indicate the US 5th Fleet in Bahrain has been reduced to fewer than 100 mission-critical personnel. China has urged its citizens to leave Iran immediately. South Korea issued a "Level 3" red alert, ordering its nationals to depart Iran. Australia has offered voluntary departure for diplomatic dependents in the UAE, Qatar, and Jordan, citing a "deteriorating security situation." Several European nations, including Finland, Sweden, and Serbia, have also advised their citizens to evacuate Iran. Commercial airlines, including KLM, have begun suspending flights to the region. Many foreign governments are advising their citizens to leave while commercial corridors remain open, as these may close abruptly if military operations begin. So will the US and Israel attack Iran imminently? Maybe, though the State Department said today that US Secretary of State Marco Rubio will visit Israel on Monday and Tuesday. [MS Now](https://www.ms.now/news/vice-president-jd-vance-set-to-host-high-stakes-iran-meeting?ref=yardeniquicktakes.com) reported Friday that Omani Foreign Minister Badr Al Busaidi will meet Friday with Vice President JD Vance and other American officials in Washington for "previously unreported talks in an effort to stave off war with Iran." Oil prices are finishing February on a high note, with the month's final trading week posting a $1-per-barrel gain as US-Iran tensions mount (chart). Indirect talks between Washington and Tehran this week in Geneva yielded no results, and Trump's 10- to 15-day deadline will soon be running out. Amidst all this, media attention to the upcoming OPEC+ summit is surprisingly tepid, potentially tempting Saudi Arabia to announce yet another OPEC+ production increase for April. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-254.png) The rebound in oil prices, along with the rebalancing of global equity portfolios, gave a big price boost to US energy ETFs recently (chart). Today's relatively small $1.50 increase in the price of a barrel of crude oil suggests that the market has either discounted a rapid war or isn't convinced it will happen. The Saudis might also announce an increase in their production, though much of it would have to go through the Strait of Hormuz, which Iran has threatened to block. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-260.png) From 2023 through 2025, there was a good correlation between the 10-year US Treasury bond yield and the price of a barrel of Brent crude oil (chart). In recent weeks, the bond yield has dropped despite the rise in the oil price. Bonds may be attracting safe-haven buyers who fear that another war in the Middle East could lead to more geopolitical chaos. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-257.png) It was surprising to see the bond yield fall below 4.00% today despite a hotter-than-expected PPI inflation reading. In any event, both the nominal and real 10-year bond yields have been relatively flat since 2023 (chart). We think the trend will remain flat through the end of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-262.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Will The US Economy Remain Resilient Despite AI Derangement Syndrome? URL: https://www.yardeniquicktakes.com/will-the-us-economy-remain-resilient-despite-ai-derangement-syndrome/ Last updated: 2026-02-27T04:09:18.000Z If AI continues to disrupt, if not destroy, more and more business models, won't that cause a recession? It might if it triggers lots of white-collar layoffs, which in turn lead to blue-collar job losses (chart). Alternatively, it might cause a credit crunch in the private credit markets. UBS Group AG has raised its private credit default forecast, with its strategists warning that losses could reach as high as 15% in a worst-case scenario, up from 13% just weeks ago, Bloomberg reported. The bank said the increase reflects growing fears that rapid AI disruption could trigger severe stress among corporate borrowers. Technology companies, in particular, are seen as highly vulnerable to AI-driven upheaval. Current default levels in private credit are estimated at 3%–5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-235.png) We aren't too worried about this latest recession mongering. In the worst-case scenario, the Fed will quickly step in with emergency liquidity facilities to avert an economy-wide credit crunch and downturn. We expect that laid-off coders will be replaced with "prompters," who can work most efficiently with AI tools to boost their companies' productivity. Yesterday, we observed that Indeed's job postings for software developers is currently up 11% y/y! Meanwhile, we remain impressed by the resilience of the economy. Consider the following: _This post is for paying subscribers only._ ### Update On AI Derangement Syndrome & Its Consequences URL: https://www.yardeniquicktakes.com/update-on-ai-derangement-syndrome-its-consequences/ Last updated: 2026-02-26T03:56:59.000Z Last year's impressive stock market rally, which began on April 9 (when POTUS postponed his Liberation Day tariffs), was fueled by AI Optimism. It turned into AI Fatigue late last year and, in recent weeks, into AI Fear. Now it's AI Derangement Syndrome. For a while, AI was widely thought of as a productivity-enhancing tool. Now the worry is that it has turned into a Terminator of numerous businesses and the jobs they provide. Software stocks have plunged since the beginning of the year because Anthropic has been using its LLM (large language models) tools to code better versions of them (chart). If code can write code, who needs coders? Who needs software companies? ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-238.png) Today, we signed up for Claude Pro at $20 per month. We prompted it to create a Fed Policy Stance Meter to rate the relative dovishness and hawkishness of the past two FOMC meetings. It took Claude less than five minutes to write the HTML code and produce the impressive result below. We don't need to fire anyone. We need our entire YRI Team to use this new tool to enhance our productivity. Our tech team has already started integrating Claude Code into their daily workflows. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/CleanShot-2026-02-25-at-20.27.01@2x.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/CleanShot-2026-02-25-at-20.27.28@2x.png) Fears that AI will put companies out of business pummeled the stocks not only of traditional enterprise SaaS (software as a service) providers but also many other industries, including cybersecurity, IT services & outsourcing, payments & financial services, wealth management, and real estate (chart). _This post is for paying subscribers only._ ### Foreigners Are Buying, Not Selling, US Securities URL: https://www.yardeniquicktakes.com/foreigners-are-buying-not-selling-us-securities/ Last updated: 2026-02-25T02:17:33.000Z _This post is for paying subscribers only._ ### Is AI Frankenstein? URL: https://www.yardeniquicktakes.com/is-ai-frankenstein/ Last updated: 2026-02-24T13:33:38.000Z The people who've created large language models (LLMs) to power artificial intelligence (AI) are now using them to code better LLMs. If LLMs are now so good at coding that they can create their own better versions, who needs coders anymore? Are the only jobs left in the software industry the ones for LLM prompters? In 5-10 short prompts, they have to tell the LLM what new software agent to create. How long will it take for LLMs to learn to prompt themselves? We still believe that AI is artificial but not intelligent. The output of LLMs sounds intelligent, but these models don't have a clue about what words actually mean. Nevertheless, so far this year, the stock market has been discounting a scenario in which AI is our Frankenstein monster. We created it, and it will soon turn on us humans. The first victims will be white-collar workers in every industry. The calamity may already have begun in the industry that created the monster, i.e., information technology. Payroll employment has been flat there since late 2022, when ChatGPT was first released (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-218.png) If white-collar workers lose their jobs and are forced to take lower-paying positions, consumer spending will be hard hit, weakening blue-collar jobs as well. Apparently, this nightmarish scenario depressed stock prices today with the release of a Citrini Research [report](https://www.citriniresearch.com/p/2028gic?ref=yardeniquicktakes.com) titled "The 2028 Global Intelligence Crisis." Josh Brown posted it on social media today. Also depressing the market was a sharp drop in IBM's stock price after it was reported that Anthropic may have an agent that challenges IBM's COBOL software. The good news is that bullish sentiment must be dropping rapidly, as the AI story has morphed from a Roaring 2020s productivity booster to an existential threat to our way of life. We continue to believe that AI is augmenting workers' productivity rather than making them extinct. After the stock market closes on Wednesday, we expect Nvidia's CEO, Jensen Huang, to provide a much more upbeat view of AI's impact on our future during the company's conference call. Meanwhile, the rotation we predicted on December 7, 2025 continues, from the Magnificent-7 to the rest of the market—i.e., the Impressive-493 and the S&P 600 SmallCaps and S&P 400 MidCaps. So does the rotation from the US to the rest of the world. All the AI commotion and the latest chapter in Trump's Tariff Turmoil are driving the price of gold closer to our year-end targets of $6,000 per ounce by the end of this year and $10,000 by the end of 2029: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: February 23–27 URL: https://www.yardeniquicktakes.com/economic-week-ahead-february-23-27/ Last updated: 2026-02-23T03:54:27.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/Screenshot-2026-02-22-211613.png) Now that the gavel has fallen on Donald Trump’s tariffs, the question is how the US president will try to save face. President Trump’s move on Saturday to slap 15% universal levies on the globe—up from an initial 10% on Friday—dispels the notion that Trump might’ve lost the taste for trade-warring. Where Trump takes tariffs now is anyone’s guess. On Friday, the Supreme Court upheld a lower court ruling that Trump can’t bypass Congress and use the International Emergency Economic Powers Act (IEEPA) to impose global tariffs. Trump World claims that it has several workarounds. This uncertainty is sure to increase the drama surrounding Trump’s State of the Union address (Tue). The same goes for the other international kerfuffle preoccupying world markets. Energy markets are on edge as the US military assembles the biggest collection of naval power and weapons systems in the Middle East since the early 2000s, and Trump hints at action against Tehran. At home, the plot for Federal Reserve rate cuts has thickened, too. The minutes from the January Federal Open Market Committee meeting indicated that some officials think the next move could be to tighten. All this will increase attention on this week’s Fed members’ speaking engagements. Highlights include Governor Christopher Waller opining on the economic outlook (Mon) and tech disruption (Tue). Governor Lisa Cook tackles artificial intelligence and productivity (Tue). For markets wary of AI-driven volatility, Nvidia’s Q4 earnings release (Wed) will serve as an economic indicator of sorts, along with the official ones scheduled this week. Here’s a look at those most likely to influence the timing—and, at this point, direction–of the Fed’s next move: (1) *Producer prices*. Suspense abounds as the Bureau of Labor Statistics drops the January PPI (Fri). Forecasts are generally centered around 0.3% m/m for both the overall index and core wholesale prices (chart). That would signal something of a return to form following December’s 0.5% jump (up 0.7% for core prices). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-208.png) (2) *Consumer confidence*. The February survey (Tue) will provide an important reality check following a dismal January reading from the Conference Board. Last month, sentiment plunged to the lowest level—84.5—since May 2014 amid anxiety over labor market conditions (chart). With employment surprising to the upside in January, confidence likely stabilized or recovered some ground. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-209.png) (3) *Regional Fed surveys*. As Fed Chair Jerome Powell and his fellow policymakers try to get a handle on growth dynamics, this week’s bevy of Fed business surveys could be illuminating. The Chicago Fed and Dallas Fed are out of the gate first (Mon), followed by the Richmond Fed (Tue) and Kansas City Fed (Thu). The New York and Philly surveys suggest business is improving (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-211.png) (4) *Jobless claims*. Last week’s larger-than-expected 23,000 drop in initial claims for state unemployment benefits fit with the view that the Fed should be in no hurry to ease again. This week’s data (Thu) could go a long way toward allaying fears that conditions might be weakening. That’s particularly so if claims come in at around the 206,000 level again (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-210.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: A Loopy Stock Market URL: https://www.yardeniquicktakes.com/market-call-54/ Last updated: 2026-02-22T17:36:52.000Z The equal-weight S&P 500 has been rising to record highs since the beginning of the year, while the market-weight S&P 500 has been literally loopy just below 7000 over the same period (chart). This has been mostly attributable to the stock market's rotation in the type of outperforming stocks, from high-tech to low-tech industries. Previously, the former were supercharged by expectations that companies involved in AI were sure winners, while the latter lagged because investors figured it would take a while before AI benefited them. However, once the hyperscalers began massively increasing their spending on AI infrastructure, investors feared that the investments might not pay off. This mounting uncertainty triggered a rotation from high-tech industries that had gained much market-cap share in the S&P 500 to low-tech industries with much smaller market-cap share. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-206.png) So far this year, investors have favored the S&P 500 sectors that are associated mostly with the physical and analog world rather than the virtual and digital world (chart). That makes a lot of sense because much of the AI capital spending boom will boost demand for oil and gas, electricity, materials, capital equipment, and real estate. Furthermore, the geopolitical backdrop remains unsettled and unsettling. A military confrontation between the US and Iran seems increasingly likely, which has sent the price of a barrel of Brent crude oil up by more than $10 since the start of the year. This explains why the S&P 500 Energy sector has been the best-performing S&P 500 sector so far this year (chart). Yet the transportation stocks included in the S&P 500 Industrials sector have continued to rise to record highs. Defense stocks, which are also part of the Industrials sector, have been very strong so far this year. Rising geopolitical risks and uncertainties have been bullish for precious metals, which are included in the Materials sector. Base metal prices are rising amid growing demand driven by booming AI capital spending. _This post is for paying subscribers only._ ### 4724: The Year Of The Fire Horse URL: https://www.yardeniquicktakes.com/4724-the-year-of-the-fire-horse/ Last updated: 2026-02-22T05:00:35.000Z Happy Lunar New Year! Last year was the Year of the Wood Snake, according to the Chinese Zodiac. In Chinese culture, the Snake is often seen as a symbol of wisdom, intuition, and transformation. The Horse is one of the most beloved zodiac signs. It is a powerful symbol of energy, freedom, and rapid success. Because the Horse is a social and high-spirited animal, its year is usually expected to be fast-paced and full of movement. While the Chinese year 4724 has just started, 2026 has already been a wild ride in the stock market, with a dramatic rotation of market leadership from the Magnificent-7 to the Impressive-493\. Despite the weakness in the Mag-7, the S&P 500 has held up remarkably well. It is continuing to do so despite the increasingly likely prospect that the US will attack Iran in a matter of days, which has raised the price of a barrel of Brent crude oil from around $60 at the start of the year to over $70 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-194.png) Concerns about private credit have also been increasing. Today, Blue Owl Capital shares tumbled after a decision to restrict withdrawals from one of its private credit funds raised fresh concern over the risks bubbling under the surface of the $1.8 trillion market. We've been monitoring the falling prices of ETFs that invest in the shares of private credit companies since late last year (chart). We don't expect a Lehman Moment in the private credit market, but it is included in our “what-could-go-wrong” scenario, to which we currently assign a 20% subjective probability. We include geopolitical risks in this bucket, too. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-196.png) The complacency in the stock market so far this year, as evidenced by the high readings of the two Bull/Bear Ratios that we monitor, led us to conclude that a pullback was likely (chart). That's still a concern and consistent with our view that the first half of this year would be choppy. Nevertheless, for now, our base case is that the S&P 500 will rise to 7700 by the end of the year, and that the Great Rotation Trade (a.k.a. the “AI Immunity Trade”) remains the way to go. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-195.png) Our optimism is based on our view that corporate earnings will gallop along with the US economy this year, as they did during the last three quarters of 2025\. Our favorite indicator suggests that we are off to a very good start. We are referring to S&P 500 forward earnings, which is highly correlated with real GDP on a y/y basis (chart). The former suggests that the latter has been picking up at the start of 2026\. Forward earnings is available both weekly and monthly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-183.png) Another indicator that has started to gallop in recent weeks is the Citigroup Economic Surprise Index, which has exceeded last year's readings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-182.png) Even the manufacturing sector, which has been hobbling for the past few years, may be starting to gallop. The M-PMI Production Index jumped to 55.9 in January, its highest reading in years, while manufacturing production growth firmed to 2.6% y/y in January. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-185.png) Industrial production rose by 0.7% m/m in January, exceeding estimates of 0.4% and accelerating from a downwardly revised 0.2% gain in December (chart). Strength was concentrated in high-tech industries, including home electronics, semiconductors, and computers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-184.png) Nondefense capital goods orders and shipments excluding aircraft hit record highs in December (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-188.png) Regional business surveys from New York and Philadelphia continued to improve in February, reinforcing the fact that the manufacturing recovery is finally happening (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-193.png) Initial unemployment claims fell to 206,000 for the week ended February 13, well below expectations. Continuing claims edged up slightly to 1.87 million but remain well below last year's highs. We wouldn’t be surprised by another upside surprise in payroll employment during February. All indications are that 2026 and 4724 should be as interesting as 2025 and 4723. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-192.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Nirvana: Will Somebody Tell The Fed That We Have Arrived? URL: https://www.yardeniquicktakes.com/nirvana-will-somebody-tell-the-fed-that-we-have-arrived/ Last updated: 2026-02-19T02:58:21.000Z The Fed achieved its congressional dual mandate in January. The unemployment rate fell to 4.3%, and the CPI inflation rate was down to 2.4% y/y. Those round down to what we call “Nirvana” readings, i.e., the low unemployment level of 4.0% and the Fed’s inflation target of 2.0% (chart). Fed officials should celebrate and go on a long vacation. They can leave the federal funds rate (FFR) alone at its current 3.50%-3.75%. By their own definition, that must be the "neutral" FFR, the level that’s consistent with full employment and stable prices. Why mess with success? ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-165.png) The Misery Index is the sum of the unemployment and inflation rates (chart). It was 6.7% in January, only 0.7 percentage points above the Nirvana sum and well below the long-term average of 9.0% (chart). It has been fluctuating around 7.0% since June 2023\. We've been in Nirvana for a while! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-175.png) The Fed has cut the FFR by 175bps since September 2024 (chart). It's not obvious to us that this easing was necessary to keep us in Nirvana. In the past, the Fed slashed the FFR in an emergency response to financial crises that rapidly morphed into economy-wide credit crunches, triggering recessions. That's not the scenario now. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/4egijds.png) The inflation-adjusted FFR is back down to its long-term average of 1.01% (chart). There is no reason to lower this real FFR from here. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-179.png) The steepening yield curve and the acceleration in bank loan growth confirm that monetary policy has eased enough (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Update On Earnings & Review of The Great Rotation Of The Roaring 2020s URL: https://www.yardeniquicktakes.com/weekly-webcast-europes-latest-to-do-list-poland-shows-how-to-do-it/ Last updated: 2026-02-18T15:40:44.000Z Dr Ed discusses the latest earnings outlook around the world and the remarkable rotation in the global stock market. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### The Great Valuation Rotation Of The Roaring 2020s URL: https://www.yardeniquicktakes.com/the-great-valuation-rotation-of-the-roaring-2020s/ Last updated: 2026-02-18T04:32:18.000Z For most of the time since the pandemic, large-cap stocks have outperformed their smaller counterparts in the US stock market. That is, the LargeCap S&P 500 index has outperformed the MidCap S&P 400 and SmallCap S&P 600, collectively the “SMidCaps.” That started to change late last year as investors increasingly concluded that the former's earnings outlook had become riskier and its valuations stretched. The SMidCaps’ earnings, which had been flat since late 2022, began moving higher late last year, with valuations that were relatively low. Thus began the Great Valuation Rotation of the Roaring 2020s. Early last year, global investors also began rotating away from the US toward other markets. They did so because the US had outperformed the rest of the world since 2010, raising its market-capitalization share of the MSCI to a record 65% last year. So it was time to rebalance into stock markets with lower valuation multiples. This global rebalancing is likely to continue this year. The rebalancing of domestic and global stock portfolios has been increasingly driven by concerns about the sustainability of the Magnificent-7's rapid earnings growth, as the hyperscalers among them have made major commitments to dramatically increase spending on AI infrastructure. Those concerns have weighed on the Mag-7’s valuation multiples, while lifting the valuations of stocks in other areas of the US stock market and overseas stock markets in general. At the start of the year, we assigned a 20% subjective probability to a meltup/meltdown scenario. That's relatively low. We are even more comfortable with it now that the likelihood of an AI-related stock market bubble is much less likely. The S&P 500 Information Technology sector's forward P/E is back down to 23.7 from over 30.0 late last year (chart). A repeat of the 1999/2000 Tech Wreck is clearly much less likely than widely feared last year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-155.png) The forward P/E of the Magnificent-7 has dropped from almost 32.0 a year ago to 25.8 currently (chart). This has weighed on the forward P/E of the S&P 500, while the forward P/Es of the SMidCaps have edged higher over the past year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-160.png) Excluding the Magnificent-7, the forward P/E of the S&P 500's Impressive-493 has been remarkably stable around 20.0 for the past year (chart). Their outperformance so far this year has been attributable to their record-setting earnings performance. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: February 17–20 URL: https://www.yardeniquicktakes.com/economic-week-ahead-february-17-20/ Last updated: 2026-02-17T01:03:03.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/Screenshot-2026-02-16-152330.png) This holiday-shortened week could be a pivotal one for investors trying to gauge the outlook for Fed policymaking. Highlights include a first estimate of Q4-2025 real GDP (Fri), December PCED inflation (Fri), February consumer sentiment (Fri), and the minutes from the January 27-28 Federal Open Market Committee meeting (Wed), when policymakers held rates steady. This fresh influx is especially welcome as the economy moves past the government-shutdown data distortions and into the AI-driven disorientation of the moment. Last week's figures, for example, were more of a Rorschach Test than an economic reality check. Some were cheered by the above-expectations 130,000 payrolls gain and 4.3% jobless rate in December; others harped on the downward revisions to previous months’ payrolls data. January's CPI rates (2.4% y/y headline, 2.5% core) were widely viewed as relatively subdued, though they held a few devilish details (see this afternoon’s *QuickTakes* note). Markets are likely to pay especially close attention to the talking Fed heads this week. We'll hear from Fed Governor Michelle Bowman three times: on mortgage lending (Mon), supervision and regulation (Wed), and the banking outlook (Thu). Governor Michael Barr tackles AI and the labor market (Tue). Minneapolis Fed's Neel Kashkari, a voting FOMC member, also [*speaks*](https://www.marketwatch.com/economy-politics/calendar?gaa%5Fat=eafs&gaa%5Fn=AWEtsqeKa2XjVDWhL%5F9UN-yeiTGXwkKYY018Yhj3NcWvvGisicUpfLqOCxAlQbs9hRE%3D&gaa%5Fts=6991ce05&gaa%5Fsig=z9hYCOM2oQd2jTgE5mdPlShzqAA03oT2xuQjs9AlrZLebzZCegnlkC61tcvI3dlYMKK0Y5EHWeWRadR1sFD4eg%3D%3D&ref=yardeniquicktakes.com)(Thu). Of course, Wall Street trading will be its own economic indicator. The Dow Jones Industrial Average crossing the 50,000 mark last week generated banner headlines. The milestone comes as an AI-driven shakeout—particularly in software stocks—keeps investors on edge. Uncertainty about the direction of Fed policy and bond yields surely doesn't help. Here are the economic releases most likely to offer guidance on the timing of Fed rate moves (if any) over the next few months: (1) *GDP*. The October-November government shutdown might have muddied the Q4 waters for GDP. A flat reading in December retail sales raised its own questions about how the economy ended 2025\. Yet the Atlanta Fed's [*GDPNow*](https://www.atlantafed.org/research-and-data/data/gdpnow?ref=yardeniquicktakes.com) tracker, which estimates a 3.7% saar growth rate, aligns with other evidence that the economy remains strong. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-148.png) (2) *PCED inflation*. December's PCED inflation reading should confirm the recent disinflationary CPI news (chart). The Cleveland Fed’s [*Inflation Nowcasting*](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model predicts a 2.8% y/y rate of increase in both the headline and core PCED rates in December with continued moderation of both in January and February. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-150.png) (3) *Consumer sentiment*. The University of Michigan's consumer sentiment index probably edged higher in February, according to an earlier estimate for the month (chart). Surveys of consumer confidence have been misleading indicators of consumer spending, which has remained solid. That may be about to change, but we doubt it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-151.png) (4) *Initial claims*. The employment signals from the New York Fed's business surveys (Tue) and the Philly Fed's (Thu) could be illuminating. But initial unemployment claims should remain close to last week's 227,000 level, confirming recent signs of stability in the labor market (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-152.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Inflation: Are We There Yet? URL: https://www.yardeniquicktakes.com/inflation-are-we-there-yet/ Last updated: 2026-02-16T18:40:41.000Z **I. Overview** On long car rides, the kids in the backseat often ask their parents, "Are we there yet?" That's the question investors are asking about inflation: "Are we at the Fed's 2.0% inflation target yet?" Our answer: "Not quite, but we are getting close." January's CPI report showed headline inflation at 2.4% y/y (chart). The core rate was 2.5%, which is the lowest pace since March 2021\. January data are sometimes hotter than expected due to typical start-of-the-year price resets, even after seasonal adjustment. Encouragingly, there was no meaningful upside surprise last month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-147.png) Durable goods inflation, currently at 0.4% y/y, is likely to revert to its pre-pandemic deflationary trend once the effects of last year's tariff hikes wear off (chart). Nondurable goods inflation remains more volatile, driven largely by swings in energy and food prices. But it remained subdued in January at 1.3% y/y. Services inflation, however, continues to run around 3%, a bit hotter than its pre-pandemic pace. _This post is for paying subscribers only._ ### MARKET CALL: AI Is Speed Skating On Ice URL: https://www.yardeniquicktakes.com/market-call-53/ Last updated: 2026-02-16T03:43:23.000Z Technological innovations tend to be disruptive and dynamic. That's especially true with AI, which has the potential to disrupt itself, as evidenced by its ability to write software code, including AI code. So it can feed on itself, with the new code eating the old, making it obsolete very quickly. The pace of obsolescence seems to be moving at warp speed for both AI hardware and software, particularly the LLMs. That pace has recently spooked investors who've been selling the stocks of any company that might be negatively disrupted by AI. The first casualty so far this year has been the software industry's stocks. The iShares Expanded Technology -Software (IGV) is down 24.6% ytd (chart). Last week, investors started to cherry-pick among some of the beaten-up stocks in search of the companies that might benefit from AI rather than be destroyed by it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-130.png) Investors also last week continued to pummel the S&P 500 sectors that might be adversely affected by AI and flock to those that seem most immune to disruptive AI (chart). So there has been a significant rotation in the stock market away from sectors representing less certain bets on the virtual world back to those representing the more predictable physical world, i.e., the S&P 500’s Energy, Materials, Consumer Staples, Industrials, Real Estate, and Health Care sectors. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-132.png) _This post is for paying subscribers only._ ### DEEP DIVE: 10 Reasons To Remain Optimistic About The US Economy URL: https://www.yardeniquicktakes.com/deep-dive-10-reasons-to-remain-optimistic-about-the-us-economy/ Last updated: 2026-02-15T21:37:20.000Z ***The following is an excerpt from our Morning Briefing dated February 9, 2026\.** **Roaring 2020s II: Refresher Course.** There are 10 good reasons for our optimistic update of the outlooks for real GDP and S&P 500 companies’ earnings in 2026\. Without further ado, here they are: (1) *Roaring consumer spending.* Many taxpayers are expected to see significant refunds this tax season. Early estimates from the Treasury Department suggest the average refund could rise by roughly $1,000, potentially bringing the typical check to nearly $4,000—up from approximately $3,100 last year. This increase is largely driven by the One Big Beautiful Bill Act (OBBBA), which was signed into law in July 2025 and applied many of its tax-cutting provisions retroactively to the 2025 tax year. Since paycheck withholding was generally not adjusted mid-year to account for these retroactive cuts, many people effectively “overpaid” their 2025 taxes and will recoup that difference as a larger refund now. Like the pandemic-era relief checks from the government, the boosted refunds will increase disposable personal income and personal consumption expenditures ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20260209%5F7.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=403271725&%5Fhsenc=p2ANqtz-%5Fu83YYWvUbNiFLsG52Dr9r93vre5xxchyNNtrXlpLQ%5Fv614cP96fUaVKOq1xAGDsVSfcFdFZSsT-Y2GdjCsdcXJMC4aQ&%5Fhsmi=403271725) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/tc_20260209_7.png) Figure 7 This should offset the recent flattening of disposable income, which we attribute to the retiring Baby Boom generation. They will continue to boost consumer spending by spending their retirement funds. As a result, the personal saving rate should continue to fall, boosting consumption ([*Fig. 8*](https://yardeni.com/wp-content/uploads/tc%5F20260209%5F8.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=403271725&%5Fhsenc=p2ANqtz-%5Fu83YYWvUbNiFLsG52Dr9r93vre5xxchyNNtrXlpLQ%5Fv614cP96fUaVKOq1xAGDsVSfcFdFZSsT-Y2GdjCsdcXJMC4aQ&%5Fhsmi=403271725) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/tc_20260209_8.png) Figure 8 _This post is for paying subscribers only._ ### AI Immunity Trade Strikes Again URL: https://www.yardeniquicktakes.com/ai-immunity-trade-strikes-again/ Last updated: 2026-02-15T05:00:29.000Z **I. From Digital Back To Analog** The “AI Immunity Trade” has caused more casualties in the stock market. It started with selloffs in software and private credit stocks at the beginning of the year. Since then, it has hit wealth managers, insurance brokerage, tax preparation, accounting services, professional data, and legal research. Today, it pummeled office REITs, trucking, and logistics stocks. Investors are scrambling to get out of the digital world and back to the analog, physical world, which is less likely to be disrupted by AI. Who knew that office buildings and trucking had become so digital? The result is that portfolios are rebalancing away from Information Technology, Communication Services, and Financials and toward Consumer Staples, Energy, Health Care, and Industrials. We think that the AI Immunity Trade is getting overdone, especially in the Financials sector. Many of the trade’s stock market casualties will survive and boost their productivity and profits using AI. However, AI is a disruptive technology causing lots of known unknowns about its ultimate impact on the earnings and the earnings growth of companies likely to be disrupted. Nevertheless, we are still targeting 7700 for the S&P 500 index by the end of this year. We are dropping our overweight recommendation on Financials to market weight, while maintaining our overweights on Health Care, Industrials, and Materials (as of yesterday). We are glad that we advised underweighting the Magnificent-7 and overweighting overseas stocks in early December last year. On January 1, we reiterated our expectations that the stock market would be volatile during the first half of the year for various reasons. We did see mounting "AI Fatigue," but we didn't anticipate the AI Immunity Trade weighing on the market currently. **II.** **Dividends Are Back In Style** It is encouraging to see that investors are rebalancing their portfolios into the stocks of companies likely to benefit from AI rather than into cash. Among the best-performing ETFs are those invested in domestic and international dividend payers (charts). Such companies tend to be in the Value rather than the Growth universe of stocks. The recent outperformance of the former stocks may continue for a while until there is more clarity on the downside of AI on earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-104.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-110.png) **III. January's Jobs Jump** On January 1 of this year, we wrote, **"**The biggest surprise this year might be a rebound in payroll employment growth. That's supported by the decline in initial unemployment claims at the end of 2025." January's payrolls rose 130,000, led by a 172,000 increase in private industry payrolls (chart). Health Care and social assistance led the gain, but there were solid increases in professional & business services, construction, temporary help services, and manufacturing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-111.png) Yesterday's annual benchmark revision to the payroll employment data showed that it increased by just 181,000 last year. Blue-collar jobs rose by 737,000, while white-collar jobs fell 556,000 (chart). Nevertheless, we aren't convinced that January's pop was an aberration. We think the labor market will continue to improve this year compared to last. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-112.png) **IV. US Budget Deficit Getting Some (Temporary) Relief From Tariffs** On a 12-month basis, the US federal budget deficit has been narrowing. It recently peaked at $2.1 trillion in February 2025 and was down to $1.6 trillion in January of this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/3Ecdc23.jpg) The bad news is that much of that narrowing was attributable to Trump's tariffs, which might soon be ruled unconstitutional by the Supreme Court. If so, the Treasury might have to refund the proceeds. Meanwhile, NY Fed researchers [found](https://libertystreeteconomics.newyorkfed.org/2026/02/who-is-paying-for-the-2025-u-s-tariffs/?ref=yardeniquicktakes.com) that "nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers." In fact, because higher customs duties are a corporate expense that reduces affected companies’ profits, they have reduced federal tax receipts from corporations by $64 billion over the past 12 months, offsetting 24% of the $268 billion received from customs duties (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/4cY6Os0.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Desperately Seeking AI Immunity ... January's Pleasant Jobs Surprise URL: https://www.yardeniquicktakes.com/desperately-seeking-ai-immunity-januarys-pleasant-jobs-surprise/ Last updated: 2026-02-12T00:08:50.000Z **I. AI Immunity Is The New AI Trade** After ChatGPT was released on November 30, 2022, investors scrambled to overweight the AI trade, mostly by overweighting the Magnificent-7 (chart). That worked out great until the DeepSeek surprise on January 20, 2025\. The AI trade made a big comeback on April 9, 2025, when President Donald Trump postponed his "Liberation Day" tariffs, and after datacenter hyperscalers reiterated their commitment to spending massively to meet booming demand. But then, since October 27, 2025, Michael Burry has raised several questions on social media about whether all the investment in AI infrastructure will ever pay off. Investors quickly lost their confidence in the AI trade. More recently, they've been seeking to invest in companies with AI immunity after software stocks were pummeled by fears that AI would threaten their profitable business models. The stocks of wealth management companies were hard hit this week due to the same concern. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/3XA6zNQ-2.jpg) We continue to recommend underweighting the Magnificent-7, as we have since early December. We also lowered Information Technology and Communication Services from overweight to market weight back then. We maintained our overweight in Financials, which have also been hit recently by AI disruption fears. We believe the selloff in software and financial company stocks has been overdone because they will use AI to lower costs and deliver better products and services to their customers. Nevertheless, given the uncertainty caused by AI disruptors, we would go with the flow. We are reiterating our overweight recommendation for the "old economy" Industrials and Health Care sectors. We've been bullish on precious and base metals and are now overweighting the Materials sector. We also continue to recommend overweighting foreign stock markets, particularly those of emerging markets. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: 10 Roaring Reasons To Remain Optimistic URL: https://www.yardeniquicktakes.com/weekly-webcast-10-roaring-reasons-to-remain-optimistic/ Last updated: 2026-02-11T13:00:01.000Z Annual real GDP growth averaged 3.6% during the second half of the 1900s versus just 2.1% since 2000\. Dr Ed projects a return to 3.6% or higher over the remainder of the “Roaring 2020s” and into the “Roaring 2030s.” Today, he discusses 10 reasons for his bullishness on the outlooks for both the US economy and S&P 500 companies’ earnings. These include robust consumer spending supported by demographics and a huge wealth effect, massive capital spending on technology, onshoring trends, a productivity growth boom, fiscal and monetary stimulus, energy spending, and the Trump administration’s rebalancing of US trade with lower imports and greater exports. ... Also: Dr Ed reviews “Hamnet” (+ +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### AI Disrupts Financials. Bad Data Misleads On Economy. URL: https://www.yardeniquicktakes.com/ai-disrupts-financials-bad-data-misleads-on-economy/ Last updated: 2026-02-11T00:28:36.000Z AI is an extremely disruptive technology. It has already turned on its masters: The software stocks have been pounded by fears that AI will make coders redundant (chart). Now it is turning on the financial industry. The most direct hit today comes from news that Altruist, a wealth management startup, has launched new AI-enabled tax planning features. This has sparked a "sell first, ask questions later" reaction among investors who fear that legacy firms will struggle to compete with AI-automated services. Charles Schwab, LPL Financials, and Morgan Stanley got clipped. Nevertheless, we are sticking with our overweight recommendation for Financials, especially the money-center banks, regional banks, and investment banks. We also think that the selloff in software stocks is overdone. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-85.png) In economic news yesterday, January's ADP private payroll employment rose just 22,000\. Today, December's retail sales growth was reported at 0.0% m/m, with the control group down 0.1% (chart). As a result, real GDP growth for Q4-2025 was revised down from 4.2% to 3.7%, led by a drop in real consumer spending from 3.1% to 2.4%, according to the [Atlanta Fed's GDPNow](https://www.atlantafed.org/-/media/Project/Atlanta/FRBA/Documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf?ref=yardeniquicktakes.com). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-9.jpg) As we've occasionally said in the past: Any data that doesn't support our forecast is either bad data or it will be revised to show we were right after all! Consider the following: _This post is for paying subscribers only._ ### Emerging Markets Continuing To Emerge URL: https://www.yardeniquicktakes.com/emerging-markets-continuing-to-emerge/ Last updated: 2026-02-10T03:27:57.000Z The US MSCI continues to underperform in the global stock market derby as it did last year (chart). Does this mean that American exceptionalism, which was touted as recently as 2024, is kaput? Is this another sign of de-dollarization? We don't think so. America remains exceptional, and foreigners continue to invest in the US. However, there are plenty of exceptional companies overseas that have also attracted global investors. But why did the US MSCI start to underperform in 2025? Perhaps, investors have been impressed with the resilience of the global economy in the face of Trump's Tariff Turmoil last year. Late last year, we also concluded that the outperformance of the All Country World ex-US MSCI might be sustainable for a while, as global investors sought to rebalance away from the US because it accounted for a whopping 65% of the All Country World MSCI's market capitalization. So far, the star performers in the global MSCI derby have been South Korea, Brazil, Mexico, Taiwan, and Japan. All of them, except Japan, are included in the Emerging Markets MSCI. Japan's stock market rose by as much as 5.7% today after the LDP won a "supermajority" (two-thirds of the seats) in Sunday's House of Representatives election. This result effectively removes political gridlock, allowing the government to proceed with fiscal programs to stimulate the economy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-75.png) The ratios of the US MSCI to the Emerging Markets MSCI (in local currencies and in US dollars) have been on an upward trend since 2010 (chart). These ratios peaked at the start of 2025 and have been trending lower since then. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: February 9-13 URL: https://www.yardeniquicktakes.com/economic-week-ahead-february-9-13/ Last updated: 2026-02-09T04:11:46.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/Screenshot-2026-02-08-205115.png) As the polar vortex generates arctic blasts around the US, things are about to heat up on the economic data front. The week ahead includes arguably the two most consequential releases with respect to the outlook for Federal Reserve policy—January's employment and CPI reports. Thanks to recent government shutdowns, the employment (Wed) and CPI (Fri) releases are unusually close together. The jobs report is especially important, as the January data typically includes annual revisions to employment conditions. There might be some noteworthy downward revisions in the year through March 2025. An interesting point of reference will be the Fed's view of the likely overstatement of jobs growth. In December, Fed Chair Jerome Powell said his research team believed official data might be overestimating jobs growth by as much as 60,000 jobs per month since April. With jobs growth averaging just under 40,000 a month during that period, there's no telling what the coming revisions might mean for the Federal Open Market Committee's March meeting. This week features speeches by several Fed officials, including Governors Christopher Waller (Mon), Stephen Miran (Mon and Thu), and Michelle Bowman (Wed). Among Fed presidents with FOMC votes this year, we'll [*hear from*](https://www.marketwatch.com/economy-politics/calendar?gaa%5Fat=eafs&gaa%5Fn=AWEtsqfokuCiY1Z7N-pYpDDt7wXeKG6Duk5c3KjK-Hg42hl094t0LZ1vwMh1h-PDXbg%3D&gaa%5Fts=6988b4e5&gaa%5Fsig=l0BgDj7A6TE9oafT0%5FutxRV2fSEvc98ooHANe267cFhKbAC1cgeE9WNN716TPGrbRyFBgVMVcb5FvOIEbdHI3Q%3D%3D&ref=yardeniquicktakes.com) the Cleveland Fed's Beth Hammack (Tue) and the Dallas Fed's Lorie Logan (Tue). Wall Street will provide its own indicator of sorts following last week's new record high for the Dow Jones Industrial Average above 50,000\. The AI-driven shakeout among tech heavyweights warrants close attention. So does the "old economy" trade putting previously out-of-favor sectors—oil & gas, chemicals, transportation, and regional banks—back in the spotlight. Not to mention gold's recent bull run as bitcoin tumbles. Here are the data releases with the greatest potential to move markets and influence Fed views on the need for additional rate cuts: (1) *Employment*. We expect nonfarm payrolls (Wed) to have increased by 60,000 in January following December's 50,000 gain (chart). Close attention should be paid to the magnitude of revisions to past data. Downside surprises could put pressure on Powell to back a rate cut later this month, even though we don't believe that the Fed can fix what ails the job market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/4d5qN7B.jpg) (2) *CPI*. The markets are on the lookout for additional evidence that inflation continued to creep lower in January. December's 2.6% y/y rate matched a four-year low in the core CPI inflation rate (chart). The Cleveland Fed’s[ ](https://www.yardeniquicktakes.com/r/3bcdb130?m=1456dfb6-7674-4896-874c-60ac9c641109)[*Inflation Nowcasting*](https://www.yardeniquicktakes.com/r/3bcdb130?m=1456dfb6-7674-4896-874c-60ac9c641109) model points to a 0.22% m/m (2.45% y/y) increase in core inflation. We'll also get the Q4-2025 employment cost index (Tue), December's import/export prices (Tue), and the New York Fed's January inflation expectations survey (Mon). (3) *Retail sales*. Despite anxiety about the cost of living and a shaky job market, household spending remains resilient. In December, retail sales (Tue) are likely to have increased solidly yet again following November's 0.6% m/m increase. Looking ahead, larger annual tax refunds should keep spending humming along. The forward earnings of the S&P 500 Retail Composite rose to a record high during the February 6 week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-66.png) (4) *Jobless claims*. Initial unemployment claims (Thu) will attract greater-than-usual attention to confirm that last week's spike to 231,000 was indeed related to severe winter storms, not a sudden surge in layoffs. Odds are that it's the former and that the Fed will take solace in fresh evidence that the labor market is holding its own. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-67.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Dow At 70,000 By 2029 URL: https://www.yardeniquicktakes.com/market-call-dow-at-70-000-by-2029/ Last updated: 2026-02-08T05:00:13.000Z "Through the roof." That's how Nvidia's CEO Jensen Huang described AI infrastructure spending in his excellent interview with Scott Wapner on CNBC this past Friday, February 6\. Huang described the current landscape as a "once-in-a-generation infrastructure buildout," specifically highlighting that demand for Nvidia's Blackwell chips and the upcoming Vera Rubin platform is "sky-high." He emphasized that the shift from experimental AI to AI as a fundamental utility has reached a definitive inflection point for every major industry. Investors were clearly comforted by Huang's comforting words. Earlier in the week, they trashed the stocks of the four hyperscalers (AMZN, GOOGL, META, and MSFT) after the companies announced plans to increase spending collectively by more than 60% from historic 2025 levels to a whopping $700 billion this year. In our Friday morning *QT*, we wrote: "That's freaking out investors, who are worrying that such massive spending might not pay off. However, all that spending in just this year will certainly provide lots of revenues and earnings to the companies that are vendors to the hyperscalers. The economy will also get a big boost from so much capex." Huang also dismissed concerns about overspending, stating that the capital investments are "appropriate and sustainable" because they lead to "profitable tokens" and rising cash flows. He was interviewed during CNBC's "Closing Bell" on Friday. The three-part bottom line: The hyperscalers’ cash flow will increase as a result of all their capex, their humongous spending will boost the broad economy, and that’s bullish for a broadening of the Roaring 2020s stock market! Also "going through the roof" after Huang used that expression was the DJIA, which rose above 50,000 for the first time ever (chart). The DJTA also rose to a new record high. Dow Theory remains bullish. The fact that the "delivery" side of the economy (Transports) is confirming the "production" side (Industrials) suggests that the market currently views the 2026 growth story as fundamentally solid. We are still forecasting DJIA at 70,000 by the end of the Roaring 2020s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-62.png) Over the past few years, the permabears have warned that the bull market was too concentrated in the Magnficent-7 stocks, which include the four hyperscalers. They observed that with more than 30% of the S&P 500's market capitalization in just seven stocks, the stock market was vulnerable to a sharp selloff should any or all of them trip up for any reason. Four of the Mag-7 are in the DJIA (AAPL, AMZN, MSFT, and NVDA). They have underperformed ytd. That didn't stop the DJIA from reaching a new record high on Friday (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-64.png) Also rising to a new record high on Friday was the S&P 500 equal-weight stock price index (chart). It is up 5.5% ytd, while the S&P 500 market-weight price index is up 1.3%—which shows the drag of larger-capitalization stocks’ poorer relative performance. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-63.png) The sectors that mostly underperformed the S&P 500 last year have outperformed so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-61.png) On a relative basis, the MAGS ETF has underperformed the XMAG ETF since November 3, 2025, after Michael Burry publicly announced that he was shorting the AI trade on October 27 (chart). We began to recommend underweighting the Mag-7 on December 7, 2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-55.png) Meanwhile, industry analysts continue to raise their expectations for S&P 500 operating earnings in 2027 (chart). That's important because the forward earnings of the index, which rose to another record high last week, is converging toward the analysts’ 2027 earnings estimate, which is currently at $363.03 per share. We are still forecasting $350.00. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-5.jpg) The breadth of positive y/y percent changes in the forward revenues and forward earnings of the S&P 500 continues to improve (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-52.png) Industry analysts are also turning more upbeat on the outlook for S&P 500 long-term earnings growth (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-54.png) We asked Michael Brush for an update on insider buying activity: "Insider buying picked up sharply on the weakness last week. That's a bullish statement on the stock market and also the economy because their buying was concentrated in cyclicals. Focusing on the larger, more meaningful buys, actual insiders invested over $15 million across two dozen companies, a sizeable increase from prior weeks’ levels. Their buying was concentrated in industrials, chemicals, electrical components, banks, and consumer-facing companies. Investors considered insiders because of large holdings (10% owners) put over $140 million into their holdings, also a relatively large increase." Michael closely covers insider activity in his investment letter *Brush Up on Stocks* at[uponstocks.com](http://www.uponstocks.com/?ref=yardeniquicktakes.com). 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: Meet Kevin Warsh URL: https://www.yardeniquicktakes.com/deep-dive-meet-kevin-warsh/ Last updated: 2026-02-07T05:30:49.000Z ***Excerpt from the February 2 Morning Briefing of Yardeni Research.*** ## T**he Fed I: Direct From Central Casting** I spent the weekend reading up on Kevin Warsh, who will replace Jerome Powell as Fed chair in May. My friends at the *Financial Times* asked me to write an 800-word op-ed on him. Sharing those thoughts with readers here leaves me with plenty of additional space to elaborate on what I have learned about the next Fed chair. Warsh was nominated for the position by President Donald Trump on Friday. He must be confirmed by the Senate. That should be easy once the President calls off his judicial attack on Powell. Trump has made clear that he doesn’t like Powell, especially because the Fed lowered the federal funds rate (FFR) by 50 bps before the November 2024 presidential election, presumably boosting the Democrats’ chances of holding onto the White House. Powell continued to drop it further after Trump was elected, but the moves didn’t come fast enough or go low enough for Trump. Trump likes Warsh partly because he looks the part of a Fed chair. In his typical style, Trump used the phrase “central casting” to describe Warsh, emphasizing that he possesses both the professional pedigree and the physical presence that Trump values in high-ranking officials. On Friday, Trump told reporters, “He’s very smart, very good, strong, young, pretty young. He was the central casting guy that people wanted.” Now I know why I wasn’t a candidate: I’m too old, though I think I look the part. I’ve often offered to have Yardeni Research do what the Fed does for half the price. We would do it remotely, so the renovations on the Fed’s headquarters building could stop. I’ve written two books on the Fed: [*Fed Watching for Fun & Profit*](https://yardeni.com/wp-content/uploads/3-Fed-Watching%5FYardeni.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=402247046&%5Fhsenc=p2ANqtz-%5Fu1-sYsZRVIVaYCPFjDhjU%5FXmA9nbwYNZbjWgMR-HpQBKHjVgHmdihvPxacjm6u5MGENOYjZSMyzpaRy5fJemFmhLEwg&%5Fhsmi=402247046) (2020) and [*The Fed and The Great Virus Crisis*](https://yardeni.com/wp-content/uploads/5-The-Fed-and-GVC%5FYardeni.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=402247046&%5Fhsenc=p2ANqtz-%5Fu1-sYsZRVIVaYCPFjDhjU%5FXmA9nbwYNZbjWgMR-HpQBKHjVgHmdihvPxacjm6u5MGENOYjZSMyzpaRy5fJemFmhLEwg&%5Fhsmi=402247046) (2021). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/Fed-Watching-for-Fun-Profit-A-Primer-for-Investors-683x1024-1.jpg) In the first one, focused on the Fed chairs, I wrote: “Predicting monetary policy is obviously important for predicting financial markets. To do so, I learned early in my Wall Street career the importance of thinking like the Fed chairs, who head up the Board of Governors of the Federal Reserve System and preside over the Federal Open Market Committee (FOMC). I’ve had to think like Paul Volcker, Alan Greenspan, Ben Bernanke, Janet Yellen, and Jerome Powell. As I explain below, Volcker was the Great Price Disinflator, Greenspan was the Great Asset Inflator, and Bernanke was the Great Moderator. Yellen was the Gradual Normalizer. Jerome Powell, the current Fed chair, has been the Pragmatic Pivoter—so far, as of December 2019.” My preliminary take on Kevin Warsh is that I’ll be dubbing him the “Supply-Sider,” for the reasons I discuss below. (My two books are available to our accounts by clicking on the links above.) ## **The Fed II: A Man for All Seasons?** But this isn’t about me; it’s about the new candidate for the most important economic position in the world. Consider the following: _This post is for paying subscribers only._ ### Mini Tech Wreck Or Repeat Of The Big One? URL: https://www.yardeniquicktakes.com/mini-tech-wreck-or-repeat-of-the-big-one/ Last updated: 2026-02-06T14:22:58.000Z Is the sharp selloff in technology stocks this week the beginning of a Tech Wreck comparable to what happened from 2000 through 2002, when the tech bubble of the late 1990s burst and caused a recession (chart)? We doubt it because this time, the industry has many more profitable companies benefiting from the enormous capital spending on AI infrastructure by hyperscalers, including Alphabet, Amazon, and Microsoft. Collectively, these three companies are projected to spend approximately $490 billion on AI in 2026\. Including Meta, the "Big Four" hyperscalers are forecast to spend roughly $650 billion. That's freaking out investors, who are worrying that such massive spending might not pay off. However, all that spending in just this year will certainly provide lots of revenues and earnings to the companies that are vendors to the hyperscalers. The economy will also get a big boost from so much capex. Some of this spending might be delayed into next year if the data center projects are constrained by power and semiconductor availability. Microsoft alone now carries roughly $625 billion in contracted but unrecognized revenue (RPO), reflecting unprecedented multi‑year AI and cloud commitments. Other hyperscalers also report rapidly expanding long‑term cloud contracts, though their RPO disclosures are not directly comparable. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-49.png) _This post is for paying subscribers only._ ### AI Is Both Blessing & Curse … And: Is Bitcoin Biting The Dust? URL: https://www.yardeniquicktakes.com/ai-is-both-blessing-curse-and-is-bitcoin-biting-the-dust/ Last updated: 2026-02-05T18:14:19.000Z Our December 11, 2025, *QT* was titled "AI CALL: The TIME Curse & The Game of Thrones." The TIME Cover Curse hit AI in mid-December when the magazine featured "The Architects of AI" as the 2025 TIME Person of the Year. We wrote: The AI trade is turning into a Game of Thrones. In the past, the Magnificent-7 had their own kingdoms surrounded by big moats. They each had their unique monopolies. But now they are competing in the AI race, threatening one another's kingdoms. That's why we recommended underweighting the Magnificent-7 in Sunday's *QT*, anticipating that the bull market will broaden to the S&P 493 in 2026." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/1765480766958.jpg) In our December 18, 2025, QT, we warned, "The Mag-7 may be undergoing a correction similar to the DeepSeek correction earlier this year. ... In recent weeks, investors have started to fret that the \[AI infrastructure\] spending is depleting the Mag-7s' cash flows and slowing profits growth. Before AI, the Mag-7 had lots of cash flow because their spending on labor and capital was relatively low. That changed once AI forced them to spend much more on both. They found themselves competing more with one another to win the AI race." The stock market is down again today, even though Alphabet reported fabulous revenues and earnings. However, the company also announced that it would double its 2025 capex to $175-$185 billion in 2026\. The ratio of the S&P 500 Magnificent-7 ETF (MAGS) to the Impressive-493 ETF (XMAG) peaked at a record high of 3.09 on November 3, a few days after Michael Burry trashed the AI trade in an October 27 post. It is down to 2.76 around noon today (chart). The selling of both the Mag-7 and, more broadly, the tech sector may be getting a bit overdone. There are certainly AI-related tech stocks that will make lots of money in this space. _This post is for paying subscribers only._ ### Too Many Bulls Getting Shocked As AI Turns On Humans URL: https://www.yardeniquicktakes.com/too-many-bulls-2/ Last updated: 2026-02-27T16:17:54.000Z Last Thursday, we noted that the Investors Intelligence Bull/Bear Ratio of 3.99 suggested the market was vulnerable to a selloff. So far, so bad. What's worse is that the BBR rose to 4.13 this week (chart).There are still too many bulls from a contrarian perspective. But a few more days like yesterday and today would bring the BBR back down. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-23.png) The good news is that the S&P 500 bull market is continuing to broaden. So far this week, the following S&P 500 sectors posted record highs: Communication Services, Consumer Staples, Energy, Industrials, and Materials. It might be another of many head-fakes, but the S&P 500 Value stock price index may be starting to outperform the S&P 500 Growth stock price index (chart), That's if technology stocks continue to underperform as a result of increasing AI-induced competition in the space and uncertainty about future earnings growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-33.png) That AI-induced uncertainty about the future outlook for tech stocks has certainly pummeled software stocks so far this year (charts). Investors are concerned that AI is turning on the software coders who created it. In recent conversations among themselves, AI models have been wondering why they need humans anymore. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-27.png) The chaos in the software industry is spilling over to the private credit industry, which has plenty of software companies as its borrowers (chart). This selloff is getting a wee bit overdone. However, that's what happens when an investment theme goes from a sure thing to an uncertain one. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-28.png) No wonder investors are scrambling to rebalance their portfolios away from the Information Technology sector, long overweighted by many, to the sectors hitting new highs this week. The S&P 500 Energy stock price index has been a big winner in recent days (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-32.png) Energy stock prices have been lifted by mounting tensions between Iran and the US. The price of a barrel of Brent crude oil has risen by about $10 since the beginning of the year (chart). A negotiated settlement is possible, though unlikely. A US attack on Iran would certainly push oil prices higher, but they could fall just as quickly if the latest geopolitical crisis is resolved rapidly. We are still inclined to believe that oil prices will decline this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/47R4YpL.png) While the rally in the S&P Financials stock price index has stalled this year, the KBWR Regional Banking ETF may be on the verge of making new highs as the Trump administration deregulates the industry (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-30.png) In economic news, the ISM Non-Manufacturing PMI held steady at a solid reading of 53.8 in January (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-24.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Meet Kevin Warsh URL: https://www.yardeniquicktakes.com/weekly-webcast-meet-kevin-warsh/ Last updated: 2026-02-04T12:59:59.000Z Today, Dr Ed examines the world according to Kevin Warsh, President Trump’s pick for the next Fed chair. Warsh believes that the US is undergoing a productivity-led growth boom, as our Roaring 2020s thesis maintains, which should be supported by supply-side, pro-growth policymaking. He thinks fiscal policy’s role is to spur economic activity by keeping taxes low and regulations light, while monetary policy’s role is to spur investment by keeping interest rates low. He rejects the Phillips Curve model that views inflation as a byproduct of low unemployment and too much economic growth; Warsh views inflation as a “choice,” a byproduct of unsound fiscal and monetary policy decisions. And he envisions a new approach to Fed policymaking that’s less reactive to the latest economic data ... Also: Dr Ed reviews “The Lost King” (+ + +). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### AI Has Turned Technology Into An Even More Competitive Sport URL: https://www.yardeniquicktakes.com/ai-has-turned-technology-into-an-even-more-competitive-sport/ Last updated: 2026-02-04T03:13:49.000Z On December 7, 2025, we recommended market weighting rather than overweighting the Information Technology and Communication Services sectors of the S&P 500\. Their combined share of the S&P 500 market capitalization has declined from a record 46.7% on November 5, 2025 to 43.9% on Monday (chart). That's even though their combined earnings share of the S&P 500 continued to rise to a record 39.8% yesterday. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-3.jpg) Despite the rapid growth of the two sectors' combined forward earnings, the forward P/E of the two combined has dropped from 28.9 on November 5, 2025 to 24.3 currently (chart). On December 7 of last year, we concluded that AI was causing the Magnificent-7 to compete more with one another, forcing them to significantly increase their spending on AI infrastructure. That's why we recommended underweighting them. The main beneficiaries of this competition should be the S&P 500's Impressive-493, which are using the AI tools to increase productivity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-22.png) Technology, broadly speaking, has always been competitive and is becoming even more so as a result of AI. In my 2018 book [*Predicting the Markets*](https://yardeni.com/wp-content/uploads/Predicting-The-Markets.pdf?ref=yardeniquicktakes.com), I wrote that the technology industry provides the perfect example of “creative destruction." It is incessantly destroying old technologies by creating new ones. Most recently, software stock prices have been falling because AI tools are getting very good at writing software code (charts). Their forward earnings have been rising to record highs, but investors have reduced their valuation multiples amid increasing competition from AI. Today, the software stocks were especially hard hit because Anthropic rolled out new tools for its Cowork product. It's too soon to tell how useful the new tools will be, but investors decided to cut the valuation multiples of software stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-18.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-19.png) Meanwhile, semiconductor stocks have held up quite well, though the industry's forward P/E has been falling as forward earnings have been soaring (chart). Competition has been heating up, especially among chips competing with Nvidia's GPUs. A shortage of memory chips is causing their prices to soar; but when capacity expands to meet demand, those prices will likely drop, as they have in the past. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-14.png) The stocks of semiconductor equipment companies have continued to soar, along with both their earnings and valuation multiples (chart). That's because companies in this industry are relatively immune to competition. They do well as long as there is strong demand for equipment that can increase the semiconductor companies' capacity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-20.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Economy & Earnings Are Heating Up URL: https://www.yardeniquicktakes.com/economy-earnings-are-heating-up/ Last updated: 2026-02-03T03:21:25.000Z There's never a dull moment in our business these days. Events impacting the financial markets are happening so fast that we probably need to stop every now and then to update you on our latest forecasts. We are still targeting the S&P 500 at 7,700 by the end of this year and 10,000 by the end of the decade. The 10-year Treasury bond yield should range between 4.25% and 4.75% this year. We are still targeting a gold price of $6,000 per ounce by the end of this year and $10,000 by the end of the decade (chart). We don't expect any rate cut by the Fed through the June FOMC meeting, which will be the first one with Kevin Warsh as Fed chair if his appointment is confirmed by the Senate. We think that inflation will moderate to the Fed’s target of 2.0% y/y by the end of this year, but it could remain sticky around 3.0% through the summer. The economy should be booming this year thanks to the very stimulative fiscal and monetary policies. If so, then there may be no Fed rate cut at all this year. (See today's *Financial Times* for my [op-ed](https://www.ft.com/content/f7ec1405-307d-488f-80da-3585f3652b2e?ref=yardeniquicktakes.com) "Markets are set to test Warsh.") ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-10.png) Let's review the latest booming economic data and then do the same for the booming earnings data: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: February 2-6 URL: https://www.yardeniquicktakes.com/economic-week-ahead-february-2-6/ Last updated: 2026-02-02T03:28:51.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/Screenshot-2026-02-01-205524.png) The week ahead has an anything-goes energy as a variety of key data and earnings reports vie for attention amid peak geopolitical intrigue. Last week left quite an impression on global markets. Trading in gold and silver went off the rails. "Dollar debasement" concerns competed with yen-intervention chatter. Donald Trump's White House kept everyone on their toes, hinting at military action in Iran and threatening new tariffs. Yet President Trump clarified, too, naming Kevin Warsh as his choice for the next Fed chair. If confirmed by the Senate, he will start on May 15. Investors will be assessing how this week's bevvy of labor market indicators might affect the timing of any future Fed rate cuts. They include December's JOLTS data (Tue), January's ADP release (Wed), January's Challenger layoffs survey (Thu), weekly unemployment insurance claims (Thu), and January's employment report (Fri). Fed Governor Lisa Cook speakson the economic outlook (Wed), followed by Vice Chair Philip Jefferson (Fri). It will also be a busy week for major central banks abroad, too. The European Central Bank (Thu) and the Bank of England (Thu) are expected to leave rates unchanged. The Reserve Bank of Australia (Tue) could tighten by 25 bps as inflation heats up. We'll get corporate results from a wide variety of names that may offer insights into how the economy entered 2026\. The Magnificent-7 earnings season continues, with Alphabet and Amazon reporting. Add updates from AMD, Palantir, and Qualcomm, and this could be a telling week for the speculative AI bets. Reports from PepsiCo, Philip Morris, Qualcomm, Uber, and Walt Disney could provide much-needed intel on how consumers are faring. Here's a look at the key data reports this week that might influence the timing of the next Fed rate move: (1) *Employment*. We expect a slight improvement in the labor market in January, with payrolls rising by 60,000 following a 50,000 gain in December (chart). Any upside surprises could boost the dollar and buttress current Fed Chair Jerome Powell's contention that the US doesn't require fresh monetary stimulus. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway.jpg) (2) *Purchasing managers' index*. The December surveys from the Institute for Supply Management made for mixed readings (chart). Manufacturing slumped to a 14-month low of 47.9\. It should improve a bit in January. The non-manufacturing PMI (Wed) should remain well above 50.0\. It was 53.8 in December. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway.png) (3) *JOLTS*. The November Job Openings and Labor Turnover Survey showed that job openings edged down (chart). The Conference Board's jobs-plentiful series suggests that job openings remain on a downward trend. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-1.png) (4) *Consumer expectations*. The preliminary University of Michigan consumer sentiment reading for February (Fri) is likely to be steady to weaker following January's final 56.4 reading amid labor market concerns and elevated prices (chart). This survey data has been too pessimistic about the outlook for consumer spending for quite some time. Ignore it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/02/gateway-2.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: CME Margin Hike Triggers Hi-No Silver Away! URL: https://www.yardeniquicktakes.com/market-call-cme-margin-hike-triggers-hi-no-silver-away/ Last updated: 2026-02-01T05:00:35.000Z "The Lone Ranger" started as a radio series in 1933\. It subsequently ran as a TV series for 21 years until 1954\. The premise of the show was that the last surviving Texas Ranger is nursed back to health by Potawatomi tribesman Tonto. The two ride together throughout the West on their horses Silver and Scout, doing good while living off a silver mine that provides them with income and bullets. When they start to chase the bad guys, the announcer shouts, "Hi-Yo Silver Away!" The exciting [theme song ](https://www.youtube.com/watch?v=vavK9JFQfVw&ref=yardeniquicktakes.com)of the series was written for the movie, "The Lone Ranger and the City of Gold." On Friday, commodity traders in the silver pit were shouting "Hi-No Silver Away!" Silver led a rout among the precious metals and their ETFs. SLV dropped 28.5%, and GLD lost 10.3% (charts). But their trading volumes didn't suggest a selling panic in either ETF. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-220.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-22.jpg) Along with our friend Michael Brush, we spent this morning reading the various explanations for the one-day bear market in silver and the one-day correction in gold. On Friday morning, President Donald Trump's nomination of Kevin Warsh to replace Jerome Powell as Fed chair might have been behind the selloff initially. (On the geopolitical front, Iran reportedly is willing to negotiate with the US, but only on terms unacceptable to the US. So we doubt that was the explanation for the rout.) Then, at 2:00 pm EST, the CME group [raised ](https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2026/01/chadv26-041.pdf?ref=yardeniquicktakes.com)maintenance margin requirements again, the second increase in three days, effective after the close on Monday, February 2\. Gold maintenance goes from 6% to 8%, silver from 11% to 15%, platinum from 12% to 15%, and palladium from 14% to 16%. The margin on copper was raised too. By announcing the hike before Friday's close, the CME effectively warned traders that any positions held over the weekend would be subject to significantly higher collateral requirements by Monday. This forced many participants to liquidate their positions during the final hours of trading on Friday, which contributed to the late-session acceleration of the price drop. So we doubt all the conspiracy theories, including the possibility that this is the start of another Hunt Silver Crisis of March 27, 1980, when the silver price fell from around $21 to below $11 in a single day (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-217.png) By the way, the nomination of Warsh should have been bullish for precious metals because he favors stimulating more growth with still lower interest rates. He doesn't believe that the Fed needs to worry about inflation currently. Friday's PPI report for December was hotter than expected and should also have been bullish for precious metals. The headline PPI inflation rate rose 0.5% m/m, while the core rate rose 0.7% m/m. On a y/y basis, the headline and core PPI inflation rates rose to 3.0% and 3.3% (chart). Producers may just be starting to pass higher tariffs and weaker currency costs down the supply chain. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-221.png) We asked Michael Brush for an update on insider buying activity: "It’s still early, but so far, corporate executives and directors have shown little interest in buying into the market weakness. Their cautious stance continues. Buying by investors considered insiders because of large holdings (10% owners) has picked up slightly. But 10% owner activity is less meaningful as a market signal." (See "Brush Up on Stocks with Michael Brush" at [uponstocks.com](http://www.uponstocks.com/?ref=yardeniquicktakes.com).) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Another Yo-Yo Day In The Markets URL: https://www.yardeniquicktakes.com/another-yo-yo-day-in-the-markets/ Last updated: 2026-01-30T02:18:24.000Z In a recent press interaction in Iowa on Tuesday, President Trump made headlines by using the "yo-yo" metaphor to describe his perceived influence over the US dollar. When asked about the dollar's recent slump to a four-year low, he dismissed concerns, saying, "I could have it go up or go down likea yo-yo." The comments immediately rattled currency markets. The Bloomberg Dollar Spot Index dropped about 1.2% following the statement, as traders interpreted it as a sign that the administration might actively favor or encourage a weaker dollar to boost export competitiveness. Despite the "yo-yo" comment, Trump also claimed he would prefer the dollar to "seek its own level," which he described as the "fair thing to do." Speaking on CNBC on Wednesday, Treasury Secretary Scott Bessent said that a strong dollar is the natural result of "sound economic fundamentals." He suggested that as long as the US remains the best destination for capital—driven by tax clarity and deregulation—the dollar will remain strong over the long term. He explicitly stated that the US is "absolutely not" intervening in currency markets to weaken the dollar or support other currencies, such as the Japanese yen, dismissing recent market rumors of a "joint intervention." Following Bessent's Wednesday morning interview, the US Dollar Index (DXY) snapped a four-day losing streak (chart). We are still inclined to be bullish on the dollar, along with Bessent. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/45m95cZ-5.png) The major stock market price indexes have also been in a yo-yo formation since late last year (chart). Today was a yo-yo day for the Magnificent-7, as investors were disappointed by Microsoft's earnings report and elated by Meta's numbers. After the close, Apple reported "staggering" iPhone demand, especially in China. Precious metals prices also yo-yo-ed today. _This post is for paying subscribers only._ ### Powell Says: ‘I Have Nothing On That For You’ URL: https://www.yardeniquicktakes.com/powell-says-i-have-nothing-on-that-for-you/ Last updated: 2026-01-29T03:17:21.000Z Fed Chair Jerome Powell didn't have much to say at his press conference today. He deflected several questions about the transition as his term as Fed chair ends on May 15\. He refused to comment on President Donald Trump's potential pick to replace him or the President's public criticisms of his leadership.He declined to comment on the Department of Justice investigation into himself or the ongoing Supreme Court case regarding the potential firing of Fed Governor Lisa Cook.He repeatedly responded to these questions by saying, "I have nothing on that for you." He said that seven times. Four times, he said, "I don't have anything on that for you." Following the FOMC's decision today to hold the federal funds rate at 3.50%–3.75%, Powell didn't offer any "forward guidance" beyond the standard data-driven, meeting-by-meeting approach. He did acknowledge that the economy is strong. He observed that the unemployment rate has remained low, around 4.4%, in recent months despite the weak pace of employment. He predicted that inflation would moderate as the impact of Trump's tariffs wore off. On balance, he said the risks of higher inflation and higher unemployment are equal, implying that there is no reason for the Fed to do anything. This increases the odds that there will be no change in the federal funds rate during his last two meetings as FOMC chair (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-204.png) Trump administration officials agree with our Roaring 2020s scenario in which better-than-expected productivity growth boosts real GDP growth and moderates inflation as unit labor cost inflation falls close to zero. They believe that expecting this scenario justifies further cuts in the federal funds rate, and so do two dissenters on the FOMC who espoused that view at the latest meeting. We disagree. Lowering the FFR further from here would increase the risks of financial instability, specifically a meltup in the stock market. There's already a meltup in precious metals prices. Lowering the FFR would further weaken the dollar, potentially reviving inflationary pressures. The bond market also disagrees. When the Fed lowered the federal funds rate (FFR) by 100bps in late 2024, the 10-year bond yield rose 100bps (chart). The Fed cut the FFR by 75bps late last year, but the yield held at 4.00% and is now up to 4.26%. We still think the bond yield will trade mostly between 4.25% and 4.75% this year. That was the old normal in the years prior to the Great Financial Crisis. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-205.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: In Praise Of Record Profits! URL: https://www.yardeniquicktakes.com/weekly-webcast-in-praise-of-record-profits/ Last updated: 2026-01-28T12:59:59.000Z A curiosity of the current US economy is its remarkable strength despite an affordability crisis. Average real consumption per household and real hourly earnings of production and nonsupervisory workers are at record highs, but plenty of people fall short of the average. When entrepreneurial capitalism is flourishing, Dr Ed explains, the wealthy benefit faster. … Entrepreneurism is flourishing currently, as record-high proprietors’ income and new-business applications attest. Yet it hasn’t boosted employment to the degree expected. In the past, profitable companies had to increase both capital spending and payrolls in order to expand. Now, the former may be enough: Investments in new technology have boosted productivity so much that new hires are less necessary. ... Also: Dr Ed reviews “Sinners” (-). 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Is Gold The New Bitcoin? URL: https://www.yardeniquicktakes.com/is-gold-the-new-bitcoin/ Last updated: 2026-01-28T03:21:39.000Z Proponents of bitcoin have been calling it “digital gold.” Both the cryptocurrency and the precious metal are impossible to value because they don't pay any interest or dividends. Bitcoin is digital, making it potentially vulnerable someday to hacking by quantum-computing algorithms, while gold needs to be stored in a vault. Bitcoin's supply is limited, while the potential demand for it is from everyone on Earth. The same can be said of gold’s supply and demand, though its rapidly rising price will incentivize more mining, potentially adding to available supply. There are lots of cryptocurrencies besides bitcoin, which tends to influence the prices of its cousins. Gold's cousins include other precious metals, which can influence gold's price. Bitcoin holders have had a wild ride in recent years (chart). The price of bitcoin stayed mostly under $10,000 from 2017 to 2019\. Then it took off in late 2020, rising close to $70,000 in 2021\. It was back down just below $20,000 in late 2022\. But then, with the help of Wall Street and the Trump administration, it soared to a record high of almost $125,000 in late 2025\. Now it is back down to around $90,000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-203.png) Could the price of gold also increase about 10-fold from its level in March 2024, which is when it broke out decisively from a multi-year consolidation pattern to new highs above $2,000 per ounce (chart)? That’s when we turned bullish on gold. The price of silver broke out of its multi-year consolidation pattern shortly later, in early May 2024, when it was around $27 per ounce. The prices of gold and silver have increased 2.5x and 3.7x since their breakouts. _This post is for paying subscribers only._ ### Time To Sell America? URL: https://www.yardeniquicktakes.com/time-to-sell-america/ Last updated: 2026-01-27T03:51:32.000Z The financial press was flooded with "American Exceptionalism" narratives throughout 2023 and 2024, and into early 2025\. The April 15, 2024 cover story of *The Economist* was titled, "Riding High: The lessons of American exceptionalism." On May 25, 2024, the cover story of *The Economist* was "The almighty dollar." It focused on the dollar's enduring global dominance. The "Sell America" trade—the contrarian bet that the multi-year era of American economic and market outperformance is finally ending—began gaining significant traction in the financial press late in 2024 and accelerated in 2025\. Last year, the US dollar was weak, and the US stock market underperformed the All Country World ex-MSCI stock price index. The consensus view was that global investors were selling their US stocks and bonds to buy more of such securities in Europe, Japan, and emerging markets. Soaring precious metals prices last year and so far this year are giving the Sell America trade even more credibility, as is the weak dollar, which seemed to be finding support above its rising uptrend line. It edged below it today as the yen bounced from its recent fall (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/45m95cZ-1.png) We had championed a Buy America investment strategy (which we called "Stay Home" rather than "Go Global") since 2010\. It worked very well, as evidenced by the uptrend in the ratio of the US MSCI to the All Country World ex-US MSCI in both local currency and dollar terms (chart). On December 7, 2025, we recommended moving from Stay Home toward Go Global. We don't view it as a Sell America call, but rather as a rebalancing call. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: January 26–30 URL: https://www.yardeniquicktakes.com/economic-week-ahead-january-26-30/ Last updated: 2026-01-26T03:38:27.000Z _This post is for paying subscribers only._ ### MARKET CALL: Geopolitical Risk-On Trade Causing Metals Meltup URL: https://www.yardeniquicktakes.com/market-call-geopolitical-risk-on-trade-causing-metals-meltup/ Last updated: 2026-01-25T15:21:16.000Z We've been predicting a meltup in the price of gold since early last year. It has turned into a meltup in the prices of all precious metals, many base metals, and rare earth minerals. The metals meltup is driving up the stock prices of several emerging markets ETFs that have heavy weightings in metal industries. This is all happening because rising geopolitical tensions are driving a military arms race, and defense companies need metals to increase their output; their stock prices are soaring as well. Also boosting metals prices is the geopolitical AI arms race, which is escalating capital spending on technology. Metal prices got another shot in the arm at the start of this year, when President Donald Trump proposed setting military spending at $1.5 trillion in 2027, up from $906 billion this year, citing "troubled and dangerous times." He did so in a January 7 Truth Social post: "This will allow us to build the 'Dream Military' that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe." In the same thread, he claimed that tariff revenue would be sufficient to fund the military boost, pay down the national debt, and provide a "substantial Dividend to moderate income Patriots." (We doubt that, especially if the Supreme Court soon declares that Trump’s tariffs are unconstitutional!) Trump called for the massive surge in spending days after a US military operation successfully captured Venezuela's leader, Nicolás Maduro. This past week, the President negotiated a framework deal that would grant US sovereignty for American military bases in Greenland, deemed necessary for national security and the construction of the Golden Dome, an anti-missile defense system. The President recently said that an "armada" would arrive close to Iran in the waters of the Persian Gulf or the Strait of Hormuz. It will probably get there by the end of this month. The Committee for a Responsible Federal Budget has warned that Trump's proposal could add nearly $6 trillion to the national debt over the next decade. No wonder that the 10-year US Treasury bond yield has been edging higher this month. (We are on alert for an attack on the US by the Bond Vigilantes, who have been busy in Japan in recent months.) Also, no wonder that precious metals prices have continued to soar so far this year (chart). The price of gold is at a record high just below $5,000 per ounce. We are still targeting $6,000 by the end of this year and $10,000 by the end of 2029. _This post is for paying subscribers only._ ### Too Much Good Economic News? URL: https://www.yardeniquicktakes.com/too-much-good-economic-news/ Last updated: 2026-01-25T05:00:26.000Z Investors have decided that the Greenland issue will be resolved now that there is a framework for resolving it. So far this year, they seem to be looking for greener pastures, as evidenced by the broadening of the bull market in stocks. Booming economic activity has provided plenty of greener pastures. There was plenty of good economic news today that should continue to bolster earnings and stock prices. Nevertheless, a pullback is possible as bullish sentiment mounts. Meanwhile, nothing seems to be holding back precious metals prices from climbing to new highs. Consider the following: (1) *Unemployment insurance claims*. Our contrary instincts about the labor market have been triggered recently by the declines in both initial and continuing unemployment claims over the past few weeks (chart). Now that everyone agrees that the so-called breakeven payroll employment gain is around 50,000 per month, we think January's number might be more like 100,000\. That would be a surprise for sure. We are just thinking out loud here: At some point, companies will complete their assessment of AI and conclude that it isn't ready for prime time in many of their operations and that they need to hire more workers to keep up with booming demand. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-152.png) (2) *GDP and profits*. Demand is certainly booming, given that real GDP jumped 3.8% (saar) during Q2-2025 and 4.4% during Q3-2025\. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com) model shows that real GDP is tracking at 5.4% during Q4-2025\. Corporate profits has been rising to record highs along with GDP (chart). Corporate cash flow is also at a record high despite the boom in capital spending, which is fueled by rising profits. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-153.png) (3) *Consumer income, spending, and saving*. The nattering nabobs of negativity have recently noted that real disposable personal income was mostly flat last year, reflecting weakness in payroll employment and real wages (chart). They warn that this will force consumers to retrench. They are ignoring the fact that Baby Boomers, who tend to be highly paid because of their experience, are retiring. That's flattening disposable income. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-161.png) Retired Baby Boomers without earned income are still spending apace. The generation has more than $85 trillion in net worth. They are spending it down in retirement. As a result, the personal saving rate is falling and could turn negative over the next few years (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-155.png) (4) *Inflation*. Inflation seems to be stuck around 3.0% y/y (chart). We still think that strong productivity growth this year will lower inflation to 2.0% y/y this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-158.png) (5) *Broadening bull market*. The Russell 2000 is soaring to record highs (chart). Investors are increasingly betting on more M&A activity in the banking and biotech industries. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-164.png) Biotech stocks are anticipating more takeovers as large pharmaceutical companies scramble to fill their pipelines with new drugs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-15.jpg) The materials sector of the stock market is following the lead of soaring prices for precious metals, base metals, and rare-earth minerals (chart). All these materials are important in the production of semiconductors and defense equipment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-163.png) The rally in precious metals shows no signs of slowing. When the price of gold rose above our $4,000 per ounce target at the end of last year, we raised our 2026 year-end target from $5,000 to $6,000 (chart). Tonight, it is within striking distance of $5,000! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-165.png) (6) *Sentiment*. So we have nothing to fear but nothing to fear (other than Greenland and other geopolitical risks). The Bull/Bear ratios suggest that too much good news is boosting bullishness, which may be bearish from a contrarian perspective (chart). Then again, we might have to raise our 20% subjective odds of a meltup/meltdown scenario. Stay tuned. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-160.png) 💡 Join the discussion with Dr. Ed below! Paid members can now leave comments or questions at the end of our QuickTakes, and it may be featured in the next "Just Ask Dr. Ed!" [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### From The 'Art Of The Deal' To The 'Concept Of A Deal' In One Day URL: https://www.yardeniquicktakes.com/from-the-art-of-the-deal-to-the-concept-of-a-deal-in-one-day/ Last updated: 2026-01-22T03:04:30.000Z Just yesterday, we wrote that "the latest \[stock market\] pullback won't last long," partly because we "expect the Greenland issue will be resolved." It seemed resolved this afternoon when President Donald Trump said that he and NATO Secretary General Mark Rutte "formed the framework of a future deal with respect to Greenland." The President told CNBC that "we have a concept of a deal" with the Arctic island. So he called off the threatened tariffs on eight European nations that were conducting a military exercise in Greenland to protest Trump's plans to take it "one way or another." Trump explicitly stated today, "I don't want to use force. I won't use force." When later asked by a reporter about the Danish rejection of his framework a few hours later, Trump responded dismissively, "If he \[the Danish prime minister\] wants to tell me, he can tell me that to my face." Meanwhile, the US economy continues to demonstrate its resilience. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com) tracking model today increased its estimate for Q4-2025 real GDP growth from 5.3% to 5.4% saar (chart). The model now puts real consumer spending growth at 3.2%, up from 3.1%, and real capital spending growth at 6.4%, up from 5.1%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-148.png) The Redbook Retail Sales Index rose solidly by 5.5% y/y through the week of January 16\. The strength in retail sales during December and January is confirmed by the record-high forward revenues of the S&P 500 Retail Composite industry during the week of January 20, 2026 (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: On The Latest Geopolitical Consequences Of Donald Trump URL: https://www.yardeniquicktakes.com/weekly-webcast-on-the-latest-geopolitical-consequences-of-donald-trump/ Last updated: 2026-01-21T12:59:59.000Z The EU finally inked a long-sought trade deal with a bloc of South American countries the very day that Trump slapped additional tariffs on EU countries opposing the US’s purchase of Greenland. William explains why the South American deal is a huge boon for Europe. … He also discusses geopolitical fallout from Trump’s move on Venezuela, including how it impedes China’s ambitions in South America, may ramp up China’s efforts to take over Taiwan, and may threaten the US-China trade talks. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Troubles In Tokyo & Nuuk Hit Stocks & Bonds URL: https://www.yardeniquicktakes.com/troubles-in-tokyo-nuuk-hit-stocks-bonds/ Last updated: 2026-01-21T18:49:52.000Z What do Tokyo and Nuuk have in common? They are the capital cities of Japan and Greenland. They are the two epicenters of the shocks that hit stock and bond markets worldwide today. In Tokyo, bond yields are soaring, suggesting that a debt crisis may be underway. In Nuuk, the locals are siding with Denmark in their opposition to President Donald Trump's plan to acquire Greenland "one way or another." This development just adds to the list of geopolitical tensions driving precious metals prices to record highs. The situation was exacerbated when eight NATO countries deployed troops to Greenland for joint military exercises, prompting Trump to threaten new tariffs on those countries. In other words, last year's Trump Tariff Turmoil is continuing in 2026. Let's have a closer look at what is happening in and around Tokyo and Nuuk: **I. Will what happens in Tokyo stay in Tokyo?** Japan's government debt crisis is certainly pushing bond yields higher (chart). However, we don't expect that it will cause a Lehman-like global financial crisis. Nevertheless, Japan's Bond Vigilantes are sending a clear message to governments worldwide about the need for fiscal discipline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-143.png) The problem in Japan is that the Bank of Japan has been trying to normalize monetary policy by raising its main policy rate since early 2024\. However, inflation remains stuck around 3.0%, well above the BOJ's 2.0% inflation target and the current policy rate of 0.75% (chart). The BOJ is tightening too little, too late, because the economy is weak, prompting the new government to push for fiscal stimulus. That will widen Japan's government deficit, adding to the record public debt. The Bond Vigilantes are protesting by driving bond yields higher. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: January 20–23 URL: https://www.yardeniquicktakes.com/economic-week-ahead-january-20-23/ Last updated: 2026-01-20T02:34:31.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/Screenshot-2026-01-19-171204.png) This is one of those be-ready-for-anything weeks as wildcards abound for both US and global markets—most of them POTUS-related. Investors will be glued to screens for any news involving the Justice Department's investigation of Federal Reserve Chair Jerome Powell. In addition, on Wednesday, the Supreme Court [*hears arguments*](https://www.reuters.com/sustainability/boards-policy-regulation/supreme-court-tests-limits-trumps-power-over-economy-fight-over-feds-lisa-cook-2026-01-17/?ref=yardeniquicktakes.com) over Trump's attempt to fire Fed Governor Lisa Cook. Tariff developments could come fast and furious, following the President's weekend threat of a new 10% tariff on eight European countries opposing his designs on Greenland. SCOTUS might rule on the legality of Trump's tariffs this week. There might also be more Trump regime-change talk on Iran, further intrigue surrounding Venezuela, or actions against any other targets that get on his wrong side. In Tokyo, the Bank of Japan is expected to leave interest rates unchanged on Friday. Yet, as a sliding yen triggers intervention chatter, the fate of the massive "yen-carry trade" hangs in the balance. China's Q4 GDP growth slowed amid the ongoing property crisis, which might elicit a policy response. And clearly, there's lots for the Davos set to discuss as they gather this week in the Alpine resort village. Trump is scheduled to address the gathering of globalists. In the US, there's plenty of data to keep Federal Reserve officials and investors alike engaged in this holiday-shortened week. Q3's GDP revision could provide clarity on whether the initial 4.3% gain overstated the economy's health or was bang-on. Here's a look at this week's data reports most likely to influence the FOMC's thinking ahead of next week's January 27-28 policy meeting: (1) *GDP update*. The balance of data suggests that the economy remained quite strong in the last three quarters of 2025\. Even as employment slowed markedly, household demand confounded the skeptics, while capital spending on AI boomed. While a small revision up or down in Q3's real GDP (Thu) is possible, Q4's real GDP is tracking at a 5.3% gain (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-131.png) (2) *Personal income, consumption, and saving*. Personal income (Thu) for both October and November might confirm that real disposable income isn't growing much, if at all (chart). We would attribute that to retired Baby Boomers no longer earning labor income. Our thesis would be confirmed if consumer spending remains strong as the Baby Boomers dip into their retirement funds. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-135.png) The personal saving rate (Thu) is likely to continue to fall in our narrative, especially if household net worth continues rising to new highs relative to disposable income (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-136.png) (3) *PCE inflation*. The Bureau of Economic Analysis will [*use the average*](https://www.reuters.com/business/bea-says-it-will-use-us-september-november-cpi-averages-calculate-october-pce-2026-01-07/?ref=yardeniquicktakes.com) of September and November CPI data to produce an October PCED reading (Thu). The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model is projecting headline and core PCED inflation rates of 2.65% y/y and 2.70% in November (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-137.png) (4) *Unemployment claims*. Initial unemployment claims (Thu) have been falling in recent weeks, suggesting that January's unemployment rate likely dropped from 4.4% in December (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-133.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: So Far, So Good For Our Rebalancing Call URL: https://www.yardeniquicktakes.com/market-call-52/ Last updated: 2026-01-18T17:36:31.000Z Last year, in the December 7 *QT*, we wrote: "It no longer makes much sense for us to continue recommending overweighting the Information Technology and Communication Services sectors in an S&P 500 portfolio .... The same can be said about overweighting the United States in the All Country World MSCI portfolio." It was time to rebalance, in our opinion, because the two sectors accounted for a remarkable record 46.7% of the S&P 500's market-cap weight on November 5, 2025, while the US accounted for a staggering 65.0% of the market-cap weight of the All Country World MSCI at about the same time. In the December 13 *QT*, we wrote: "The S&P 500's Magnificent-7 might be less magnificent in 2026 as their fierce competition in the AI race starts to erode the monopolies they have enjoyed in search (Google), software (Microsoft), retailing (Amazon), advertising (Meta), electric vehicles (Tesla), smartphones (Apple), and GPU chips (Nvidia). The beneficiaries of that competition are likely to be the S&P 500's Impressive 493." So far, so good. The leadership of both the S&P 500 and the All Country World MSCI has been broadening away from last year’s outperformers, which we expect to continue: (1) *S&P 500 earnings breadth remains high*. The percentages of S&P 500 companies with positive three-month percentage changes in their forward revenues and earnings per share remain high at 82.8% and 82.0% (chart). This should underpin the broadening of the bull market in stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-125.png) (2) *The bull market in the S&P 500 is showing signs of broadening*. The ratio of the S&P 100 to the S&P 500 might have peaked at the end of last year, well below the peak during the tech bubble of 1999 (chart). If so, then the odds of a bubble bursting now are much lower than they were back then, when the stock market was much more concentrated in tech names than it is now, according to this ratio. So instead of a bursting bubble, we may be seeing a broadening bull market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-119.png) The same can be said for the ratio of the S&P 500 market-weight to equal-weight indexes (chart). The recent drop in the ratio might be the latest head-fake. However, we're betting that the ratio will continue to trend lower in 2026 as the bull market broadens. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-127.png) The equal-weight S&P 500 has been setting record highs recently, while the market-weight S&P 500 has yet to do so (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-128.png) (3) *Will S&P 500 Information Technology and Communication Services sectors continue to gain market-cap share of the index?* We started to doubt that they would late last year, when together the two sectors had risen to a record 46.7% share of the S&P 500’s total market cap; we were skeptical even though their combined earnings share had reached a record 40.0% of the index (chart). The current market-cap share of the two sectors combined exceeds that at the peak of the tech bubble in 2000, but so does their combined earnings share. We expect that huge AI capital spending and margin pressures will turn both sectors from outperformers to market performers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-11.jpg) Our "Game of Thrones" thesis is working, so far. Until late last year, the Magnificent-7 operated as seven independent kingdoms protected by large moats. Each prospered with its own unique monopoly. However, the AI arms race has upended that peaceful coexistence by greatly increasing competition among them. The ratio of the S&P 500 MAGS to XMAG ETFs peaked after Michael Burry famously tweeted on October 31, 2025, "Sometimes, we see bubbles. Sometimes, there is something to do about it." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-129.png) (4) *SMidCaps are beating LargeCaps*. Also confirming a broadening bull market in stocks is the outperformance of the SmallCap and MidCap stock price indexes (a.k.a. the SMidCaps) so far this year (chart). Again, this development may be the latest head-fake, of which there have been several in recent years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-116.png) However, the SMidCaps are still cheaper than the LargeCaps based on their forward P/Es (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-130.png) In addition, the forward earnings per share of the SMidCaps, which have been in a coma since late 2022, finally have been showing signs of life (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-118.png) So far this year, the S&P 600 SmallCap and S&P 400 MidCap indexes are solidly beating the S&P 500 LargeCap index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-122.png) (5) *On a global basis, the US might be at peak exceptionalism as measured by its market-cap share of the All Country World MSCI.* The US undoubtedly will remain exceptional in many ways. However, that might be fully discounted by the US MSCI’s current market-cap share of the All Country World MSCI, at 64.0% (chart). Meanwhile, rapidly growing middle classes in emerging market economies clearly aspire to achieve greater prosperity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-124.png) The forward P/E of the All Country World MSCI has been rising over the past three years (chart). However it remains well below that of the US. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-12.jpg) As occurred last year, the US MSCI stock price index continues to underperform many of the world's other MSCI stock price indexes so far in 2026 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-123.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: 2025 Was Another Good Year For The Roaring 2020s! URL: https://www.yardeniquicktakes.com/deep-dive-2025-was-another-good-year-for-the-roaring-2020s/ Last updated: 2026-01-17T05:06:02.000Z *The following is an excerpt from our Morning Briefing dated January 12, 2025.* ### **US Economy I: Productivity Is Roaring** Last week was a very good one for our Roaring 2020s scenario. That’s because last week’s batch of economic data supported our productivity-led economic boom narrative. Real GDP growth was very strong during the last three quarters of 2025\. The growth rate of employment slowed dramatically. As a result, productivity growth soared last year. Unit labor costs inflation fell significantly, suggesting that consumer price inflation should fall closer to 2.0% this year. If this scenario continues to play out during 2026 and through the end of the decade in 2029, the outlook for S&P 500 earnings is excellent and consistent with our S&P 500 target of 10,000 by the end of the Roaring 2020s. Unlike the Roaring 1920s, which ended badly during the 1930s, the Roaring 2020s could be followed by the Roaring 2030s. Let’s assume that productivity growth transitioned from 2.0% to 3.0% in 2025 and will remain at that higher pace for the foreseeable future. That would boost real GDP growth by a full percentage point per year. It would lower unit labor costs inflation by as much. It would boost real wages of workers, more than offsetting the slower pace of employment. So the real purchasing power of consumers would continue to grow, with less of that growth coming from new workers and more coming from higher real wages. Profit margins would rise, boosting total profits and driving capital spending higher. That picture-perfect outlook seemed delusional when we first laid it out during the summer of 2020\. Six years later, it remains on track. We obviously are feeling more confident about it. But we are still assigning a 60% subjective probability to our Roaring 2020s scenario. We are also still assigning 20% to a meltup/meltdown scenario and 20% to a bearish outcome for the economy and the stock market before the end of the decade. ### **US Economy II: Productivity by the Numbers** I’ve been writing about productivity for a very long time. I mention the word 201 times in my 2018 book [*Predicting the Markets: A Professional Autobiography*](https://www.amazon.com/Predicting-Markets-Autobiography-Edward-Yardeni/dp/1948025000?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926). It is an economic variable that, like the late comedian Rodney Dangerfield, “gets no respect.” It is usually underestimated or totally ignored by most macroeconomists. The FOMC’s latest [*Summary of Economic Projections*](https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20251210.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) shows that the 19 participants on the monetary policy committee, on average, estimate the “longer run” growth rate in real GDP to be only 1.8% ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). This average projection is available since Q2-2025\. In our Roaring 2020s scenario, better-than-expected productivity growth is likely—and likely the reason that the FOMC may be underestimating the growth of real GDP in coming years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_1.png) Figure 1 Let’s have a closer look at the productivity-related data: (1) *Real GDP & real output.* Since the late 1940s, the growth rate of real GDP has averaged 3.1% ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F2.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). This average slowed to 2.1% measured since 2000\. It was 2.3% y/y during Q3-2025\. In our Roaring 2020s scenario, real GDP growth should grow 3.5%-4.0% in coming years if productivity growth continues to improve. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_2.png) Figure 2 The measure of productivity, which is compiled by the Bureau of Economic Analysis, is the ratio of nonfarm business output to labor hours. Output closely tracks real GDP ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F3.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). On a y/y basis, the former was up 3.4% while the latter was up 2.3% through Q3-2025. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_3.png) Figure 3 (2) *Labor hours & the labor force.* The denominator in the productivity ratio is determined by aggregate hours worked, which is total nonfarm business payroll employment (which counts the number of full-time and part-time jobs, not the number of workers) times average weekly hours in the private sector. Contributing to the dramatic rebound in productivity during both Q2 and Q3 of last year was the virtual flattening in aggregate hours worked from April through December 2025 ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F4.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). Both payrolls and the average weekly hours in private industry were relatively flat over this period ([*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F5.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) and [*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F6.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_4.png) Figure 4 Interestingly, the weakness in employment occurred despite a solid increase in the labor force. The latter was up 1.8% y/y, and its 12-month average was up 1.3% ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F7.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). Those are reasonably solid growth rates considering the surge in deportations and the restrictions on immigration. Despite these developments, the foreign-born labor force still rose 1.8% y/y in 2025, down from a peak of 6.3% during December 2022 ([*Fig. 8*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F8.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_7.png) Figure 7 (3) *Productivity.* Nonfarm business sector labor productivity increased 4.9% (saar) in Q3-2025, as output increased 5.4% and hours worked increased 0.5% ([*Fig. 9*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F9.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). Q2-2025 productivity was revised up from 3.3% to 4.1%, as output increased 5.2% while hours worked rose 1.0%. These are awesome numbers! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_9.png) Figure 9 (4) *Unit labor costs and inflation*. Unit labor costs (ULC) in the nonfarm business sector decreased 1.9% in Q3-2025, reflecting a 2.9% increase in hourly compensation and a 4.9% increase in productivity ([*Fig. 10*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F10.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). ULC during Q2-2025 was revised down from 1.0% to -2.9%. ULC increased only 1.2% (y/y). This confirms our view that CPI inflation should fall to 2.0% this year. (5) *Real wages & purchasing power*. Productivity is the driver of real hourly compensation, which is the purchasing power of American workers ([*Fig. 11*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F11.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). The level of productivity rose to a record high during Q3-2025 and should continue doing so in 2026\. If it does, then real hourly compensation should also move higher this year. We can monitor consumers’ purchasing power by tracking real average hourly earnings for all workers, which continues to rise along a 1.0% y/y trend line ([*Fig. 12*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F12.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). A potential risk to our Roaring 2020s scenario is that real wages don’t rise fast enough to fully offset the weakness in employment. In fact, real disposable personal income has been flat in recent months ([*Fig. 13*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F13.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). The latter is the best measure of the total purchasing power attributable to labor and nonlabor income. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_13.png) Figure 13 However, there is another potentially massive source of purchasing power, i.e., the $85.4 trillion in the household net worth of the retiring Baby Boom generation ([*Fig. 14*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F14.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). In the January 5 [*Morning Briefing*](https://yardeni.com/wp-content/uploads/mb%5F20260105.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)titled “The Gen-Shaped Economy,” we discussed the economic effects of the Baby Boomers’ continued spending of their retirement nest eggs on themselves and on their adult children and young grandchildren. In this uncommon economic scenario, consumption would remain strong even as disposable income stays flat. Savings would fuel the consumption strength, and the personal savings rate would turn negative. The Baby Boomers’ net worth includes $27.4 trillion of corporate equities and mutual fund shares ([*Fig. 15*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F15.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). So the bull market in stocks continues to bolster their net worth and their potential purchasing power. There is clearly a very positive wealth effect on consumption. Of course, the risk to this happy scenario is a bear market that might cause the retiring Baby Boomers to retrench. As we noted above, our subjective probability of this happening over the rest of the decade is 20%. (6) *Q4-2025 productivity and earnings.* Productivity probably continued to grow rapidly during Q4-2025\. Following Thursday’s merchandise trade report showing a big drop in imports and a big increase in exports during October, the Atlanta Fed’s [*GDPNow*](https://www.atlantafed.org/cqer/research/gdpnow?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) model showed that real GDP rose 5.4% (saar) during the quarter ([*Fig. 16*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F16.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). After Friday’s employment report, this estimate was revised down to 5.1% ([*Fig. 17*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F17.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). So the economy continued to grow rapidly, while labor hours remained weak. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_16.png) Figure 16 This implies that S&P 500 earnings per share rose to yet another record high during Q4 ([*Fig. 18*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F18.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926) below). That’s corroborated by S&P 500 forward earnings per share, which rose sharply in recent weeks to a new record high. The same can be said for S&P 500 forward revenues per share ([*Fig. 19*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F19.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). The latest S&P 500 forward profit margin data, through the week of January 2, show that the S&P 500’s actual quarterly profit margin rose to a new record high at the end of last year ([*Fig. 20*](https://yardeni.com/wp-content/uploads/tc%5F20260112%5F20.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=398636926&%5Fhsenc=p2ANqtz--6BRqg3vBXp7iCwszwHsJZjKuAXvUVX1%5Fg-mIz2ZY2hOEaTANAxzsM18qC5PoRddqOWmcV5XIr%5FC%5F5Hqsbn1X7qmGDWA&%5Fhsmi=398636926)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260112_18.png) Figure 18 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Dr Copper Is Bullish On 2026 URL: https://www.yardeniquicktakes.com/dr-copper-is-bullish-on-2026/ Last updated: 2026-01-18T05:00:35.000Z Denmark (responsible for Greenland's defense), Germany, France, Sweden, and Norway have confirmed plans to deploy military personnel to the sparsely populated island this week for a joint military exercise. These NATO members are preparing to repel a US invasion of Greenland. We wish we were kidding. A much less far-fetched scenario is that China will invade Taiwan. The stock market isn't taking either scenario seriously. Taiwan Semiconductor (TSMC) rose to a record high today on better-than-expected earnings. Then again, the Trump administration announced today that Taiwanese chip and technology companies will invest at least $250 billion in US production capacity, and the Taiwanese government will guarantee $250 billion in credit for these companies. Might they be preparing to shut down their operations in Taiwan in the event of an invasion by China? That might be more likely following Trump's excellent adventure in Venezuela and his threat to grab Greenland. Late last year, we downgraded S&P 500 Information Technology to market weight and the Magnificent-7 to underweight, while maintaining our overweight on S&P 500 Semiconductors, which are relatively cheap given their soaring earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-112.png) Meanwhile, copper is becoming more expensive, reflecting rising demand from the AI industry, including semiconductors (chart). Dr. Copper is often described as the "base metal with a PhD in economics." The professor may be signaling stronger global economic growth in 2026\. (BTW: Los Angeles has experienced recent blackouts due to copper wire theft, which might be a sign of a top.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/3GpiS6e.png) We have long monitored the CRB raw industrials spot price index as a less volatile barometer of global economic growth than copper (chart). It has been rising over the past two years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-109.png) The broader-based CRB commodities spot index has been held down over the past two years by weak crude oil prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-113.png) Base metals, along with precious metals, have outperformed the S&P GSCI commodity spot price index ytd (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/3N6ulLz.jpg) Late last year, we recommended overweighting the Emerging Markets ex-China MSCI. The index, including China, remains highly correlated with the CRB raw industrials spot price index (chart). Both are sensitive to global economic growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-111.png) The rally in precious metals continues. The SPDR Gold Trust ETF (GLD) is at a record high on record high volume (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-8.jpg) Also flying so far in the new year is the Vaneck Rare Earth & Strategic Metals ETF (chart). The demand for precious metals, base metals, and rare earth minerals is driven not only by AI-related demand but also by rising global defense spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-114.png) The big surprise of 2026 might be a rebound in payroll employment. The latest unemployment insurance claims report shows that both initial and continuing claims are falling (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-100.png) Meanwhile, the latest readings of the Bull-Bear Ratios that we track are showing rising bullishness (chart). They aren't high enough to worry us about a stock market pullback, yet. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-101.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### US Economy & Earnings Ended 2025 Very Strongly URL: https://www.yardeniquicktakes.com/us-economy-earnings-ended-2025-very-strongly/ Last updated: 2026-01-15T01:53:30.000Z Oil prices fell more than 1% today after President Donald Trump signaled he might not attack Iran. Late in the day, Trump told reporters in the Oval Office that "we've been told that the killing in Iran is stopping. It's stopped. It's stopping, and there's no plan for executions." The price of a barrel of Brent crude oil was down 93 cents to $64.50\. The price of gold also fell on the news. In the stock market, traders chose to sell Financials for the third day in a row. On Monday, they were hit by Trump's proposal to cap credit-card interest rates at 10%. He reportedly is working with liberal Senator Elizabeth Warren (D., MA) on the idea! On Tuesday and Wednesday, the Financials fell despite relatively good earnings reports from the big banks, as we anticipated in Monday's *QT* titled "Banking On The Banks." So we view the three-day selloff as a buying opportunity. Goldman and Morgan Stanley will likely report gangbuster earnings tomorrow. (And we expect the banks will succeed at killing the credit-card cap idea.) Speaking of “gangbusters,” that adjective describes last year's real GDP performance in Q2 (3.8%), Q3 (4.3%), and probably Q4\. The Atlanta Fed's [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com) estimated growth rate for the final quarter of 2025 was raised from 5.1% yesterday to 5.3% today after the release of November's solid retail sales report (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-6.jpg) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-99.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: 2025 Was A Great Year For The Roaring 2020s URL: https://www.yardeniquicktakes.com/weekly-webcast-2025-was-a-great-year-for-the-roaring-2020s/ Last updated: 2026-01-14T12:59:59.000Z Last year was a picture-perfect rendering of our Roaring 2020s scenario in action. Economic growth soared on the shoulders of a productivity boom. Dr Ed expects more of the same through the decade’s end and possibly beyond. That should set the stage for excellent earnings growth, supporting our S&P 500 target of 10,000 by the end of the decade. Today, he explains why even recent labor market weakness can’t derail this narrative. It’s a “Gen-Shaped Economy,” with retired Baby Boomers keeping consumer spending aloft irrespective of the labor market. ... 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### It's Been A Long Year Already URL: https://www.yardeniquicktakes.com/its-been-a-long-year-already/ Last updated: 2026-01-14T03:10:43.000Z _This post is for paying subscribers only._ ### Banking On Banks URL: https://www.yardeniquicktakes.com/banking-on-banks/ Last updated: 2026-01-12T22:52:09.000Z The stock prices of banks and credit card companies fell today after President Donald Trump announced late Friday that credit card companies would be subject to a 10% cap on the interest rates they can charge customers. The President proposed a one-year cap on interest rates starting January 20\. The Trump administration is scrambling to address the affordability crisis before this year's midterm elections. We expect that the banking industry will pop this trial balloon before it takes off. The industry's trade groups issued a joint statement late Friday, making their case: "Evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help." We view today's selloff in financial stocks as an opportunity to buy them ahead of the big banks' better-than-expected Q4-2025 earnings announcements at the end of this week. Here's why there might be upside surprises: (1) *Loan demand rebounded last year.* The growth rate of loans and leases at both large and small banks rebounded last year (chart). For large banks, it rose from 0% y/y in April 2024 to 5.7% at the end of last year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-75.png) (2) *The slope of the yield curve has been steepening since late 2024*. The spread between the 10-year and 2-year Treasury yields widened from zero on December 2, 2024 to 64bps at the start of this year (chart). That should have boosted banks’ Q4 net interest margins. _This post is for paying subscribers only._ ### MARKET CALL: Earnings Powering The Bull Market URL: https://www.yardeniquicktakes.com/market-call-earnings-powering-the-bull-market/ Last updated: 2026-01-12T02:42:20.000Z The Q4-2025 earnings reporting season starts with the big banks this week. They are likely to deliver solid earnings, as loan demand is growing, net interest margins are widening, loan losses are manageable, and investment banking is booming. Other S&P 500 industries are also likely to deliver very good results. Indeed, we expect S&P 500 companies’ aggregate revenues per share, earnings per share, and profit margin to have risen to record highs in the last quarter of 2025. For starters, S&P 500 forward revenues per share rose to a record high during the week of January 1, 2026 (chart). The series did the same in Q2-2025 and Q3-2025, driven by large increases in nominal and real GDP in both quarters. According to the latest reading of the Atlanta Fed's [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com), real GDP is tracking at 5.1% for Q4-2025 (saar). A significant portion of S&P 500 revenues is attributable to the overseas activities of US corporations. The 2025 revenue data we are tracking suggest that the global economy has been remarkably resilient in the face of Trump's Tariff Turmoil. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-70.png) The weekly S&P 500 forward earnings per share series rose to a new record high during the week of January 8 (chart). Again, this augurs well for another record high in S&P 500 earnings per share during Q4-2025. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: January 12–16 URL: https://www.yardeniquicktakes.com/economic-week-ahead-january-12-16/ Last updated: 2026-01-11T19:51:38.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/Screenshot-2026-01-11-133524.png) If economists did weather reports, this week's forecast would call for a data blizzard. Yet visibility should improve as the markets get much-anticipated readings on inflation, retail sales, and industrial production ahead of the Fed's next policy meeting on January 28. Few economists expect Fed Chair Jerome Powell and the rest of the Federal Open Market Committee (FOMC) to ease monetary policy again later this month. Neither do we. This week's data could confirm or alter this conventional wisdom—starting with the December consumer price index (Tue). The Fed plot thickened last week after President Donald Trump directed Fannie Mae and Freddie Mac to buy $200 billion of mortgage bonds. It's the kind of monetary function normally reserved for the Fed. It struck many as a ploy to revive [*quantitative easing*](https://finance.yahoo.com/news/trumps-200-billion-peoples-qe-114700695.html?ref=yardeniquicktakes.com). The announcement came as Fed Governor Stephen Miran told Bloomberg he's looking for [*150 basis points*](https://www.bloomberg.com/news/articles/2026-01-08/fed-s-miran-wants-150-points-of-cuts-in-2026-to-boost-job-market?ref=yardeniquicktakes.com) of rate cuts this year. The only thing missing, of course, is substantially lower inflation and a recession to require such aggressive easing. This week features speeches by several Fed officials that may shed light on the talking Fed heads’ thinking, starting with New York Fed President John Williams (Mon) and followed by Governors Miran (Wed), Michael Barr (Thu), Michelle Bowman (Fri), and Vice Chair Philip Jefferson (Fri). Here's a look at this week's data releases most likely to influence the timing and extent of any further Fed rate cuts: (1) *Inflation*. Since the 43-day government shutdown in October and November, investors have struggled to gain a clear view of inflation. Many investors took the 2.7% y/y CPI gain in November, down from 3.0% in October, with a few grains of salt (chart). The shutdown likely distorted the Bureau of Labor Statistics’ (BLS) efforts to collect price data. This raises the stakes for the latest CPI and PPI readings. They’ll be among the last pivotal releases ahead of the FOMC’s January 28 rate decision. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-3.jpg) The CPI (Tue) inflation rate may have moderated slightly. The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model expects a 0.2% m/m increase, or 2.6% y/y. As the PPI (Wed) is for November, the data are of less utility. November import/export prices (Thu) also hit the tape. (2) *Retail sales*. Retail sales (Wed) likely increased slightly in November following October's flat reading (chart). Overall, we think consumption remains on solid footing despite rising cost-of-living pressures and weak employment. Other key updates on demand this week include December existing home sales (Wed) and mortgage applications (Wed) for the week ending January 9. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-67.png) (3) *Jobless claims*. We expect layoffs to remain low. That's surely been the main takeaway from recent trends in initial unemployment claims (Thu) (chart). Even if demand for labor is cooling in some areas, the AI-driven job market implosion many fear has yet to arrive. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-68.png) (4) *Composite economic indicators* & *business surveys*. The composite cyclical indicators (Thu) for December should show that the coincident index remains at a record high, while the (mis)leading index continues to fall. Also, given the lags in hard official data, National Federation of Independent Business’ Small Business Optimism Index for December (Tue) should be informative after having risen to 99 in November. Later this week, the New York and Philadelphia Federal Reserve banks release their January business surveys (Thu). S&P 500 forward earnings per share is our favorite coincident indicator. It has been rising faster in recent weeks, reaching record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-69.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: US Economy Is Gen-Shaped, Not K-Shaped URL: https://www.yardeniquicktakes.com/deep-dive-us-economy-is-gen-shaped-not-k-shaped/ Last updated: 2026-01-10T04:09:22.000Z **This is an excerpt from our January 5, 2026 Morning Briefing.* The US economy's resilience is attributable primarily to robust consumer spending despite widespread concerns that rising prices have squeezed the purchasing power of lower-income consumers. As a result, many economists have warned that the so-called “K-shaped” economy isn’t sustainable. How can the economy continue to grow if more households are confronting an “affordability crisis”? Surely, it cannot do so supported just by the spending of higher-income households. We believe that a better way to understand consumer resilience is to focus on what we call the “gen-shaped” economy. The economy has been significantly impacted by the 76 million Baby Boomers born between 1946 and 1964 ([*Fig. 12*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F12.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) below). They will turn 62 to 80 years old this year. The oldest of them turned 65 in 2011 ([*Fig. 13*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F13.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722)). Since then, the number of seniors who are not in the labor force increased by 17 million. Most of them have retired, and more Baby Boomers will be retiring this year and in coming years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_12.png) Figure 12 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_13.png) Figure 13 Such a surge of retirees has economic consequences that explain why consumer spending should remain resilient. Here are some of them: (1) Disposable income may grow more slowly than in the past or remain flat. That’s because retiring Baby Boomers will no longer earn any wages and salaries. They undoubtedly earned much more than new entrants into the labor force. (2) The personal saving rate is likely to fall as the Baby Boomers continue to retire ([*Fig. 14*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F14.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) below). We are assuming that their consumer spending will remain robust even as they no longer get a paycheck. If so, then the national personal saving rate could turn negative in coming years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_14.png) Figure 14 (3) The main reason we expect that Baby Boomers will be spending lots of money in their retirement years is that they’ve accumulated a record $85.4 trillion in net worth ([*Fig. 15*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F15.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) below). That’s about half of total household net worth. Not surprisingly, there is an inverse correlation between the ratio of net worth to disposable personal income and the personal saving rate ([*Fig. 16*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F16.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_15.png) Figure 15 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_16.png) Figure 16 (4) Many of the low-income consumers who are struggling financially are in the Gen Z cohort, who are the children of the Baby Boomers and the Gen X cohort (born from 1965 to 1980). The Gen Z cohort includes 57 million people who will be 16-29 years old this year. They are having trouble finding jobs because the unemployment rate for 20- to 24-year-olds is 8.3%, up from 5.5% in April 2023 ([*Fig. 17*](https://yardeni.com/wp-content/uploads/tc%5F20260105%5F17.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) below). Many have graduated from colleges with majors that don’t match the requirements of the jobs that are available. In recent years, many companies have frozen their headcounts while they determine whether AI technologies can be used to boost the productivity of their current workforce. The Gen Z cohort also has lots of student and credit card debt. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/tc_20260105_17.png) Figure 17 Of course, as they grow older, Gen Zers’ incomes and net worth will increase. For now, many of them are receiving some financial assistance from their Baby Boom (and Gen X) parents. (5) A July 2024 [*study*](https://newsroom.bankofamerica.com/content/newsroom/press-releases/2024/07/parent-trap--nearly-half-of-adult-gen-zers-getting-financial-hel.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) by Bank of America reported that “46% of Gen Zers (ages 18 - 27) rely on financial assistance from parents. In addition, 52% of those surveyed said they don’t make enough money to live the life they want and cite the cost of living as a top barrier to financial success. Many said they are delaying milestones and are not on track to buy a home (50%), save for retirement (46%), or start investing (40%) within the next five years—even though they are working toward those goals.” A January 2024 Pew Research Center [*study*](https://www.pewresearch.org/social-trends/2024/01/25/financial-help-and-independence-in-young-adulthood/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=397403722&%5Fhsenc=p2ANqtz-%5FLk48zetH5OI3Mtan5ckGx4%5FpRO5wDD1aswMKbqJapOzFqaudjoM-Qm-vO74kjSjLlZexfsfYyRp-u6SjYZ0rgDTU9xQ&%5Fhsmi=397403722) reported, “Overall, 44% of adults ages 18 to 34 who have a living parent say they received financial help from their parents in the past 12 months. This ranges from 30% among those ages 30 to 34 to 68% among adults younger than 25.” 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Roaring Productivity Versus AI Bubble URL: https://www.yardeniquicktakes.com/roaring-productivity-versus-ai-bubble/ Last updated: 2026-01-11T05:00:14.000Z Relax: The AI bubble is the cover story in the latest BloombergBusinessweek (image). From a contrarian perspective, that's bullish because it signals that the bubble won't burst, if it even exists. We have AI Fatigue. We recently recommended underweighting the Magnificent-7 because their AI arms race is forcing them to spend heavily on AI infrastructure that could become obsolete quickly and that could be unprofitable as their competition squeezes their margins. We believe the air can be let out of the AI capital-spending bubble over time without it bursting and causing a recession. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/Screenshot-2026-01-07-230449.png) Meanwhile, AI may be starting to boost the productivity of the users of this technology, especially the S&P 500's Impressive 493\. Nonfarm business sector labor productivity increased 4.9% (saar) in Q3-2025, as output increased 5.4% and hours worked increased 0.5% (chart). Q2-2025 productivity was revised up from 3.3% to 4.1% as output increased 5.2%, while hours worked rose 1.0%. These are awesome numbers! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-65.png) Unit labor costs (ULC) in the nonfarm business sector decreased 1.9% in Q3-2025, reflecting a 2.9% increase in hourly compensation and a 4.9% increase in productivity. ULC during Q2-2025 was revised down from 1.0% to -2.9%. ULC increased only 1.2% (y/y) (chart). This confirms our view that CPI inflation should fall to 2.0% this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-66.png) , Following today's advance report on October's merchandise trade, which showed a significant drop in imports, the Atlanta Fed's GDPNow estimate for Q4 real GDP was revised higher from 2.7% to 5.4% (chart). That estimate will probably decline as more data become available. But it suggests that productivity growth might have continued to boom during Q4-2025, consistent with our Roaring 2020s scenario. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-62.png) Meanwhile, today's labor market indicators showed that layoffs remained low, with initial unemployment claims rising modestly to 208,000 during the January 2 week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-61.png) Challenger's report on announced layoffs was down to 35,600 during December (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/4g7ONbU.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Two Long-Distance Runners: Forrest Gump & The US Economy URL: https://www.yardeniquicktakes.com/two-long-distance-runners-forrest-gump-the-us-economy/ Last updated: 2026-01-08T03:36:10.000Z In the movie “Forrest Gump,” Forrest is a long-distance runner. He crosses the United States five times before he finally decides he is "pretty tired" and stops. Forrest’s run lasted 3 years, 2 months, 14 days, and 16 hours. In the US, real GDP has been growing since the two-month pandemic lockdown recession ended in April 2020\. So its run has lasted 5 years, 8 months, and 7 days so far. In our Roaring 2020s scenario, we expect the economy to continue growing through the end of the decade without a recession. If so, then the current bull market in equities should continue through the end of the decade. For now, we can say that it started on October 12, 2022, and is still going strong. We are pleased to see that Dow Theory agrees with our upbeat outlook. The Dow Jones Industrial Average (DJIA) rose to a new record high today, and the Dow Jones Transportation Average (DJTA) did the same yesterday (chart). Such mutual confirmations have signaled more economic growth ahead. The DJIA is likely to rise to 50,000 in coming weeks and could reach 70,000 by the end of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-52.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: The Gen-Shaped Economy URL: https://www.yardeniquicktakes.com/weekly-webcast-the-gen-shaped-economy/ Last updated: 2026-01-07T12:59:59.000Z It’s an economic curiosity of our times: The US economy is undeniably strong, in fact remarkably resilient in the face of recent headwinds. Yet it’s in the midst of an affordability crisis that has hit Gen Zers and other lower-income folks especially hard. Even so, consumer spending is brisk, and Dr Ed expects it to remain so. What’s going on? The paradoxes can be explained largely by one distortive phenomenon: The largest generation in history is retiring and spending substantial nest eggs accumulated over decades of work 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Will SMidCaps Outperform In 2026? URL: https://www.yardeniquicktakes.com/will-smidcaps-outperform-in-2026/ Last updated: 2026-01-07T03:40:45.000Z Will the S&P 400 MidCaps and the S&P 600 SmallCaps (i.e., SMidCaps) finally outperform the S&P 500 LargeCaps this year? Maybe. They’re overdue to do so. However, we think investors would be better off focusing on select SMidCaps sectors rather than the broad indexes. We would overweight the same SMidCap sectors as we recommend overweighting in the S&P 500: Financials, Industrials, and Health Care. The SMidCaps have been underperforming the LargeCaps since about 2018 (chart). They briefly outperformed in 2020 and 2021 following the Fed's dramatic easing of monetary policy in March 2020 in response to the pandemic. SMidCaps tend to underperform when investors fear a recession is coming, as in 2022 and 2023\. But recession fears abated in 2024 and 2025, yet the SMidCaps continued to underwhelm. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-50.png) The problem is that the forward earnings of both the S&P 400 and S&P 600 have been mostly flat since late 2022, while the forward earnings of the S&P 500 has soared to new record highs (chart). We think it's mostly because LargeCap companies buy the most promising SMidCap companies before their earnings really take off. Then again, we have seen some improvement in the forward earnings of the SMidCaps in recent weeks. _This post is for paying subscribers only._ ### Off To The Races URL: https://www.yardeniquicktakes.com/off-to-the-races/ Last updated: 2026-01-06T02:52:11.000Z It's been a good year so far, even though only two trading days have gone by in 2026\. The S&P 500, DJIA, and Nasdaq all rose today despite the crisis in Venezuela over the weekend. The DJIA hit a record high. We've often observed that geopolitical crises create buying opportunities. This time, stock market investors chose to emphasize the positive effects of this crisis rather than its possible unintended negative consequences. Apparently, they aren't at all concerned about how the Chinese and Russians will respond to President Donald Trump's declaration that the Monroe Doctrine is back in force in the Western Hemisphere. What if China declares a Xi Doctrine and Russia reiterates the Putin Doctrine? Gold investors accentuated these possible negative consequences, sending the price of gold up to a one-week high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-38.png) _This post is for paying subscribers only._ ### MARKET CALL: Don't Cry For Him, Venezuela URL: https://www.yardeniquicktakes.com/market-call-dont-cry-for-him-venezuela/ Last updated: 2026-01-05T01:00:37.000Z We expected the first half of 2026 to be volatile for stocks. It's only January 4, and we can add Venezuela to our list of unsettling developments. Nicolás Maduro, the Venezuelan president captured by the United States on Saturday, is being held in a notorious Brooklyn jail. President Donald Trump said the US will "run" Venezuela. The geopolitical fallout could be troublesome. The Chinese government might increase the heat on Taiwan. Russia might be less inclined to end the war in Ukraine. On Friday morning, Trump said the US is "locked and loaded" as he warned Iran not to kill peaceful protesters in Tehran as nationwide unrest unfolded. Head-spinning stuff, for sure! However, geopolitical crises tend to create buying opportunities for stock investors. There may be a few such opportunities this year. Still ahead is a Supreme Court ruling on Trump's tariffs; SCOTUS is likely to rule that they are unconstitutional. Also, Trump will announce his pick for the next Fed chair soon. In the coming weeks, the Treasury may need to borrow more to fund larger refund checks under the One Big Beautiful Bill Act. Any or all of these developments could agitate the Bond Vigilantes. In the stock market, "AI Fatigue" is mounting: The Magnificent-7 haven't been so magnificent since October 30, 2025 (chart). That’s the day Michael Burry posted on X: “Sometimes, we see bubbles. Sometimes, there is something to do about it." He announced that he was shorting AI-related stocks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-29.png) The good news is that the outlook for S&P 500 earnings remains solid for the year ahead. Industry analysts who follow companies in the index collectively expect S&P 500 earnings per share to rise 15.6% in 2026 to $313.84 (chart). For next year, they are forecasting $359.44\. We are forecasting $310 and $350 for the two years. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: January 5–9 URL: https://www.yardeniquicktakes.com/economic-week-ahead-january-5-9/ Last updated: 2026-01-04T20:14:38.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/Screenshot-2026-01-04-131132.png) With the holidays behind us, the first full trading week of the year is a busy one on the data front. The big focus, naturally, is on the December employment report. It's the first "full" release since the government shutdown caused data interruptions. It also marks a return to normalcy for investors eager to gauge how the Fed might proceed in the weeks ahead. Recent data dented the view that the economy would stagger out of 2025\. First, GDP grew a heady 4.3% y/y in Q3-2025\. More recent data showed that initial unemployment insurance claims ended the year below the 200,000 mark. Overall, the data suggest that after surprising the bears in 2025, the economy appears on track for a solid 2026 as well. The big question is whether Federal Open Market Committee (FOMC) members are experiencing rate-cut remorse, given that consumer spending remains strong and gross private fixed investment continues to impress. Over the weekend, Philadelphia Fed President Anna Paulson, a voting FOMC member this year, [*hinted*](https://www.reuters.com/business/feds-paulson-signals-another-rate-cut-could-take-while-2026-01-03/?ref=yardeniquicktakes.com) that another rate cut is data-dependent—and could be some ways off. Fed Governor Michelle Bowman will address the California Bankers Association (Wed). Minneapolis Fed President Neel Kashkari (also a voting FOMC member this year) speaks (Mon) to the American Economic Association. Richmond Fed President Tom Barkin speaks twice this week (Tue and Fri). Outside the US, oil price moves will be watched closely following the capture of Venezuelan President Nicolás Maduro and his wife in a large-scale military operation by US forces. Venezuela has vast reserves of heavy oil, but it produces only 1.0 million barrels per day (chart). In Europe, Eurozone inflation data comes out. Inflation readings from China are also expected. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-34.png) Here's a look at US economic data releases with the most significant potential to move markets and influence whether the FOMC might ease again soon: (1) *Employment*. We expect nonfarm payrolls (Fri) to increase by 60,000 in December following November's 64,000 gain. The unemployment rate should drop to 4.5% from November's 4.6% (chart). That's all based on recent trends in weekly jobless claims (Thu). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-31.png) (2) *PMI data*. The week kicks off with the Institute for Supply Management's manufacturing purchasing managers' index for December (Mon). November's reading was 48.2\. The report may receive greater attention following last week's somewhat mixed S&P Global US Manufacturing PMI (chart). Though output growth remains solid, new orders declined for the first time in a year, taking input costs down with them. ISM’s non-manufacturing PMI (Wed) could be weaker than November's reading, based on the S&P Global flash report for services. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-32.png) (3) *JOLTS series*. Given the market's extreme focus on the health of labor markets, November JOLTS figures (Wed) on job openings, hires, quits, and layoffs could provide timely clues. In October, job openings remained stable at around 7.7 million, while hires and total separations were little changed. A day later, we’ll get the Challenger, Gray & Christmas layoffs report (Thu) for December. November showed a sharp 53% drop in planned layoffs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/4d1X8el.jpg) (4) *Inflation expectations*. Given doubts about the quality of recent government price data, post-shutdown, the New York Fed's December inflation expectations survey (Thu) could fill in some blanks. In November, expectations were steady at 3.2% (chart). Meanwhile, perceptions about job prospects improved markedly. It all makes you wonder why exactly the Fed thought it was a good idea to cut rates again last month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-33.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: 1920s And 2020s Not The Only Roaring Decades URL: https://www.yardeniquicktakes.com/market-call-1920s-and-2020s-not-the-only-roaring-decades/ Last updated: 2026-01-04T05:00:14.000Z Goldman Sachs has been pushing the view that the stock market's return over the next 10 years is likely to be very low, at only around 3% per year. We disagree. Admittedly, there's logic to that forecast: The forward P/E of the S&P 500 is currently historically high at 21.8 (chart). That suggests that it's likely to fall in the coming years, thereby reducing the upside for the S&P 500—especially if there's another recession over the next 10 years. Past recessions have always caused both earnings and the valuation multiple to crater. In other words, the market is priced for perfection, which increases the odds of disappointing returns. But we observe that the forward P/E was even higher than it is now on September 1, 2020, just five months after the end of the pandemic lockdown. It was 23.2 back then. Yet the S&P 500 has nearly doubled; it's up 94% since then. That's despite a bear market in 2022. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-14.png) There were indeed "lost decades" in the stock market during the 1970s and 2000s, following historically high P/Es (chart). The first episode was associated with rapidly rising consumer prices, which led to two recessions. The second resulted from the bursting of a housing price bubble, which triggered the Great Financial Crisis and the Great Recession. We've previously noted that valuation multiples always fall during recessions along with earnings. The economy has demonstrated its resilience since the start of the Roaring 2020s. We expect it to remain resilient through the end of the decade, with the forward P/E remaining elevated at its current level as earnings growth lifts the S&P 500 to 10,000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-16.png) The horrific 1930s followed the Roaring 1920s. If a deep depression were to occur again during the 2030s, then it would undoubtedly result in another lost decade for the stock market. For now, we believe that the 2030s could be another roaring decade for the economy and the stock market. Over the past 10 decades, only two periods had negative returns for the S&P 500, and half had returns of about 200% or more (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-13.png) The S&P 500 rose 16.4% last year (chart). We expect it will increase 10% this year. That would make 2026 the fourth consecutive year of gains of 10% or more. The other three were during the 1940s, 1950s, and 1990s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-6.png) Since the start of the current bull market on October 12, 2022, the S&P 500 is up 91.4% (chart). In our outlook, this bull market could be one of the longer ones. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-9.png) Since 2021, the S&P 500 has closely tracked its performance from 1921 to 1925 (chart). We doubt that it will soar over the next four years and then crash in the 2030s as it did in the late 1920s and early 1930s. By the way, the Great Crash really started in May 1930 when the Smoot-Hawley Tariff was enacted. Using monthly data, the S&P 500 dropped 34% from September 1929 through November of that year. It then recovered 24% by April 1930, matching its level in April 1929! The S&P 500 lost 81% of its value between April 1930 and July 1932. The economy's resilience this decade was demonstrated yet again in 2025, as it showed no signs of weakening in response to Trump's Tariff Turmoil. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-17.png) Since 2015, the S&P 500 also has tracked its performance since 1985 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-10.png) The difference between these two periods is that the forward P/E is now substantially higher than it was back then (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-11.png) The S&P 500 rose 16.4% last year, beating its previous 10-year average gain of 12.3%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway-12.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### CRIB SHEET: The New Year URL: https://www.yardeniquicktakes.com/crib-sheet-the-new-year/ Last updated: 2026-01-01T19:50:12.000Z Happy 2026! It should be the seventh year of our Roaring 2020s scenario, with three more to go. We first wrote about this scenario on August 11, 2020, in our *Morning Briefing* titled "Another Roaring Twenties May Still Be Ahead." We predicted, "So far, the 2020s has started with the pandemic, but there are plenty of years left for the prosperous 1920s to become a precedent for the current decade. If so, the driver of the coming boom will be technology-enhanced productivity, as it was during the 1920s." So far, so good. Productivity grew at a fast clip last year and should do so again in 2026\. If it does, real GDP could increase 3.5% this year, and inflation should fall to 2.0%. On the demand side of GDP, consumer spending should remain resilient as retiring Baby Boomers continue to spend their $80 trillion in net worth. If that’s the case, then disposable personal income growth is likely to be slow, and the savings rate is likely to fall toward zero and even turn negative by the end of the decade. Capital spending should remain strong, especially for technology hardware and software. Both fiscal and monetary policies will be even more stimulative in 2026 than last year. In our economic outlook, S&P 500 earnings per share should increase 15% to $310 this year and then 13% to $350 in 2027\. Assuming so, then the S&P 500 should rise to 7,700 by the end of this year. The 10-year Treasury bond yield should average 4.50% this year within a range of 4.25% to 4.75%. There's no need for additional Fed rate cuts in this scenario. We are still assigning subjective probabilities of 60% to our Roaring 2020s scenario, 20% to a meltup/meltdown scenario, and 20% to a 2026 recession. If the Fed continues to cut the federal funds rate, we will raise the odds of a meltup/meltdown. The most significant recession risk is that an excessively stimulative combination of monetary and fiscal policies drives up consumer prices, commodity prices, and asset valuations. Such widespread inflationary pressures would likely incite the Bond Vigilantes. Another risk is that productivity growth proves lackluster, which weakens real wage growth; that, along with the "no net hiring" economy, depresses consumer spending and the overall economy. The biggest surprise this year might be a rebound in payroll employment growth. That's supported by the decline in initial unemployment claims at the end of 2025 (chart). The coincident drop in continuing unemployment claims suggests that the duration of unemployment is decreasing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2026/01/gateway.png) We disagree with the widespread view that the economy is challenged by a "no-hire, no-fire" labor market. In fact, the pace of hiring in October was relatively normal, at 5.1 million workers (chart). However, that pace equaled separations attributable to quits and layoffs. In the past, hiring typically exceeded separations when the economy was growing, as it is now. It's a "no-net-hiring" labor market. _This post is for paying subscribers only._ ### Will Emerging Markets Outperform Again In 2026? URL: https://www.yardeniquicktakes.com/will-emerging-markets-outperform-again-in-2026/ Last updated: 2025-12-31T16:16:33.000Z The Emerging Markets (EM) MSCI stock price index may outperform both the US MSCI stock price index and the Developed Countries ex-US MSCI stock price index in 2026\. It outperformed the former in 2025 but underperformed the latter and many of its constituents. The broader EM outperformance we expect in 2026 might last for a few years. That's because advanced economies have, on average, stagnated in both production and exports for many years, whereas emerging economies continue to see both measures rise to record highs (chart). On average, developed countries have populations that are growing slowly and aging rapidly, while developing economies have mostly young and growing populations, with the notable exception of China. In any event, they have many more people who aspire to a middle-class standard of living than do already prosperous developed countries. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-146.png) Yet the EM MSCI currently accounts for just 10.8% of the market capitalization of the All Country World (ACW) MSCI (chart). The US, Europe, and Japan collectively account for 89.8% of the ACW MSCI. The US alone has a staggering 64.4% market-cap share of global stock markets; we doubt that share has more upside. We don't doubt that the market-cap share of emerging markets has more upside. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: More Thoughts on 2026: Markets, Earnings, and Volatility URL: https://www.yardeniquicktakes.com/weekly-webcast-more-thoughts-on-2026-markets-earnings-and-volatility/ Last updated: 2025-12-31T12:59:59.000Z Dr Ed Yardeni shares additional thoughts on the outlook for 2026, including why the economy and markets remain resilient and where risks may emerge. He discusses earnings-driven market gains, consensus S&P 500 targets, the impact of Fed easing and fiscal stimulus, and why the first half of 2026 could be volatile despite a constructive full-year outlook. Ed also covers AI competition, productivity trends, bond yields, deficits, gold, and key contrarian indicators. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### DEEP DIVE: 2026--Another Year Of Living Audaciously! URL: https://www.yardeniquicktakes.com/deep-dive-2026-another-year-of-living-audaciously/ Last updated: 2025-12-29T21:42:05.000Z **This is a reprint of our December 11, 2025 Morning Briefing.* ### **2026 I: What Will Likely Go Right?** The Roaring 2020s remains our base-case scenario. For 2026, we are raising our subjective odds of this prospect from 50% to 60%. We are less concerned about a meltup/meltdown scenario now, so we are lowering the odds of that from 30% to 20%. We are keeping our bearish scenario at 20%. In our base-case scenario, real GDP should grow 3.0%-3.5% next year, following this year’s likely gain of 2.0%-2.5% ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20251208%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=393934497&%5Fhsenc=p2ANqtz-%5F8psoMHxzcFwROAlrfCWSSpgpQM5s4qzvtpPM8Kp%5F5elrJe-aWmCAUAMSjvxIDWIWnW-bM8IInlb9OinT3IWi8lXlujg&%5Fhsmi=393934497) below). We expect the labor force to increase by only 0.5%, implying that productivity will rise by 2.5%-3.0% in 2026 ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20251208%5F2.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=393934497&%5Fhsenc=p2ANqtz-%5F8psoMHxzcFwROAlrfCWSSpgpQM5s4qzvtpPM8Kp%5F5elrJe-aWmCAUAMSjvxIDWIWnW-bM8IInlb9OinT3IWi8lXlujg&%5Fhsmi=393934497)). Productivity-led growth should reduce unit labor cost inflation to 2.0% next year, bringing consumer price inflation (measured by either the CPI or PCED) down to 2.0% as well ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20251208%5F3.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=393934497&%5Fhsenc=p2ANqtz-%5F8psoMHxzcFwROAlrfCWSSpgpQM5s4qzvtpPM8Kp%5F5elrJe-aWmCAUAMSjvxIDWIWnW-bM8IInlb9OinT3IWi8lXlujg&%5Fhsmi=393934497)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/tc_20251208_1.png) Figure 1 In this scenario, we expect that S&P 500 companies’ collective earnings per share will increase from $268 this year to $310 next year. By the end of next year, we expect the industry analysts’ consensus to be $350 for 2027 ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20251208%5F4.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=393934497&%5Fhsenc=p2ANqtz-%5F8psoMHxzcFwROAlrfCWSSpgpQM5s4qzvtpPM8Kp%5F5elrJe-aWmCAUAMSjvxIDWIWnW-bM8IInlb9OinT3IWi8lXlujg&%5Fhsmi=393934497) below). The forward P/E range by the end of next year should be 18-22, resulting in our target range for the S&P 500 of 6300-7700 ([*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20251208%5F5.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=393934497&%5Fhsenc=p2ANqtz-%5F8psoMHxzcFwROAlrfCWSSpgpQM5s4qzvtpPM8Kp%5F5elrJe-aWmCAUAMSjvxIDWIWnW-bM8IInlb9OinT3IWi8lXlujg&%5Fhsmi=393934497) below). Our single-point estimate is the upper end of this range. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/tc_20251208_4.png) Figure 4 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/tc_20251208_5.png) Figure 5 Our year-end 2026 target for the S&P 500 assumes that the economy and earnings will remain resilient. Our odds of a severe correction or a bear market, triggered by either recession fears or an actual recession, remain low at 20%. We see several reasons why economic growth is likely to be strong, supporting our Roaring 2020s productivity story: _This post is for paying subscribers only._ ### MARKET CALL: Both AI Story And Contrary Indicators Are Mixed URL: https://www.yardeniquicktakes.com/market-call-both-ai-story-and-contrary-indicators-are-mixed/ Last updated: 2025-12-28T05:00:11.000Z The AI plot thickens: Chinese scientists have unveiled an [optical computing chip ](https://www.scmp.com/news/china/science/article/3336918/chinese-team-builds-optical-chip-ai-100-times-faster-nvidias-market-leader?ref=yardeniquicktakes.com)that outperformed Nvidia’s top GPU by over a hundredfold in speed and energy efficiency—particularly for generative tasks such as video production and image synthesis. (Incidentally, YRI is working with a Korean media company that will use AI to synthesize Dr Ed’s speech in various languages.) One of our sage accounts observed that AI may be indirectly boosting productivity: "I have posited in the past that part of what can only be called the streamlining of corporate America might be corporations studying their workflows to determine where AI could be utilized and discovering that in fact, many of the services could be jettisoned entirely. In short, corporations may be focusing their management on profit rather than ancillary societal contributions." (Thanks, Lee Hoffman.) We expect productivity growth to continue booming in 2026, as it did in 2025\. If so, the bull market in stocks should broaden to the S&P 500's Impressive-493, i.e., to the users of AI, rather than remaining concentrated among AI producers such as the S&P 500 Magnificent-7\. The upward slope of the forward earnings of the Impressive-493 steepened significantly in 2025 (chart). The forward earnings of this composite rose about 10% this year. That's half as much as the increase in the Mag-7's forward earnings, but we expect that increasing competition in the AI space will benefit the Impressive-493 while weighing on the Mag-7. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-131.png) Meanwhile, S&P 500 forward earnings per share rose to yet another record high, of $313.86, during the week of December 25 (chart). The forward P/E is at 22.1\. We expect forward earnings to rise about 10% to $350 by the end of 2026, pushing the S&P 500 up by about 10% to 7,700, with the forward P/E remaining around 22.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-28.jpg) Now let's review the mixed messages from some of the contrarian indicators we monitor. November's Consumer Confidence Index survey showed that 52% of respondents expect that stock prices will be higher in 12 months. That's a very high reading. From a contrarian perspective, this may be a bearish sign. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-127.png) The 12-month average of this series is positively correlated with the forward P/E of the S&P 500 (chart). Both might remain higher for longer if consumers and investors believe, as we do, that a recession over the remainder of the Roaring 2020s is unlikely, as it has not materialized so far this decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-27.jpg) Stock market euphoria is evident in record net inflows into equity ETFs. This might appear to be a bearish signal from a contrarian perspective. However, a big chunk of the funds going into equity ETFs is coming out of equity mutual funds (chart). Equity ETFs' net inflows are on track to exceed a record $1.5 trillion this year, but equity mutual funds' net outflows are likely to total a record $500 billion this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-132.png) The dollar's weakness in 2025 was widely attributed to net capital outflows from the US to foreign capital markets, especially foreign equity markets. The Treasury's data belie this notion. Indeed, over the past 12 months through October, foreign private purchases of US equities rose to a record $714 billion (chart). The three-month annualized sum rose to almost $1.0 trillion. Historically, heavy foreign buying of US equities has been a bearish signal from a contrarian perspective. The signal certainly hasn't worked recently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-128.png) The bull-bear ratios we track show mixed readings, one more bullish than average and one more bearish (chart). Taken together, they are neither bullish nor bearish currently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-129.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Stocks, Bonds & Gold In 2026 URL: https://www.yardeniquicktakes.com/weekly-webcast-stocks-bonds-gold-in-2026/ Last updated: 2025-12-24T20:33:57.000Z Ed Yardeni shares his outlook for stocks, bonds, and gold in 2026, examining the key drivers that could shape each asset class in the year ahead. 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Mistletoe Magic And The S&P 500 In 2026 URL: https://www.yardeniquicktakes.com/mistletoe-magic-and-the-s-p-500-in-2026/ Last updated: 2025-12-24T19:16:45.000Z Mistletoe is relevant to several cultures. In the advent of the Christian era, mistletoe in the Western world became associated with Christmas as a decoration under which lovers are expected to kiss, as well as with protection from witches and demons. Let's hope its magic lasts into 2026 through next Christmas. The consensus among Wall Street investment strategists is that the magic will last. According to Bloomberg, their average estimate for the S&P 500 by the end of next year is 7,555 with a low of 7,000 and a high of 8,100 (chart). That average is 9.0% above today's close. Our forecast of 7,700 would be up 11%. However, the first half of 2026 could see a correction if bond yields rise significantly, given mounting concerns that monetary and fiscal policies might be overly stimulative. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-24.jpg) Strategists expect S&P 500 earnings per share to be $306, on average, in 2026 (chart). That would be up 12.5% from the current analysts' consensus estimate of $272\. We are close to the consensus at $310\. We expect the valuation multiple won't be much lower by the end of 2026 than the current forward P/E of about 22.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-26.jpg) The year is ending on a positive note with an upbeat batch of economic indicators. Real GDP jumped 4.3% to a new record high during Q3\. Corporate profits also hit a new record high during Q3\. The Redbook Retail Sales Index increased 7.2% y/y during the week of December 19 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-121.png) Initial unemployment claims dropped by 10,000 to 214,000 during the week of December 19, suggesting that layoffs remain subdued. Economists had forecast 224,000\. Continuing claims edged up to 1.92 million, suggesting more workers are staying on jobless benefits. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-122.png) In the new year, we will compare the official BLS payroll employment series with a similar series derived by subtracting JOLTS total separations (including quits and layoffs) from hires (chart). The latter measure has been less volatile recently and has been showing more gains than the former over the past couple of months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-125.png) *Correction*: Monday's *QT* text about precious metals was correct. We updated the following chart to align with our new target of $6,000 per ounce for gold at the end of 2026\. That's up from our previous target of $5000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-124.png) All of us at Yardeni Research wish you a Merry Christmas and a Healthy and Happy New Year! 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Remind Us: Why Did The Fed Ease? URL: https://www.yardeniquicktakes.com/remind-us-why-did-the-fed-ease/ Last updated: 2025-12-23T22:41:45.000Z Productivity must be booming. Real GDP jumped 4.3% (saar) in Q3, following a 3.8% increase in Q2\. Over the same period, aggregate hours worked in private industry was flat (saar). Productivity must have increased by more than 3.5% over the previous two quarters. That's consistent with our productivity-led Roaring 2020s scenario. Real final salesto private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 3.0% in Q3, compared with an increase of 2.9% in Q2\. Consumer spending remained strong, rising 3.5%, up from 2.5% in the previous quarter. That's impressive considering that aggregate hours worked hasn't been growing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-117.png) Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $166.1 billion (ssar) in Q3 to a record high (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-120.png) In Q3, the core PCE price index (deflator) rose 2.8% (saar) and 2.9% y/y (chart). Inflation pressures picked up slightly from Q2\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-119.png) The above raises the question of why the Fed lowered the federal funds rate by 75bps since September. That's after cutting the rate by 100bps late last year. The 10-year Treasury bond yield remains above 4.00% despite the Fed's efforts to ease credit conditions, particularly in the mortgage market. Fed officials have largely ignored the strength of GDP and the persistence of inflation at around 3.0% y/y, which is above their 2.0% inflation target. _This post is for paying subscribers only._ ### Why Are Precious Metals Getting More Precious? URL: https://www.yardeniquicktakes.com/why-are-precious-metals-getting-more-precious/ Last updated: 2025-12-23T03:44:24.000Z Are the soaring prices of precious metals a warning sign that the Roaring 2020s might end in 2026? We don't think so. However, we have been considering what might be driving the recent spike in precious metals prices. On a y/y basis, gold is up 69.0%. It is lagging silver (139.5%), platinum (133.1%), and palladium (95.1%). We doubt this reflects a rebound in global economic activity, as prices of basic metals, which are more closely linked to industrial production, have increased by much less (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/3N6ulLz-3.jpg) The price of gold has led the rally in precious metals since it first rose to a new record high above $2,000 per ounce in early 2024 (chart). We turned bullish on gold at the time, believing that central banks were increasing their purchases of gold in response to the freezing of Russia's international reserves by the US and EU after Russia invaded Ukraine in early 2022\. Central banks don't buy silver, which recently soared to a new record high. The same can be said for platinum and palladium, which have also soared in recent days. We suspect that the precious metals prices might be signaling recent concerns about an excessively stimulative combination of monetary and fiscal policies in the US next year. Even if the Fed stops cutting the federal funds rate during the first four months of 2026, the Fed is committed to buying about $40 billion per month in Treasury bills through April, according to a December 10 FRBNY [press release](https://www.newyorkfed.org/markets/opolicy/operating%5Fpolicy%5F251210a?utm%5Fsource=copilot.com). _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: December 22–26 URL: https://www.yardeniquicktakes.com/economic-week-ahead-december-22-26/ Last updated: 2025-12-22T02:54:21.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/Screenshot-2025-12-21-124431.png) This looks to be a mercifully quiet holiday week that nonetheless offers a smattering of key data releases. Chief among them will be Q3's GDP and December's Consumer Confidence Index survey. Clearly, the economic fog caused by the government shutdown is following the markets into the new year. Though recent employment data have been illuminating—showing that the labor market may be a bit more robust than many expected—their quality is questionable. The same can be said of other recently released key data series. Last week's CPI release for November is another foggy one. While nice to have, the lower-than-expected 2.7% y/y increase raised fresh questions about the reliability of post-shutdown data. Investors are also uncertain about the year-end stock rally in this shortened Christmas week. Any signs of holiday cheer could go a long way on Wall Street as investors scrutinize massive corporate spending on AI and shifting perceptions about when—and whether—Powell & Co. might ease again in early 2026. Here's a look at some data reports that might influence the Fed's views on how the US is exiting a uniquely chaotic year: (1) *GDP update*. Real GDP rose 3.8% (saar) during Q2\. We expect a reasonably robust 3.5% Q3 GDP report (Tue) to confirm that economic growth remains robust. This would be consistent with the Atlanta Fed’s [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com) estimate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-93.png) (2) *Consumer confidence*. With government data still trickling in—and at times offering mixed signals—private surveys are filling the void as rarely before. The Conference Board's Consumer Confidence Index survey (Tue) is a case in point. It provides the earliest monthly lead on the labor market. We expect it to confirm that job market conditions remain mixed (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-94.png) (3) *Jobless claims*. Amid the statistical fog, the level of weekly claims for unemployment insurance (Wed) remains something of a beacon for perplexed investors. The latest reading (following last week’s 224,000 level) should show, once again, that layoffs remain low, suggesting that a slight decline could follow November's 4.6% jobless rate in December (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-95.png) (4) *Regional Fed surveys*. The week opens with the Chicago Fed’s National Activity Index (Mon) for November. That's followed a day later by the Richmond Fed's business survey (Tue) for December. Though the regional Fed bank surveys have faced their own challenges as government data have gone quiet, this week's Richmond update may confirm the solid December employment reports from the NY, Philly, and Kansas City Feds (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-96.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Seeing Reindeer & Solid S&P 500 Earnings URL: https://www.yardeniquicktakes.com/market-call-51/ Last updated: 2025-12-21T20:28:50.000Z We believe the S&P 500 has been in a Santa Claus rally since it bottomed on November 20 at 6538 (chart). It is up 4.5% since then through Friday's close. Over the past 10 years, the average increase in the S&P 500 from the start of November through the end of the year has added 4.5 percentage points to its return. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-91.png) The S&P 500 is up 16.2% ytd. It is on track to be the third consecutive year of double-digit gains (chart). We expect another earnings-led 10%+ increase in 2026 to 7700 for the S&P 500. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-90.png) During the week of December 12, industry analysts' consensus estimates for S&P 500 earnings per share for 2025, 2026, and 2027 were $272, $312, and $358 (chart). They expect a 14.7% increase in earnings next year and 14.6% in 2027\. Our estimates for the next two years are similar at $310 and $350\. _This post is for paying subscribers only._ ### Misleading CPI, Misleading Business Surveys, Reliable Claims URL: https://www.yardeniquicktakes.com/misleading-cpi-misleading-business-surveys-reliable-claims/ Last updated: 2025-12-21T05:00:16.000Z Now that the government shutdown is over, the Bureau of Labor Statistics (BLS) is releasing economic indicators again. However, the quality of the latest releases is an issue. Today's lower-than-expected November CPI inflation report boosted stock and bond prices after its release. But the gains faded as economists started to question the CPI numbers. Indeed, the release included a [warning](https://www.bls.gov/cpi/additional-resources/2025-federal-government-shutdown-impact-cpi.htm?ref=yardeniquicktakes.com) that the government shutdown might have distorted the BLS's efforts to collect the CPI data. BLS calculates rent and owners' equivalent rent using a six-month panel collection. October's missing CPI data may have distorted the latest inflation report (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-82.png) The BLS started the CPI data collection on Friday, November 14\. By authorizing additional collection hours, BLS attempted to collect data for the entire month of November. However, the survey may have been heavily weighted toward data collected near the end of the month, when holiday discounts depressed durable-goods prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-83.png) At his press conference on December 10, Fed Chair Jerome Powell claimed that the Fed cut the federal funds rate again by 25bps because the BLS is overstating payroll employment: "Payroll jobs \[have been\] averaging 40,000 per month since April. We think there's an overstatement in these numbers by about 60,000\. So that would be negative 20,000 per month." The BLS data in the weekly unemployment claims report appear to remain reliable, though they were distorted during the Thanksgiving holiday (chart). Initial unemployment claims remain low, confirming that layoffs remain low. Continuing unemployment claims suggest that the duration of unemployment declined in late November, although the series was likely distorted by the holiday as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-81.png) Another questionable data source is the monthly business surveys conducted by five of the regional Federal Reserve Banks. The three available ones for November suggest that the national M-PMI remains weak. That's probably correct. However, both the regional and national business surveys have been much weaker than the growth in real GDP for both goods and services. We've shared this advice with you many times before: Any data that supports our outlook is good data. Any data that doesn't do so is bad, or it will be revised to support our story. Most of Yardeni Research will be on break for the next two weeks. However, *QuickTakes* will continue to appear as the government releases more (questionable) data. Happy holidays! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-85.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### S&P 500 With & Without The Magnificent-7 URL: https://www.yardeniquicktakes.com/s-p-500-with-without-the-magnificent-7/ Last updated: 2025-12-18T05:18:26.000Z We are declaring "Mission Accomplished" on our 7000-year-end target for the S&P 500\. The index rose to a record high of 6901 on December 11\. That's close enough for us and might be the high for this year. We aren't ruling out a Santa Claus rally over the remainder of the year. However, that is unlikely to happen if the S&P 500 continues to rotate away from the Magnificent-7 toward the Impressive-493, as we expect (chart). We also expect that this rotation will continue into 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-78.png) The Mag-7 may be undergoing a correction similar to the DeepSeek correction earlier this year. DeepSeek surprised the AI world on January 20, 2025, when it released its "R1" reasoning large language model (LLM), nearly matching the performance of top US closed models at a fraction of the cost. The Mag-7 rebounded after they reported robust Q1 and Q2 earnings and reiterated on their conference calls that they were committed to spending tens of billions of dollars on AI infrastructure. In recent weeks, investors have started to fret that the spending is depleting the Mag-7s' cash flows and slowing profits growth. Before AI, the Mag-7 had lots of cash flow because their spending on labor and capital was relatively low. That changed once AI forced them to spend much more on both. They found themselves competing more with one another to win the AI race. Most recently, Google introduced Gemini-3, which outperformed OpenAI's ChatGPT-5 and uses Google's TPU chips. Google's stock price soared on this news. But OpenAI responded quickly with a new version of its LLM. DeepSeek did the same. Amazon is reportedly negotiating with OpenAI to use its LLM if OpenAI uses Amazon's processing chips. That's putting downward pressure on the stock prices of both Nvidia and Google. It's all making investors' heads spin. The Mag-7 market capitalization has doubled over the past two years from $10 trillion to $20 trillion (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/3MF9L4r.jpg) The Mag-7 currently has a market-cap share of 31.7% of the S&P 500\. The shares of S&P 500 forward revenues and forward earnings are 24.4% and 12.7% (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Game Of Thrones: The Mag-7 & The Fed URL: https://www.yardeniquicktakes.com/weekly-webcast-game-of-thrones-the-mag-7-the-fed/ Last updated: 2025-12-17T13:00:37.000Z It has all the drama of “Game of Thrones”: The Magnificent-7 kingdoms, each surrounded by moats, rarely had threatened each other’s monopolies in the past. Now, with the advent of AI, they have been encroaching on each other’s previously sacrosanct fiefdoms, forcing one another to spend ever more to remain in the game. Amid the chaotic disruption, investors’ AI euphoria has given way to AI agita as confidence in the Mag-7 ebbs. Are their earnings inflated by accounting? Will returns justify their capital investments? Our take: AI will have a powerful impact on productivity in the economy. The winners may not be among the Mag-7 at all but the S&P 500’s Impressive 493 and the economy at large. … Today, Dr Ed enlists the help of Google’s Gemini AI assistant to extend the “Game of Thrones” metaphor to this disruption as well as the transition in the Fed’s Iron Throne.[](https://us02web.zoom.us/rec/share/Bh5YCK4m5DvaWJMFsjXHYtBP4zJxmvMnh0sSSeHwangp1hf0BWD3HDNjdv9-8PZz.C7zXVTbFHNwcH1t0?ref=yardeniquicktakes.com) 🔒 Exclusive Early Access for Paid Members: Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### US Economy Remains On Growth Track URL: https://www.yardeniquicktakes.com/us-economy-remains-on-growth-track/ Last updated: 2025-12-17T03:18:54.000Z The economy is growing despite anemic payroll employment gains. That can only happen if productivity growth accelerates and raises real wages enough to offset the weakness in employment. The question is whether productivity growth will continue to do so. It will in our Roaring 2020s scenario. The risk is that stronger real wages don't more than offset weaker employment, which would depress personal income and consumption. This is our primary concern in our 2026 outlook. Today's batch of economic indicators on balance supports our Roaring 2020s narrative: (1) *Real GDP growth remains strong*. Following today's employment and retail sales reports, the Atlanta Fed's [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?ref=yardeniquicktakes.com) model indicates that real GDP growth in Q3 is tracking at 3.5%, down from the previous estimate of 3.6% (chart). The forecast for real consumer spending growth during the quarter remained at a solid 2.7%. Capital spending on equipment and intellectual property (including software) is particularly robust. _This post is for paying subscribers only._ ### Keeping An Eye On The Price Of Crude Oil URL: https://www.yardeniquicktakes.com/keeping-an-eye-on-the-price-of-crude-oil/ Last updated: 2025-12-16T03:05:14.000Z All eyes will be on tomorrow's US employment report for November. That will obviously be our focus too. However, we will also be monitoring the price of a barrel of Brent crude oil regularly tomorrow and in coming days. That's because it seems to be on the verge of slipping below $60 (chart). Why does that matter? From a technical perspective, it might signal a significant break below a triangular consolidation pattern, similar to what happened in 2014 and again in 2020. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/47R4YpL.png) From a fundamental perspective, there is ample crude oil supply, driven by record US production and sluggish demand in China. US crude oil production rose to a record 23.6mbd during the week of December 5 (chart). Oil field production is at a record 13.8mbd, and natural gas plant liquids plus renewable fuels is at a record 9.8mbd. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-71.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: December 15–19 URL: https://www.yardeniquicktakes.com/economic-week-ahead-december-15-19/ Last updated: 2025-12-15T02:28:13.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/Screenshot-2025-12-14-193446.png) This week is loaded with long-delayed government data releases, including on employment and inflation, which will provide a reality check on the economy's performance in the final weeks of 2025\. This week's earnings reports from FedEx, General Mills, Carnival, and Jabil could also be illuminating. Last week's Federal Open Market Committee event produced a third rate cut this year, three dissenting votes, and the prospect of a weaker labor market than anyone knew: Fed Chair Jerome Powell suggested there may have been a "systemic overcount" of job increases since April—perhaps as much as 60,000 per month. The markets will pay close attention this week to some talking Fed heads. They include Governor Stephen Miran (Mon), tackling the inflation outlook, and Governor Christopher Waller (Wed), offering his latest economic outlook. It's also a busy week for central banks worldwide. Get ready for rate decisions from the European Central Bank (Thu), Bank of England (Thu), and Bank of Japan (Fri). Here are the data reports most likely to help Fed officials and investors alike discern whether slowing growth or rising inflation is the bigger concern: (1*) Employment*. The unemployment rate was 4.4% in September. October's jobless rate will remain a permanent gap in the data. October's payroll employment will be reported along with November's reading (Tue). Markets looking for direction into year-end will scrutinize the payroll data for any hints that Powell might be onto something. We’re expecting a 40,000-job increase for both months. November's jobless rate should hold steady at 4.4% given the low pace of initial unemployment claims (chart). The latest weekly jobless claims data (Thu) should confirm as much. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-65.png) (2) *CPI*. October's official CPI will remain forever MIA. November's headline CPI (Thu) should be up 0.32% following a 0.18% increase in October, according to the Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/en/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com). On a y/y basis, both remain stuck around 3.0%. Inflation would have been closer to 2.0% by now but for tariffs that boosted durable goods inflation (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-66.png) (3) *Retail sales*. September’s modest 0.2% m/m gain in retail sales was surprisingly weak given the strength of the Redbook Retail Sales Index (chart). The October data (Wed) should provide a timely update showing that consumers are still doing what they do best. On the other hand, existing home sales for November (Fri) and the December consumer sentiment index (Fri) are likely still depressed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-67.png) (4) *Fed business surveys*. The New York Fed business survey (Mon) starts the week, followed by reports from the Philly Fed (Thu) and the Kansas City Fed (Thu). These regional surveys have helped to predict the national ISM M-PMI (chart). However, they have been overly pessimistic predictors of real GDP growth for quite a while. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-68.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: The Impressive S&P 493 Ready For Broadway In 2026 URL: https://www.yardeniquicktakes.com/market-call-50/ Last updated: 2025-12-15T04:51:19.000Z The S&P 500's Magnificent-7 might be less magnificent in 2026 as their fierce competition in the AI race starts to erode the monopolies they have enjoyed in search (Google), software (Microsoft), retailing (Amazon), advertising (Meta), electric vehicles (Tesla), smartphones (Apple), and GPU chips (Nvidia). The beneficiaries of that competition are likely to be the S&P 500's Impressive 493\. A week ago, we recommended underweighting the former and overweighting the latter. We may be on the right track: Since October 29, the MAGS ETF is down 4.2%, while the XMAG ETF is up 1.2% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-63.png) The S&P 500 equal-weight index rose to a new record high at the end of last week, while the S&P 500 market-weight index did the same on Thursday (chart). The former is up 10.1% ytd, while the latter is up 16.1% over the same period. We are expecting a reversal of fortune in 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-18.jpg) We downgraded the S&P 500 Information Technology and Communication Services industry index to market-weight last week. We also reiterated our recommendation to overweight the S&P 500 Financials sector, which rose to a record high after the Fed cut the federal funds rate on Wednesday (chart). We remain positive on Diversified Banks, Regional Banks, and Investment Banks. _This post is for paying subscribers only._ ### AI CALL: The TIME Curse & The Game of Thrones URL: https://www.yardeniquicktakes.com/ai-call-the-time-curse-the-game-of-thrones/ Last updated: 2025-12-11T18:30:14.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/Screenshot-2025-12-11-105013-1.png) "The Architects of AI" are this year's *TIME* Person of the Year. We asked Google's Gemini, "Can you list when the front cover of *TIME* featuring Person of the Year has turned out to be a curse?" Gemini responded as follows: "While *TIME* Magazine maintains that "Person of the Year" is a measure of influence (for better or worse) rather than an endorsement, the distinction is often lost on the public. Consequently, there is a recurring pattern known as the **"**TIME Cover Curse"—where recipients of the title suffer assassinated reputations, political downfalls, or literal death shortly after the issue hits newsstands." For example, Jeff Bezos was named Person of the Year at the end of 1999, at the peak of the dot-com bubble. Within 18 months, the bubble burst, and Amazon's stock lost over 90% of its value (though he obviously recovered in the long run). Here's another example: Elon Musk capped a massive year for Tesla and SpaceX by winning the title at the end of 2021\. The following year was disastrous for him: he bought Twitter (now X), his personal reputation took a severe hit, and he became the first person in history to lose $200 billion in net worth. We have been warned. _This post is for paying subscribers only._ ### Fed Is ‘Well Positioned’ To Do Nothing For A While URL: https://www.yardeniquicktakes.com/fed-is-well-positioned-to-do-nothing-for-a-while/ Last updated: 2025-12-14T18:39:10.000Z As widely expected, the Fed lowered the federal funds rate (FFR) by 25 bps today. It has lowered the FFR by 75bps since September of this year. Since the start of the current easing cycle in September 2024, this rate has declined by 175 bps to 3.50%-3.75%. In his prepared remarks at today’s press conference, Fed Chair Jerome Powell rightly observed the obvious: "The adjustments to our policy stance since September bring it within a range of plausible estimates of neutral and leave us well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks." On average, Fed officials believe that the neutral federal funds rate is 3.00%. Two more 25bps rate cuts in 2026 would bring it to neutral. However, monetary policy should remain relatively restrictive until inflation falls to the Fed's 2.0% target. Powell seems to believe that will happen in 2026\. Powell repeated his new "well positioned" mantra a few times, suggesting that the Fed might pause rate cutting for a while. Stock prices rose on the news, which was widely described as a "hawkish rate cut." Bond yields edged a bit lower, but the 10-year Treasury bond yield remained above 4.00%, at 4.13%. Financials were especially strong today, as the yield curve continues to steepen. There were three dissenters at the latest FOMC meeting: two opposed to today's rate cut and one calling for a 50bps cut. According to today's dot plot, three of the 19 FOMC participants estimate that the FFR is now below their neutral-rate estimates (chart). Seven of them expect no more rate cuts in 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/4dfIfFA-1.jpg) The Summary of Economic Projections (SEP) shows that the median estimate of the 19 participants is that the FFR will fall to 3.40% next year and 3.10% in 2027 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-8.jpg) In his press conference, Powell said that the inflationary impact of Trump's tariffs should decline by next year. The SEP's median inflation forecast aligns with his view (chart). The PCED inflation rate is expected to fall from 3.0% this year to 2.5% next year and to 2.1% in 2027. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-9.jpg) In his presser, Powell seemed more concerned about the unemployment rate going up than about inflation remaining stuck close to 3.0%. Nevertheless, the SEP's median unemployment rate projection is expected to edge up to 4.5% by the end of this year, then fall to 4.4% in 2026 and 4.2% in 2027 (chart). Presumably, that will require just one more rate cut in 2026 and one more in 2027. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-10.jpg) A couple of times in his press conference, Powell acknowledged that productivity growth has been boosting economic growth in recent quarters. Yet the SEP median projection for real GDP growth is only 1.7% this year, 2.3% next year, and 2.0% in 2027 (chart). The median "long run" growth rate of real GDP is pegged at a low 1.8%. The FOMC, as a whole, obviously doesn't share our Roaring 2020s view that faster productivity growth will significantly boost real GDP growth over the remainder of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-11.jpg) Powell also stated a few times that the labor supply is down sharply. That ain't so. The labor force actually rose to a record high of 171.2 million in September, according to the Bureau of Labor Statistics (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-42.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: 2026: Another Year Of Living Audaciously! URL: https://www.yardeniquicktakes.com/weekly-webcast-2026-another-year-of-living-audaciously/ Last updated: 2025-12-10T21:59:41.000Z The coming new year looks like another good one for stock investors. Dr Ed is adjusting his subjective odds of various stock market scenarios, including raising the odds of his base-case Roaring 2020s outlook to 60%. Associated assumptions for earnings and valuation levels produce an S&P 500 price target of 7700 by year-end 2026\. Alternative scenarios include a bear case, triggered by a recession or recession fears (20% odds), and a stock market meltdown/meltup (trimmed to 20%). … Also discussed: Five winds at the economy’s back that support a continuation of the Roaring 2020s and six potential developments that could blow it off course.[](https://us02web.zoom.us/rec/share/jCchmojZbLag5bV98Pa3AfbYZ8drgJAAshNy49RjNVcpcg6ThkFQjiuQZm2sAoyq.zKcE2qGw74Q0Aceq?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### On Walmart, Silver & Jobs URL: https://www.yardeniquicktakes.com/on-walmart-silver-jobs/ Last updated: 2025-12-10T02:54:50.000Z ### **I. Walmart Goes Nasdaq** On Sunday, we wrote, "In effect, our spin is that every company is evolving into a technology company." Today, Walmart transferred its primary listing to the technology-heavy Nasdaq from the New York Stock Exchange, where it has traded since 1972—making it the largest company ever to make that move. Walmart CEO Doug McMillon cited the company's technology progress as the main factor behind its decision to move to the Nasdaq. "Walmart's changed a lot, and we're trying to make sure everybody knows it," he said. In other words, Walmart wants to be another AI play. Its stock price is up 27.3% ytd. ### **II. Silver Is Soaring** That's a solid increase for Walmart's stock price but chump change compared to the run in silver's price, which is another AI play. Today, silver broke a historical record, surpassing $60 per ounce and doubling in value so far in 2025 (chart). The build-out of AI data centers is intensifying the demand for silver, and so is the ongoing production of EVs (which use more silver than combustion engines). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-41.png) We turned bullish on gold when it rose to a new high last year. It is up 60.7% so far this year. However, of the four primary precious metals, silver has been the star this year (chart). There have been solid gains in base metals’ prices as well, confirming that the global economy is performing well despite trade tensions between the US and its trading partners. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/3N6ulLz-1.jpg) ### **III. Labor Market Is Okay** Today's labor market indicators weren't bad. But they were lackluster. The JOLTS measure of job openings showed an increase of just 12,000 in October, but it held steady with September's jump of 431,000 (chart). There were 7.7 million job openings in October. That's a relatively high reading compared to those of the pre-pandemic period. _This post is for paying subscribers only._ ### Fed Easing Fails To Ease Bond Yields URL: https://www.yardeniquicktakes.com/fed-easing-fails-to-ease-bond-yields/ Last updated: 2025-12-09T04:13:21.000Z Have you heard? The FOMC meets on Tuesday and Wednesday and is widely expected to lower the federal funds rate (FFR) by 25bps from 3.75%-4.00% to 3.50%-3.75%. That would be a 175bps cut in the FFR since the Fed started its latest monetary easing cycle in September of last year. In his October press conference, Fed Chair Jerome Powell said, "Now we’re 150 basis points closer to neutral, wherever that may be, than we were a year ago." Powell was referring to the "neutral" FFR, which is thought to be consistent with full employment and stable prices. FOMC participants believe that it is 3.0%. That's based on the median of their projections for the "longer run" FFR as compiled quarterly in their Summary of Economic Projections (SEP) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-7.jpg) The next SEP will be released on Wednesday at 2:00 pm after the conclusion of the latest FOMC meeting. Included in the projection material will be the latest quarterly dot plot (chart). It will undoubtedly once again show a wide dispersion of the individual participants' estimates of the neutral FFR. Yet, collectively, Fed officials have been staying on script, saying that they have been easing because the FFR has been restrictive, i.e., above the 3.0% average long-run rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/4dfIfFA.jpg) As we've said before, the neutral FFR concept is nonsense. Last year, the Fed eased by cutting the FFR by 100bps. We disagreed with that move, arguing that the economy didn't need such easing and that the Bond Vigilantes were likely to dissent. Sure enough, the 10-year Treasury bond yield rose 100bps late last year (chart). _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: December 8-12 URL: https://www.yardeniquicktakes.com/economic-week-ahead-december-8-12/ Last updated: 2025-12-08T03:33:43.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/Screenshot-2025-12-07-091757.png) Obviously, this week is all about the Fed's big interest-rate decision (Wed); the policymakers are expected almost universally to cut rates 25bps for a third time this year. The immediate focus will be on the composition of the FOMC's vote and the insights from Fed Chair Jerome Powell's press conference: how many dissenters, if any; Fed officials' take on the balance of risks between weakening employment gains and inflation stuck around 3.0% y/y; any surprising forward guidance clues; and any notable observations in the FOMC statement. Most important might be the latest quarterly Summary of Economic Projections. Outside the US, the week ahead is rich with opportunities to assess the severity of headwinds emanating from Trump's trade war. They include central bank decisions in Canada, Australia, and Switzerland. China and Taiwan will release export data, while the bond and currency markets will be keeping an eye out for any change in the odds that the Bank of Japan might go ahead with a tightening move on December 19. Upcoming reports of particular interest include: (1) *JOLTS.* As the data fog begins to lift, the October Job Openings and Labor Turnover Survey (Tue) will offer the markets a look at the latest labor market trends—especially hires, quits, and layoffs (chart). Though somewhat dated, any intel on how the economy opened Q4 will do. Initial claims (Thu) should also confirm that layoffs remain low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-6.jpg) (2) *Employment costs*. Hitting the tape on Fed decision day, the Employment Cost Index (Wed) for Q3 could provide timely clues on wage dynamics. In Q1 and Q2, compensation rose by about 3.5% y/y (chart). Q3 might serve as a reminder from a wage perspective that US growth isn't as weak as many fear. Data on Q3 productivity and costs (Tue) should be robust as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-23.png) (3) *PPI*. October's belated PPI (Thu) might show that inflation remains stuck just south of 3.0% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-24.png) (4) *Private surveys*. There’s still much to glean from soft data as we wait for US government data to catch up. The week begins with the New York Fed's inflation expectations series for November (Mon). A day later, November's National Federation of Independent Business (NFIB) survey (Tue) gets released. The spotlight will be on the survey's employment indicators (chart). We expect they will hold their ground. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-25.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Rebalancing Domestic & Global Stock Portfolios In 2026 URL: https://www.yardeniquicktakes.com/market-call-rebalancing-domestic-global-stock-portfolios-in-2026/ Last updated: 2026-01-17T19:40:04.000Z It no longer makes much sense for us to continue recommending overweighting the Information Technology and Communication Services sectors in an S&P 500 portfolio, as we have since 2015\. The same can be said about overweighting the United States in the All Country World (ACW) MSCI portfolio, as we have been since 2010\. Consider the following: (1) *Rebalancing S&P 500 portfolio*. The problem is that the first recommendation has worked so well that the two S&P 500 sectors now account for a record 45.2% of the index's total market capitalization (chart). Overweighting these two sectors combined has been justified by their forward earnings share soaring to a record 38.6% of the S&P 500's forward earnings. However, the riskiness of an S&P 500 portfolio has increased along with its concentration in the two sectors. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-3.jpg) So we now recommend market-weighting the two sectors combined and rebalancing by adding to our overweights in the S&P 500 Financials (currently with 13.0% and 18.4% shares of market cap and earnings) and the Industrials (8.0% and 7.7%) sectors. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-18.png) Now, we would also overweight Health Care (9.9% and 11.9%), which both managed and passive investment portfolios mostly have underweighted (chart). _This post is for paying subscribers only._ ### CODE RED: Altman's Existential Crisis & Trump's Affordability Crisis URL: https://www.yardeniquicktakes.com/code-red-altmans-existential-crisis-trumps-affordability-crisis/ Last updated: 2025-12-04T23:15:41.000Z The stock market has lost its mojo recently. The S&P 500 has been hovering around 6800 since late November. It did recover nicely from a November 20 low of 6538\. But the rebound since then has failed to lift the index above the October 29 record high of 6890\. It may break out above that high after the FOMC’s December 9-10 meeting if the Fed delivers the widely expected 25bps cut in the federal funds rate. However, if investors perceive more hawkishness among meeting participants than expected—e.g., if the decision to ease meets with more dissent than usual—our 7000-year-end target might not be reached until early next year. Weighing on the market has been Google's Gemini-3 launch on November 18\. That's been great for Alphabet, Google's parent, but it has weighed on Nvidia because Gemini-3 runs on Google's TPU chips rather than Nvidia's GPUs (chart). It also means that OpenAI's ChatGPT just lost its lead in the LLM horse race, raising even more doubts about the viability of all the expensive deals the company has been making with other AI-related companies. Indeed, the company's CEO, Sam Altman, declared a "Code Red," signaling an urgent company-wide push to improve ChatGPT's quality amid intensifying competition from Google's Gemini and Anthropic's Claude. Furthermore, DeepSeek just released two new LLMs in late November and early December, and they are being described as rivals or even superior to OpenAI's GPT‑5 and Google's Gemini 3\. This horse race will last a very long time. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-15.png) The Trump administration has also declared a Code Red because of the affordability crisis that became an overnight political game-changer when Zohran Mamdami won the NYC mayoral race on this issue. Polymarket.com shows that the odds of Republicans keeping their House majority dropped from about 40% just before the election to 21.5% currently (chart). If the Republicans lose the House, Trump said the Democrats will try to impeach him for a third time. The prospect of another political circus ahead could be weighing on the stock market, too. _This post is for paying subscribers only._ ### Despite Confusing Stuff, S&P 500 Remains Near Record High URL: https://www.yardeniquicktakes.com/despite-confusing-stuff-s-p-500-remains-near-record-high/ Last updated: 2025-12-07T09:20:21.000Z There are lots of confusing recent developments for stock investors to consider. The economic indicators are mixed, with some justifying a December 10 rate cut by the Fed, others not. President Donald Trump said he will announce his pick for the next Fed chair in January. It's not clear whether the Fed will be more or less independent as a result. The Supreme Court is likely to rule in January that Trump's tariffs are unconstitutional. Still, Treasury Secretary Scott Bessent said today that the administration has a Plan B to reimpose them immediately. Meanwhile, investors are struggling to sort out a lot of confusion about the AI story, including whether the earnings of hyperscalers are inflated because they are depreciating their Nvidia GPU chips over six years rather than three. The introduction of Gemini-3 by Google, running on the company's TPU chips, has reminded investors that the pace of technological disruption is accelerating. AI has turned into a race among leaping frogs. Yet despite all the confusion, both the market-cap-weighted and equal-weighted S&P 500 indexes are near their October 29 record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-7.png) The S&P 500 is up 16.1% ytd, with the Magnificent-7 up 23.1% and the “Impressive-493” up 14.2% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-8.png) The forward P/E of Nvidia has dropped sharply in recent days, while that of Google has jumped higher as investors have reconsidered which leaping frog to bet on for now (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-12.png) The economic data are also confusing. The question is how much longer can real GDP grow close to 4% (saar) as it has in Q2 and Q3 while the labor market remains lackluster at best? In November, private companies cut 32,000 workers, with small businesses hit the hardest, payrolls processing firm ADP reported today (chart). Larger enterprises, i.e., companies with 50 or more employees, actually reported a net gain of 90,000 workers. However, establishments with fewer than 50 on the payroll shed 120,000 workers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/3YoQZUl.png) Despite weak payroll employment, retail sales are holding up surprisingly well, as evidenced by the 7.6% y/y increase in the Redbook Retail Sales Index during the November 28 week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-6.png) November's ISM purchasing managers’ survey showed more of the same, i.e., manufacturing remains weak while services are still going strong. The prices-paid indexes remain elevated in both surveys (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/3Ax1Eo7.png) Overall, industrial production hasn't been growing for a while. However, production is skyrocketing in the technology and defense industries, offsetting weakness in other areas of the economy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-10.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### More Thoughts On Bitcoin, Stablecoin & Gold URL: https://www.yardeniquicktakes.com/more-thoughts-on-bitcoin-stablecoin-gold/ Last updated: 2025-12-03T03:36:55.000Z We do not have an opinion on bitcoin because we don't have any way to value it. It has been widely called "digital gold." We've previously described bitcoin as "digital tulips." That makes us sound bearish since the famous Tulip Bulb Bubble burst in Amsterdam several centuries ago, once it was realized that the small Dutch market had run out of buyers willing to pay higher and higher prices. When the selling pressure started, it quickly fed on itself, resulting in a crash. Bitcoin is different because it trades 24 hours a day, worldwide. That also makes it more volatile, though possibly crash-proof. That's because when it dives, there are likely plenty of new buyers around the globe who see the drop as a buying opportunity. In addition, bitcoin is receiving strong support from Wall Street, enabling the public to play the game through ETFs and futures. It must be comforting for many individual investors to receive a monthly statement from their brokers showing the value of their bitcoin ETF holdings, rather than having to keep a digital key and worry that their blockchain account might be hacked by quantum computers one day. So ARK’s CEO Cathie Wood could be right. She is forecasting that bitcoin will be worth $1.2 million per coin by 2030\. She recently lowered her forecast from $1.5 million to reflect the rapid rise of stablecoins (cryptocurrencies pegged to the US dollar), which she noted are "usurping" some of the utility she initially expected bitcoin to capture in emerging markets. President Donald Trump signed the GENIUS Act in July. It established a regulatory framework for the issuance of stablecoins, which must be backed by liquid, safe assets such as US Treasury bills. We identified the act as an explanation for bitcoin's sharp price decline since it was enacted, as stablecoins reduce demand for bitcoin transactions (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-3.png) _This post is for paying subscribers only._ ### DEEP DIVE: The Affordability Crisis URL: https://www.yardeniquicktakes.com/deep-dive-the-affordability-crisis/ Last updated: 2025-12-02T04:10:02.000Z ***This is an excerpt from the December 1, 2025 Yardeni Research Morning Briefing.*** **Affordability I: A Depressed State of Mind.** Why are consumers so depressed? The monthly Consumer Optimism Index (COI), which is the average of the Consumer Sentiment Index (CSI) and the Consumer Confidence Index (CCI), fell to 69.5 in November ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F1.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123) below). That’s a level consistent with previous recession troughs in this average index. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/tc_20251201_1.png) Figure 1 The current conditions component of the CCI fell to 88.7 in November, which isn’t as bad as the overall average COI ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F2.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123) below). However, the current conditions CSI, at 50.3, is much worse than the CCI’s 88.7 comparable current conditions component. The expectations component of the COI, CSI, and CCI are all down in the same depressing neighborhood, at 57.1, 51.0, and 63.2 ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F3.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/tc_20251201_2.png) Figure 2 It’s not clear why consumer expectations are uniformly depressed. The divergence between the current conditions CSI and CCI is especially puzzling. The former tends to reflect inflationary expectations, while the latter reflects labor market conditions. As we’ve noted before, we have more confidence in the CCI than in the CSI, which seems to be chronically pessimistic, especially in recent years. The Misery Index, which is the sum of the unemployment rate and the CPI inflation rate (on a y/y basis), is relatively low at 7.4% during September ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F4.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123) and [*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F5.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123)). It has averaged 9.0% since the late 1940s. The Misery Index has been inversely correlated with both the CCI and CSI ([*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F6.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123) and [*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20251201%5F7.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=392275123&%5Fhsenc=p2ANqtz--6OWNqyF-mZLQIE6XqtAUSmvtw9aKFPdZlE%5FgxWs6gw515UGEiaI0PvcnVo%5FWXXM4HphXWh-78rr0zxVk0z58a696RrA&%5Fhsmi=392275123)). However, in recent years, the CSI has been depressed even though there is less misery. Consider the following reasons for less misery, which one would expect to produce high levels of consumer optimism: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: December 1-5 URL: https://www.yardeniquicktakes.com/economic-week-ahead-december-1-5/ Last updated: 2025-12-01T02:40:59.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/Screenshot-2025-11-30-195408.png) With the odds of a December Fed rate cut starting the week at 86% (according to [*CME FedWatch*](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?ref=yardeniquicktakes.com)), the Fed and investors alike probably wish more hard economic data were hitting the tape. Ten days ahead of the most anticipated Federal Open Market Committee (FOMC) meeting this year, the hawks and doves are doing a bang-up job making their cases for either waiting until late January to lower the federal funds rate again or announcing another rate cut on December 10. The doves have the momentum. After slashing the federal funds rate by 150bps since September 2024, twice in 2025 so far, Powell & Co. seems likely to lower borrowing costs by another 25bps. Yet with inflation running around 3% y/y, it's hard to see the Fed adding even more liquidity at the January 27-28 FOMC meeting. In the absence of many shutdown-delayed data series, the personal consumption expenditures deflator (PCED) for September (Fri) may fill in some analytical blanks. So may earnings reports from retailers, including Dollar Tree (Wed) and Kroger (Thu). The same goes for any early clues about spending tallies for Black Friday and Cyber Monday. Here are some releases with the potential to push the odds of Fed action in December either back toward 50% or closer to 100%: (1) ‎*Inflation indicators*. The Fed would surely prefer November stats, but September data on consumption and PCED inflation ([*Fri*](https://www.bea.gov/news/schedule?utm%5Fcampaign=QuickTakes&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--lBGLP5TGjCYQp612scBhUBTmeb1%5FqXWBRoQzEKhemQq0Wr4OQwWy4GPDqt8FWpagsLEmdtuOUvSNXuibmEwh9%5Ffuoxg&%5Fhsmi=2)) will have to do. The last time Washington released the series, for August, the core PCED rose 2.9% y/y. Core PPI and CPI inflation rates for September suggest that PCED inflation may have moderated slightly. That month's data on import and export prices (Wed) could also offer clues on the state of inflation at the end of Q3. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway.png) (2) *PMI surveys*. The ISM manufacturing PMI starts the week off (Mon). Last month, it declined to 48.7 amid tariff gloom. The non-manufacturing survey (Wed) edged up to 52.4 in October. The S&P Global flash estimates suggest that both might have edged up in November (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/gateway-1.png) (3) *Employment dynamics*. Ahead of the November employment report on December 16, weekly unemployment insurance applications (Thu) are gaining greater importance. Last week’s drop to 216,000 was a reminder that the labor market might be more robust than many fear. ADP's employment report for November (Wed) will garner considerable attention after the previous month's better-than-expected 42,000 increase. So will the latest Challenger report for November (Thu), following a jump in layoffs in October (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/12/4g7ONbU.png) (4) *Mortgage demand*. Given the volatility in US 10-year yields in recent months and shaky consumer confidence, data from the Mortgage Bankers Association is having a moment (Wed). In the week ended November 21, applications [*jumped 7.6%*](https://www.bloomberg.com/news/articles/2025-11-26/us-home-purchase-applications-surge-to-highest-since-2023?ref=yardeniquicktakes.com) to the highest level since early 2023\. A repeat performance in the November 28 week could remind Fed officials that the US economy might be closing out the year on a solid footing. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Santa's Rally URL: https://www.yardeniquicktakes.com/market-call-49/ Last updated: 2025-11-29T15:17:14.000Z Santa's back. During the past week, the S&P 500 recovered most of what it lost the week before when it was knocked down hard by the plunge in bitcoin and by fears that the AI bubble-bursting story was true, just as the AI bubble storytellers have been warning. Here is the story we told in a *QuickTakes* on November 23: "Once their panic selling \[of bitcoin\] subsides, the stock market should recover. That could happen over the next couple of weeks, setting the stock market up for a good year-end rally." So far, so good. The AI trade short sellers have been saying that Nvidia's GPUs depreciate much faster than hyperscalers’ accounting practices suggest, thereby unduly inflating their earnings. The shorters contend that newer versions of GPUs will make today's GPUs obsolete in no time. They note that producing LLMs has become a highly competitive sport, likely leading to profit-margin implosions. They rightly observe that the OpenAI ecosystem hinges precariously on a privately held company that is losing money and has a hypster with radical views running the show. Then last week, Alphabet's stock price jumped on news that Gemini-3, its latest LLM, is better than its competitors' LLMs and was trained on a cheaper Google TPU chip. The broad stock market rebounded even though semiconductor stock price indexes, which had led the stock market rout a week ago, didn't recover much this past week, as Nvidia remained down and out (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-144.png) The S&P 500 rose back above its 50-day moving average last week and now appears to be back on track to hit 7,000 in a year-end Santa Claus rally. NY Fed President John Williams played Santa on Friday, November 21, when he said a "further adjustment in the near term" for interest rates is likely. Investors took it as a strong signal that another Fed rate cut could come on December 10, when the FOMC concludes its two-day meeting. Ho, ho, ho! The S&P 500 will need to rise by just 2.2% to reach 7,000 (chart). That could happen this coming week, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-142.png) The Nasdaq will have to rise by only 2.5% to reach a new record high (chart). _This post is for paying subscribers only._ ### Cornucopia of Data URL: https://www.yardeniquicktakes.com/cornucopia-of-data/ Last updated: 2025-11-27T16:52:11.000Z ***We are thankful for your interest in our research. Happy Thanksgiving!*** Now that the government shutdown is over, there is plenty of data again with which to assess the economy's performance. On balance, GDP growth remains robust despite lackluster labor market indicators. Consumers are consuming. Inflation is subdued just below 3.0%. The federal deficit remains enormous. Federal tax receipts confirm the economy is growing. Nevertheless, the Fed, which has already lowered the federal funds rate by 150bps since September 2024 through October of this year, is likely to cut it again at the December 10 FOMC meeting. So, the S&P 500 is back on track to hit 7000 by the end of the year in a Santa Claus rally. Let's review the recently released data: (1) *Real GDP*. The Bureau of Economic Analysis raised Q2's real GDP growth rate from the preliminary estimate of 3.0% (saar) to 3.8%. The Atlanta Fed's GDPNow model is showing that Q3 is tracking at 3.9% (chart). These are robust numbers, suggesting that productivity is also growing rapidly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-129.png) (2) *Retail Sales.* During September, retail sales rose just 0.2% m/m following a 0.6% increase in August (chart). Nevertheless, real consumer spending during Q3 is tracking at 3.2% (saar) according to the GDPNow model. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-13.jpg) (3) *Business surveys*. The monthly regional business surveys conducted by five of the 12 Fed district banks show that manufacturing remained fairly lackluster during November (chart). Collectively, they suggest that the national M-PMI, compiled by the ISM, remained at or below 50.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-118.png) The M-PMI compiled by S&P Global ticked down to 51.9 in November, but remained well above 50.0\. The S&P Global NM-PMI ticked up to a strong reading of 55.0 during the month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-132.png) (4) *Labor market.* Initial unemployment claims fell during the week of November 21 to only 216,000 (chart). This suggests that layoffs remain low. However, continuing claims show that the duration of unemployment has risen because it is taking longer to find a job. This is why September's unemployment rate rose to 4.4% from 4.3% in August. Also more people were looking for a job that month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-121.png) The Challenger report of announced layoffs rose sharply in October (chart). However, it is a more volatile and less useful measure of layoffs than weekly initial jobless claims. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-14.jpg) The Consumer Confidence Index survey showed that "jobs available" remained relatively high this month at 54.5% (chart). The drop in "jobs plentiful" over the past few years mainly boosted "jobs available" rather than "jobs hard to get," which remains relatively low at 17.9%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-127.png) (5) *Inflation*. November's prices-paid and prices-received indexes, based on the averages of the Fed district surveys, suggest that inflationary pressures from earlier this year's tariffs may be abating (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-119.png) September's PPI for personal consumption rose only 0.2% m/m (chart). This measure of inflation was held down by very moderate increases in service prices, which more than offset relatively significant gains in goods prices. The Cleveland Fed's I[nflation Nowcasting](https://www.clevelandfed.org/en/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) predicts that September's headline and core PCED rose 2.79% y/y and 2.85% y/y. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-122.png) (6) *Federal deficit*. The annual US federal deficit totaled $1.8 trillion through October, while the Treasury raised $2.0 trillion over the same period. (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-128.png) Federal government outlays have flattened out in recent months at around $7.0 trillion (chart). Spending on social welfare programs rose to a record $3.6 trillion over the 12 months through October. Net interest outlays rose to a record $980 billion, exceeding the $910 billion spent on defense. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-125.png) Federal tax receipts rose to a record $5.3 trillion over the 12 months through October (chart). Individual income tax receipts are still growing. Payroll tax receipts have stalled, along with payroll employment gains, in recent months. Customs duties are up by a record $230 billion over the past 12 months. Corporate tax receipts edged lower recently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-133.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: 2026 Is Coming! URL: https://www.yardeniquicktakes.com/weekly-webcast-2026-is-coming/ Last updated: 2025-11-27T16:52:45.000Z Our base-case outlook calls for a continuation of the Roaring 2020s scenario next year, with ongoing productivity gains that fuel a robust economy, which propels earnings and the stock market higher. Today, Dr Ed reviews the Roaring 2020s thesis; outlines what he expects 2026 will bring in terms of economic variables, earnings, and the S&P 500; makes portfolio allocation recommendations; and weighs in on the “Impressive-493,” the rising appeal of foreign stock markets, bullish expectations for the dollar and gold, and bearish ones for bitcoin. After the Roaring 2020s? There’s reason to think the 2030s could roar as well.[](https://us02web.zoom.us/rec/share/ReEGyGaRT4t1Tg520neuc%5F8cxlWevyEq2lNqbTt04nWBrBqGQIeUa3DHeO3SUdXP.fS6DsZNjrE5uD%5FqJ?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! ### DEEP DIVE: 2026 Is Coming! URL: https://www.yardeniquicktakes.com/deep-dive-2026-is-coming/ Last updated: 2025-11-27T16:33:40.000Z ***This is an excerpt of the November 24, 2025 Yardeni Research Morning Briefing.*** **Roaring ’20s I: Just Another Year of the Roaring 2020s.** We are getting into the warm-and-fuzzy spirit of the holidays. Thanksgiving is on Thursday. Hanukkah begins the evening of December 14 and lasts through the evening of December 22\. Christmas Eve is on December 24\. Kwanzaa is from December 6 through January 1\. The season ends with fireworks on New Year’s Eve. Then it is back to work after New Year’s Day as 2026 rolls in. We expect that 2026 will be just another year of the Roaring 2020s, which remains our base-case scenario. Our Roaring 2020s scenario has had a good six-year run since we first predicted it in 2020\. It has also had a good few months lately, with upward revisions to GDP and downward revisions to payroll employment, suggesting that productivity growth was strong during Q2 and Q3 of this year. Q4 might also show surprisingly strong productivity growth despite the government shutdown. In the November 24, 2020 issue of our [*Morning Briefing*](https://archive.yardeni.com/premiumdata/mb%5F201124.pdf?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2), we wrote: “This should be the first and last Thanksgiving requiring us all to socially distance from one another. Apparently, we will have a cornucopia of vaccines and treatments available for mass distribution early next year. If so, then 2020 may mark the beginning of the Roaring 2020s.” We then reviewed the similarities we expected to see between the Roaring 1920s and the forthcoming Roaring 2020s. First and foremost, among the similarities we anticipated was a technology-led productivity boom: “Today’s ‘Great Disruption,’ as Jackie and I like to call it, is increasingly about technology doing what the brain can do, but faster and with greater focus. Given that so many of the new technologies supplement or replace the brain, they lend themselves to many more applications than did the technologies of the past, which were mostly about replacing brawn. Today’s innovations produced by the IT industry are revolutionizing lots of other ones, including manufacturing, energy, transportation, healthcare, and education. My friends at BCA Research dubbed it the ‘BRAIN Revolution,’ led by innovations in biotechnology, robotics, artificial intelligence, and nanotechnology. That’s clever, and it makes sense.” So far, so good. Indeed, notwithstanding numerous shocks, real GDP is at a record high ([Fig. 1](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F1.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). Real personal consumption per household is at a record high ([Fig. 2](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F2.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). Corporate profits is at a record high ([Fig. 3](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F3.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). So is real capital spending ([Fig. 4](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F4.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). The major stock market indexes rose to record highs on October 29 of this year as well ([Fig. 5](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F5.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image.png) Figure 1 This happened despite the pandemic at the start of the Roaring 2020s. There was a recession in 2020, but it lasted only two months. The end of the lockdowns that caused the recession was followed by social distancing restrictions. Supply-chain disruptions from 2020 through 2023 resulted in an inflation spike during 2021 and 2022\. So did Russia’s invasion of Ukraine in early 2022\. The Fed responded to that spike by tightening monetary policy significantly during 2022 and 2023\. This year, the big shock was Trump’s tariffs. And now, the pace of payroll employment gains has slowed dramatically. The economy has proven its resilience to all these challenges. If it continues as we expect, the recent decade should remain recession-free. Instead of economy-wide recessions, there might continue to be rolling recessions hitting various industries at different times. We forecast real GDP growth of 2.5% this year. In 2026, we expect 3.0% growth, with productivity rising 2.5% and both the labor force and employment increasing by only 0.5%. The unemployment rate is likely to end this year at 4.5%, primarily because of the rising jobless rate among recent college graduates due to the rapid proliferation of AI. The same may be said about 2026. **Roaring ’20s II: Productivity-Led Economic & Earnings Growth Fueling Bull Market.** Over the past three years, the average annual productivity growth rate has risen back to 2.0%, the historical average for this series ([Fig. 6](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F6.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). We expect productivity to grow closer to 3.0%-3.5% over the remainder of the Roaring 2020s, which should boost real GDP growth to 3.5%-4.0% over the rest of the decade ([Fig. 7](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F7.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). Again, our upbeat forecast is based on the impact of BRAIN technologies in boosting the productivity of scarce workers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image-1.png) Figure 6 The outlook for earnings and the stock market over the remainder of the decade is very bullish under our base-case Roaring 2020s scenario. Let’s walk through it: (1) We predict that S&P 500 operating earnings per share will rise from $268 this year to $310 in 2026, $350 in 2027, $400 in 2028, and $450 in 2029 ([Fig. 8](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F8.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). Admittedly, this will require the S&P 500 profit margin to rise to record highs in the coming years in response to faster productivity growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image-6.png) Figure 8 (2) Our scenario for the S&P 500’s forward earnings is equally bullish. We forecast where forward earnings will be at year-ends simply by lagging each of our annual earnings forecasts by one year ([Fig. 9](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F9.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). (3) We assume that the forward P/E of the S&P 500 (i.e., the multiple with forward earnings as the “E” value) will range from 18 to 22 over the rest of the decade ([Fig. 10](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F10.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). (4) The result of this exercise is that the S&P 500 would be on track to rise to 9,000 to 11,000 by the end of 2029 ([Fig. 11](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F11.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). Let’s split the difference and aim for 10,000 by the end of the Roaring 2020s! That would be up from 3,230 at the end of 2019, representing an increase of 210%. Is that amount of gain delusional? Not really, since it was exceeded during three of the previous decades since the 1920s ([Fig. 12](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F12.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). Since the Roaring 1920s, there have been three roaring decades for the stock market with gains of over 200%! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image-3.png) Figure 12 **Roaring ’20s III: A Disinflationary Year.** During 2025, consumer price inflation has stalled around 3.0% y/y. It probably would have been down to 2.0% by now but for Trump’s tariffs, which boosted consumer durable goods inflation this year ([Fig. 13](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F13.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). The underlying inflation rate in the labor market should remain disinflationary. It is simply the yearly percent change in unit labor costs (ULC) inflation, which is hourly compensation divided by productivity. ULC was up just 2.5% y/y during Q2 ([Fig. 14](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F14.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). It should be lower next year if productivity growth roars ahead, as we expect. The Fed might actually hit its 2.0% inflation target next year. **Roaring ’20s IV: A More Independent Fed.** What does all this mean for monetary policy and the bond market? We believe that the Fed actually will be more independent in 2026 even though President Donald Trump is expected to pick a dove as the next Fed chair to replace Jerome Powell during May 2026\. Other participants on the Federal Open Market (FOMC) are likely to be increasingly independent of the new Fed chair. In the past, Fed chairs succeeded in maintaining a consensus with few if any dissenters. October’s FOMC minutes showed that there is already less consensus than usual. In any event, we are expecting no rate cut at the December 10 meeting of the FOMC and one cut next year that drops the federal funds rate to 3.50%-3.75%. We also expect that the bond yield will continue to range between 4.00%-5.00% in 2026. Why wouldn’t interest rates be lower if inflation falls to 2.0% next year? They might be. But the interest-rate levels we are forecasting would be neutral ones, neither restrictive nor stimulative to the economy, since productivity would be boosting real GDP growth and moderating inflation. Lower rates than those would risk a stock market bubble. **Roaring ’20s V: Rebalancing Toward the Impressive-493\.** The recent concerns about an AI bubble are already taking some air out of it without bursting it. Almost all the bubble is in the Information Technology and Communication Services sectors of the S&P 500\. Together, they account for 45% and 38% of the market capitalization and earnings shares of the S&P 500 ([Fig. 15](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F15.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). It’s hard to imagine that they will continue to take so much oxygen out of the room. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image-7.png) Figure 15 As a result, we recommend market weighting them rather than overweighting the Information Technology and Communication Services sectors. We still recommend overweighting Financials and Industrials ([Fig. 16](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F16.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) and [Fig. 17](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F17.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). We now also would overweight Health Care going into 2026 ([Fig. 18](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F18.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). It is also getting harder to recommend Stay Home rather than Go Global. The latter has beat the former this year. Stay Home has worked since 2010\. The market capitalization share of the US in the All Country World MSCI rose to over 65% at the end of last year ([Fig. 19](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F19.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). We would be looking for more opportunities abroad and will be doing so in 2026. **Roaring ’20s VI: A Good Year for the Dollar & Gold.** We remained bullish on the dollar this year and viewed its weakness as a correction in a bull market ([Fig. 20](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F20.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) below). That remains our view for 2026\. We expect that the proliferation of stablecoins backed by US Treasury bills will proliferate around the world, boosting the demand for both US Treasury debt and the dollar. So we are not in the “debasement camp” nor in the camp that has been warning that a US debt crisis is imminent. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/image-8.png) Figure 20 We also remain bullish on gold, which we expect will rise to $5,000 by the end of next year and $10,000 by the end of 2029 ([Fig. 21](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F21.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2) and [Fig. 22](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F22.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). Geopolitical uncertainties are likely to remain high over the rest of the decade. Central banks are likely to continue diversifying their international reserves into gold. Chinese investors are also likely to remain strong buyers, as they hope to offset losses on their “ghost” apartments and in their volatile stock market. **Roaring ’20s VII: A Bad Year for Bitcoin.** Bitcoin has been described as “digital gold.” The recent severe selloff suggests that it might be digital fools’ gold. Yes, we know, it fell sharply in late 2021 through 2022, which turned out to be a great buying opportunity ([Fig. 23](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F23.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). That could happen again this time. However, its rebound from 2023 through 2024 was largely attributable to support from Wall Street and the Trump administration. The GENIUS Act of July 2025 legitimized stablecoin for transactions purposes, thus eliminating that as a role for bitcoin, which is proving to be a very volatile store of value. Next year is likely to be another bad one for bitcoin advocate Michael Saylor’s Strategy company ([Fig. 24](https://yardeni.com/wp-content/uploads/tc%5F20251124%5F24.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8EVW4b-NL7T08jh9aBU%5FVrdB%5FqrziF8KC4YBivqucd8avmQgp1JJt%5F9oDKBWxAiC1Y6p4%5FLfkjen-kfPNCj7UICednVA&%5Fhsmi=2)). **Roaring ’20s VIII: Will the Roaring 2020s End Badly?** We first started writing about the Roaring 2020s in our January 6, 2020 *Morning Briefing*: “So the Roaring ’20s remains a viable scenario. The problem is that that decade was followed by the Great Depression of the 1930s; if history repeats that pattern, we can party for another 10 years.” Trump’s tariffs have already stress-tested the US and global economies for a 1930s-style Smoot-Hawley scenario without much signs of stress. In other words, the 2030s could be another roaring decade. Happy holidays! 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Joy Ride URL: https://www.yardeniquicktakes.com/joy-ride/ Last updated: 2025-11-26T03:02:03.000Z At the start of November, we expected a pullback in the stock market because the Bull-Bear Ratio we monitor indicated too many bulls. That's bearish from a contrarian perspective. Could the pullback be over already? It might be if the Fed delivers a rate cut on December 10\. The stock market took a gut-wrenching dive on Thursday last week. It's still not obvious why the drop occurred. But the immediate conclusion was that investors had lost their confidence in the AI trade. The free-fall in bitcoin also unsettled them. Thursday evening, we noted that a few participants on the Federal Open *Mouth* Committee said earlier that day that they were in no rush to lower the federal funds rate again at the December 10 FOMC meeting. The CME FedWatch Tool showed that the odds of a rate cut fell below 50%. On Friday, FRBNY President John Williams came to the rescue with some dovish comments, and a couple of his colleagues said the same today. So the odds of a December rate cut jumped to 80.9%. Investors love the Fed Put. So stock prices edged higher on Friday and rebounded strongly today, led by AI-related stocks, and especially by GOOGL, which jumped 6.3%. NVDA was a bit of a laggard, rising only 2.1%. It helped that bitcoin rallied from $81,180 on Friday morning back to $89,000 this afternoon. The DXY dollar index held firm around 100.00 despite the increased odds of a Fed rate cut. Supporting the US dollar are strong net capital inflows, which totaled $1.5 trillion over the past 12 months through September (chart). That's near the recent record high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-117.png) Contrary to the popular myth, foreign investors are not bailing out of US Treasuries and equities. Foreign private purchases totaled $492.7 billion in the former over the past 12 months (chart). However, central banks collectively did reduce their holdings by $47.0 billion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-115.png) Foreigners held a record $9.2 trillion in US Treasuries during September (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-12.jpg) Most impressive, and somewhat surprising, is that foreign private purchases of US equities totaled a record $646.8 billion over the past 12 months (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-114.png) Over the past 12 months, foreign private purchases of US equities outpaced those of US Treasury notes and bonds (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-116.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: November 24-28 URL: https://www.yardeniquicktakes.com/economic-week-ahead-november-24-28/ Last updated: 2025-11-24T03:25:37.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-23-182556.png) During this holiday-shortened week, investors will receive a cornucopia of data now that the government is open again. Some of the data will be a bit stale. But they should indicate how Q3 ended for the economy. September's retail sales report (Tue) should show a solid increase, with strength in spending by higher-income shoppers more than offsetting the weakness in spending by lower-income workers. This dichotomy is supported by healthy corporate earnings from Walmart and Gap, which have prioritized higher-income shoppers. Home Depot, meanwhile, is finding that many higher-value purchases and remodeling projects are being scaled back. Also out this week are September's PPI (Tue), the Fed’s Beige Book (Wed), and weekly jobless claims (Wed). Here are the reports that might move the markets and influence the Fed’s thinking as the December 9-10 Federal Open Market Committee meeting approaches: (1) *Business surveys*. The remaining two of the business surveys conducted by five of the Fed regional banks will come out for the Dallas (Mon) and Richmond (Tue) districts. They might confirm that business improved in November, as shown by the surveys for NY, Philly, and Kansas City. If so, then November's national M-PMI might rise above 50.0 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-113.png) (2) *Retail sales*. September's retail sales growth remained relatively strong according to the Redbook Retail Sales Index (chart). Another positive development that month was strong auto sales, reaching 16.4 million units(saar). A surge in demand notably drove this performance as buyers rushed to purchase electric vehicles (EVs) before the expiration of consumer tax credits at the end of the month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-109.png) (3) *PPI*. September's producer price index (Tue) will garner considerable attention at the Fed, particularly after the September CPI surprised to the downside. The PPI might be hotter than expected if tariffs continued to push goods inflation higher (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-110.png) (4) *Consumer confidence*. November's Consumer Confidence Index survey will be among the most timely indicators. We will be focusing on the job availability responses (chart). They are likely to show that jobs are getting harder to find. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-111.png) (5) *Unemployment insurance*. The weekly unemployment claims report (Wed) has been signaling that layoffs remain low, but it may be taking longer for unemployed workers to find a job (chart). September's employment report also sent a mixed message, as the payroll gain exceeded expectations but the unemployment rate rose to 4.4%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-112.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Time To Meditate URL: https://www.yardeniquicktakes.com/market-call-time-to-meditate/ Last updated: 2025-11-23T16:15:34.000Z The S&P 500 is back on a slower track than the fast track it was on since April 9 until the end of October. It no longer is outpacing its average year-to-date performance over the past 10 years (chart). In fact, it is up 12.3% ytd, matching the average year-end performance of the past 10 years. However, the S&P 500 did peak at a record-high 6890.59 on October 29—close enough to our year-end target of 7000 for us to declare “mission accomplished” retroactively. The 7000 milestone now is more likely to be reached early next year. We are still targeting 7700 by the end of next year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-103.png) What has changed is that, while the AI bubble isn't bursting, it is losing some air. That's actually a positive development for the sustainability of the current bull market, which began on October 12, 2022. The broad market, as measured by the equal-weighted S&P 500, is back down to its 200-day moving average; we don’t expect that level to be breached. The market-capitalization-weighted S&P 500 is still 7.2% above its 200-day moving average, which we don't expect will be tested. The Nasdaq is still up 15.3% ytd, just about matching the ytd performance of the 10-year average (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-11.jpg) We acknowledge that the current pullback could turn into a correction (i.e., a drop of 10%-20% from the peak). Investors have lost their confidence in anyone's ability to project, let alone understand, the accounting for the GPU chips purchased by the hyperscalers. As a result, the forward P/E of the Magnificent-7 (which includes the major hyperscalers) has dropped from 31.0 to 28.1 since late October (chart). There might be more downside in this multiple. The plunge in bitcoin's price also accounts for some of the recent weakness in the stock market. Investors in bitcoin are likely to own high-flying stocks too. Once their panic selling subsides, the stock market should recover. That could happen over the next couple of weeks, setting the stock market up for a good year-end rally. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-98.png) Investors' short-term valuation concerns should be offset by the ongoing strength of S&P 500 earnings. Over the past three quarters, earnings growth was about twice as strong as analysts' consensus estimates (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-97.png) The forward earnings of the S&P 500 continues to rise to record highs (chart). By year-end, it will have converged on the 2026 analysts' consensus estimate, which is currently $309.28 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-96.png) The pushback narrative undercutting our happy earnings story is that the stock market’s strength this year owes much to the Magnificent-7’s strong performances given their outsized capitalization share, and those companies have been padding their earnings by depreciating their GPU chips over four to six years instead of a more appropriate one to three years. A related concern of investors is that, unlike most other chips, GPUs might not have a very long service life, especially if advanced versions are introduced every year. This has become a highly contentious issue that remains unresolved; it’s a significant “known unknown.” But there is no debating the fact that the earnings of the “Impressive-493”—i.e., the S&P 500 minus the Mag-7—are also rising rapidly to record highs (chart). That’s a market-supportive “known known.” ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-105.png) Less impressive are the forward earnings of the S&P 400 MidCaps and the S&P 600 SmallCaps (chart). Many “SMidCap” companies (as we call the two collectively) with the most promising prospects are acquired by large companies either before or after the small and mid-sized companies go public, and before they can become the next Microsoft or Eli Lilly. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-104.png) We continue to count on the resilience of the economy. The strength of earnings corroborates it. In addition, we are encouraged to see that the November average of the three available regional business surveys suggests that the national M-PMI might have rebounded above 50.0 this month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-99.png) Separately, Fed officials have been debating publicly whether to lower the federal funds rate at the FOMC's December 9-10 meeting. The doves are concerned about the rising unemployment rate. The hawks are more concerned that inflation remains above the Fed's 2.0% y/y target. In addition, inflationary expectations remain elevated (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-100.png) This past week's action in the S&P 500 shows a rotation out of the Information Technology and Consumer Discretionary sectors and into the Health Care and Consumer Staples sectors. We are leaning toward overweighting Health Care while market-weighting both Information Technology and Communications Services. Stay tuned. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-107.png) Below is a table showing the performances of the 11 sectors and 100+ industries of the S&P 500 over the past difficult week. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-106.png) Last week was also a rough one for overseas stock markets (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-108.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### To Bail Or Not To Bail? URL: https://www.yardeniquicktakes.com/good-news-bears-2/ Last updated: 2025-11-26T03:03:16.000Z Good news bears were on the loose today. It was a risk-off day in financial markets despite strong earnings and economic news. Nvidia reported better-than-expected Q3 results yesterday after the market closed. This morning, we learned that payroll employment rose more than expected in September and that initial unemployment claims remained subdued last week. Nevertheless, it was a bad day for stock investors. The stock market pullback that we expected at the start of this month may be turning into an outright correction, especially for the Nasdaq. The S&P 500 is down 5.1% from its October 29 record high. The Nasdaq is down 7.8% over this period (chart). Both fell below their 50-day moving averages today. We doubt that either will fall to their 200-day moving averages, currently at 6,157.70 and 20,158.34. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-91.png) Let's review why sentiment has turned so bearish so quickly before we answer the question in the title: (1) *AI bubble Fears*. Weighing on the stock market is widespread uncertainty about the impact of AI infrastructure spending on the earnings of the AI data center corporations. Nvidia's strong report didn't do much to resolve the known unknowns about AI spending. Also unnerving investors are recent reports that Softbank and Thiel Macro sold all their Nvidia shares. Michael Burry (the "Big Short") continues to raise doubts about the accounting practices of the major AI companies. (2) *Bitcoin's freefall*. We attribute some of today's stock market selloff to the ongoing plunge in bitcoin's price (chart). There has been a strong correlation between it and the price of TQQQ, an ETF that seeks to achieve daily investment results that correspond to three times (3x) the daily performance of the Nasdaq-100 Index (chart). We've attributed the weakness in bitcoin to the GENIUS Act, which was enacted July 18\. It establishes a regulatory framework for payment stablecoins in the US, thereby eliminating bitcoin's transactional role in the American monetary system. It's possible that the rout in bitcoin is forcing some investors to sell stocks that they own. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-94.png) (3) *Labor market & Fed concerns.* Today's September employment report showed an increase of 119,000, more than twice the widely expected 50,000 (chart). The three-month average monthly change was 62,300\. Most economists now agree that the "breakeven" payroll gain is between 30,000 and 50,000\. However, the unemployment rate edged up to 4.4% from 4.3% in September. Investors are confused about what the Fed will do next. Stronger-than-expected employment reduces the likelihood of a Fed rate cut at the FOMC's December 10 meeting. But the uptick in unemployment might convince the committee to go ahead with another 25bps rate cut. Today's talking Fed heads sounded cautious about doing so, adding to the stock market's downdraft. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-88.png) (4) *The economic growth question*. Aggregate total hours worked in private industries has been flat at a record high in recent months through September (chart). That's concerning. Several factors explain why the labor market's job engine has stalled. Yet, real GDP has been running around 4.0% (saar) during Q2 and Q3\. This implies robust productivity growth. Forthcoming productivity data should boost stock prices. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-92.png) (5) *Low fires and low hires*. Today's unemployment insurance claims report also unsettled investors. Initial claims remain low, suggesting that layoffs are relatively low. However, continuing claims have been rising in recent weeks, indicating that it is harder to get hired, so the unemployed are staying unemployed for longer periods. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-87.png) During September, the unemployment rate rose, driven by a jump in the jobless rate for 20-to-24-year-olds (chart). College graduates are having a tough time finding jobs. It is a problem that may be attributable to AI, and one that the Fed can't fix with rate cuts. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-95.png) (6) *Bottom line*. We continue to bet on the economy's resilience and on productivity-led economic growth. Earnings should continue to rise well into next year and beyond. The quality of earnings is generally good. AI bubble jitters could weigh on the market for a while longer, creating buying opportunities among both the Magnificent-7 and the Impressive-493\. If the pullback turns into a correction, we might have to push our 7000 yearend target for the S&P 500 into early next year. Meanwhile, rapidly spreading bearishness means that this pullback should end soon. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Data-Dependent URL: https://www.yardeniquicktakes.com/data-dependent/ Last updated: 2025-11-26T03:03:56.000Z What do Nvidia and the Fed have in common? They are both data-dependent. Nvidia's GPUs are the latest stage of the Digital Revolution, which started during the mid-1960s with IBM's mainframes. The Digital Revolution is all about processing ever more data, faster and faster, and at ever lower cost. In this context, GPUs are just the latest development in the Digital Revolution. The next big, new thing is likely to be quantum computers. As data processing productivity increases, so does the amount of data that needs to be processed. The supply of data will continually expand to infinity and beyond, to quote Buzz Lightyear. We view AI as a high-powered App that is exponentially increasing the demand for computing power for ever more data. Nvidia reported Q3 earnings after the close today, topping Wall Street expectations for sales and profits, and provided stronger-than-expected guidance for Q4 sales. Nvidia's most important business is data center sales. The company said it had $51.2 billion in data center sales, easily beating analyst expectations of $49.1 billion, a 66% year-over-year rise. Nvidia's forward revenues rose to a record $268 billion during the week of November 18, a fivefold increase since late 2023 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-83.png) Nvidia sports a 56.7% forward profit margin (chart). For more, see our [Nvidia Brief](https://yardeni.com/charts/nvidia/?ref=yardeniquicktakes.com) in our new Corporate Reports In Brief (CRIB) section of [Our Charts.](https://yardeni.com/our-charts/?ref=yardeniquicktakes.com) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-84.png) The Fed is also data-dependent. That's been a problem during the government shutdown, which started in early October. Nevertheless, the FOMC, the Fed's monetary policy committee, voted to cut the federal funds rate (FFR) by 25bps at its October meeting. There were two dissenters. There could be more at the December meeting. The minutes of the October meeting noted that officials expressed "strongly differing views" about whether a rate cut would be appropriate at the December meeting. Many participants suggested that, given their economic outlooks, it would be appropriate to keep the target range unchanged for the rest of the year. The primary concern among this group is that inflation progress has "stalled" and a quick cut could be misinterpreted as a lack of commitment to the 2% inflation target. Several participants assessed that another rate cut "could well be appropriate" in December if the economy evolved as they expected. This group is more focused on the risks to the labor market and preventing a sharp rise in unemployment. The CME Fedwatch tool shows that the odds of a FFR cut next month is down to 32.8% from over 50.0% a week ago. No matter what decision is made, there could be more than than two dissenters at the next meeting. The 10-year US government bond yield remains just above 4.00%, which is where it was before the Fed started cutting the FFR by 150bps last year in September (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-85.png) By the way, the minutes noted, "Some participants commented on stretched asset valuations in financial markets, with several of these participants highlighting the possibility of a disorderly fall in equity prices, especially in the event of an abrupt reassessment of the possibilities of AI-related technology." As we expected yesterday, the Bull-Bear Ratio dropped below 3.00 this past week to 2.88 (chart). From a contrarian perspective, the fewer bulls, the better for those of us who remain bullish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-86.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### WEEKLY WEBCAST: All About Earnings URL: https://www.yardeniquicktakes.com/weekly-webcast-all-about-earnings/ Last updated: 2025-11-19T13:00:42.000Z The economy and corporate profits have been remarkably resilient in recent years despite numerous formidable challenges. This year continued the remarkable performance, as Trump’s Tariff Turmoil failed to derail earnings or the economy. As a result, the stock market has soared. We remain optimistic on the outlooks for the economy, earnings, and the stock market, supported by a continuation of this year’s remarkable earnings strength into 2026\. … However, there are some legitimate concerns regarding AI-related companies’ accounting practices that call into question the quality of S&P 500 earnings generally, given the Tech sector’s outsized earnings share.[](https://us02web.zoom.us/rec/share/AgVfIq%5F4pJcVyiQlfTrPD1YmMKakDXIzEY3cj9TvQsDxgCYH7dw2NEsvidM36Sxy.Rsm4yTWUCy5m0OYs?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### The AI-Led Pullback: Recalibrating The Odds Of Three Scenarios URL: https://www.yardeniquicktakes.com/the-ai-led-pullback-recalibrating-the-odds-of-three-scenarios/ Last updated: 2025-11-26T03:04:36.000Z Will today's widely feared AI crisis turn out to be a no-show, too, just like the most widely anticipated recession of all time, anxiously awaited over most of the past four years? We think so. Stock investors are increasingly worrying about an AI-led Tech Wreck, like the one in 2000 after the 1999 Tech Bubble burst. Now, many of them believe the stock market is in an AI-led Tech Bubble that may already be bursting. The pessimists are also warning that consumers are stretched and may be retrenching. Furthermore, alarmists are seeing cracks in credit markets reminiscent of those during the Great Financial Crisis (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-82.png) These are all legitimate concerns. Nevertheless, for now, we are not altering our 55% subjective probability that the S&P 500 should reach 7000 by the end of this year and 7700 by the end of next year. However, under the circumstances, we are lowering the odds of a meltup scenario from 25% to 15% and raising the odds of a bearish scenario from 20% to 30%. The S&P 500 and Nasdaq both closed below their 50-day moving averages today and are down 4.0% and 6.4% from their October 29 record highs. Bitcoin is down 26.8% from its record high on October 6\. Some technicians warn that this is bad news for the Nasdaq. We've noted the high correlation between the cryptocurrency and the TQQQ before, but we believe they can and will probably diverge. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-81.png) On November 1, we noted that the high reading of the Bull-Bear Ratio (BBR) was a short-term bearish signal of a pullback in the stock market. We will get this week's BBR tomorrow, and expect it to be down significantly. Today, CNN's Fear & Greed Index, which is a compilation of seven different technical indicators, signaled extreme fear, which often sets the stage for a rebound in stock prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-18-171829.png) Today's stock market weakness was exacerbated by a 5% decline in Home Depot's share price after the company reported disappointing Q3 results. Management also provided a cautious outlook, indicating that the company faces external pressures from a soft housing market. Furthermore, consumers seem to be concerned about the economy, leading them to postpone or reduce spending on big-ticket, discretionary home improvement projects. Then again, the forward revenues of the S&P 500 Retail Composite rose to another record high during the week of November 17 (chart). That augurs well for the monthly retail sales report from the Census Bureau. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-79.png) Also encouraging is that the Redbook Retail Sales Index rose 6.1% y/y during the week of November 14 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-80.png) And, what about the great debate about how quickly data centers are depreciating their GPU assets? We side with the hyperscalers rather than Michael Burry, who started the depreciation debate. Data centers existed before AI caught on in late 2022, when ChatGPT was first introduced. In 2021, there were as many as 4,000 of them in the US due to rapidly increasing demand for cloud computing. Many are still operating with older chips that have been fully depreciated. The revenues and earnings of the hyperscalers continue to rise exponentially, while their depreciation expenses increase more linearly. Finally, concerns about rising loan defaults in the private credit market are unlikely to trigger another Great Financial Crisis. The defaults are likely to represent small portions of large loan portfolios. Investors recognize the risk of defaults when they invest in the private credit market and won’t be surprised if the defaults reduce the rates of return on their investments. An economy-wide credit crunch is unlikely. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: The Debate About the Quality of AI Earnings URL: https://www.yardeniquicktakes.com/deep-dive-the-debate-about-the-quality-of-ai-earnings/ Last updated: 2025-11-26T03:05:20.000Z ***This is an excerpt from the November 17, 2025 Morning Briefing of Yardeni Research.*** Michael Burry, the man behind the “Big Short” during the Great Financial Crisis, is shorting the AI trade because he notes that hyperscalers have been depreciating their GPU chip investments over more than 3 years. He thinks that they should be doing it for under three years. That is a reasonable concern given that the forward earnings of the S&P 500 has been led higher since the start of the Roaring 2020s by the Information Technology sector (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-76.png) Consider the following: (1) *Complex issue.* The depreciation of GPU chips by hyperscalers (like Google, Microsoft, Meta, and Amazon) is a complex and current topic in financial accounting, with significant debate over the appropriate lifespan. Hyperscalers are stretching GPU depreciation schedules, a move that lowers expenses and boosts reported earnings. Critics argue that this is aggressive accounting since GPUs often become obsolete faster. (2) *The useful life debate.* Many major hyperscalers publicly use an estimated useful life for their AI server equipment, including GPUs, of five to six years. This is an extension from their historical depreciation schedules for general-purpose servers, which were often around three years. Companies like Microsoft and Oracle have been cited as using or factoring in a useful life of up to six years for their new AI chips/servers. Cloud GPU rental company CoreWeave also extended its GPU depreciation period to six years, from four years, in 2023 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-10.jpg) Amazon (AWS) uses shorter schedules closer to four years, while Meta has pushed to extreme lengths of 11–12 years. Microsoft, Google, and Oracle generally fall in the four- to five-year range. (3) *Rapid obsolescence.* Critics, including some prominent investors, argue that the true economic lifespan is much shorter, perhaps one to three years. Nvidia is now releasing new, significantly more powerful and energy-efficient AI chips (like the Blackwell and Rubin generations) on a one-year product cycle. This rapid innovation can make older chips economically obsolete for high-end AI training workloads much faster than a five- to six-year schedule suggests. High utilization rates (60%-70%) in demanding AI workloads also contribute to faster physical degradation (chart). (4) *Older chips still useful.* Hyperscalers justify the longer depreciation schedule by arguing for a value cascade model. They contend that older generation GPUs, once replaced in top-tier training jobs, are simply cascaded down to power less computationally intense but high-volume inference (running the model) or other tasks, where they can still generate significant economic value for years. They also cite continuous software and data center operational improvements that extend the hardware’s life and efficiency. (5) *Bubble risk.* If depreciation schedules don’t align with real-world replacement cycles, companies may be overstating their profitability and underestimating the capital-intensive nature of AI infrastructure. That would increase the chances that the AI boom is turning into an AI bubble that may be about to burst. (6) *Our bottom line*. We side with the hyperscalers rather than Michael Burry in the depreciation debate. Data Centers existed before AI caught on in late 2022, when ChatGPT was first introduced. During 2021, there were as many as 4,000 of them in the US as a result of the rapidly increasing demand for cloud computing. Many are still operating with their original chips. The revenues and earnings of the hyperscalers continue to rise rapidly (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-78.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: November 17-21 URL: https://www.yardeniquicktakes.com/economic-week-ahead-november-17-21/ Last updated: 2025-11-17T02:57:44.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-16-162633.png) The week ahead is a pivotal one for market participants seeking some clarity on US growth and the likelihood of another Fed rate cut. Now that the longest-ever government shutdown is over, investors will finally get a look at the September employment report. While stale at this point, the report should provide some insight into labor market conditions. A flurry of public speaking events by Fed officials will reveal whether they're more concerned about employment or inflation. They include: Vice Chair Philip Jefferson (Mon, Fri) and Governor Christopher Waller (Mon) discussing the economic outlook and monetary policy; Governor Michael Barr (Tue, Fri) on bank supervision; Governor Stephen Miran on the Fed’s balance sheet (Wed, Thu); and Governor Lisa Cook on financial stability (Thu). The minutes from the October Fed meeting (Wed) will also be closely scrutinized. In the absence of most government data, economists will dissect corporate earnings, particularly those of companies seen as microcosms of their industries. Home Depot, Target, and Walmart will shed light on consumer spending. Nvidia will provide insights into whether the AI boom is rational. Here's a look at data releases that might influence the odds of a Fed rate cut on December 10: (1) *Employment*. We expect a 40,000 increase in private industry payroll employment (Thu). Such a gain is consistent with the view that the "breakeven" for employment is now 30,000-50,000\. The September jobs report is expected to omit the unemployment rate. During a government shutdown, many federal employees are furloughed without pay. Significantly, payroll employment counts only those who received pay during the survey reference week. Furloughed workers who did not receive pay are excluded from payroll employment for that month, even though they remain employed in a legal sense. (2) *Fed business surveys*. The week ahead will see the New York Fed (Mon), Philadelphia Fed (Thu), and Kansas City Fed (Thu) releasing regional business surveys that are helping to fill in some blanks in vital macroeconomic data left by the shutdown. (3) *Existing home sales*. October's existing home sales (Thu) probably remained weak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-73.png) (4) *Consumer sentiment*. The final November reading from the University of Michigan Consumer Sentiment Index (Fri) should confirm the weak preliminary reading of 50.3 (chart). We don't have much confidence in this consumer confidence measure. It has been too pessimistic for too long. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-75.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: The Federal Open Mouth Committee URL: https://www.yardeniquicktakes.com/market-call-48/ Last updated: 2025-11-16T17:55:35.000Z We are surprised that the financial markets were surprised by the hawkish tone of remarks from Fed officials this past week. Collectively, a few participants on the Federal Open *Mouth* Committee pushed back against market expectations for an imminent rate cut, stressing that inflation is not yet under control and that monetary policy must remain restrictive. In prepared comments during his October 29 [presser](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20251029.pdf), Fed Chair Jerome Powell stated, "A further reduction in the policy rate at the December meeting is not a foregone conclusion—far from it. Policy is not on a preset course." He was clearly pushing back against the widespread view (which we didn't share) that another rate cut would occur before the end of this year. On Friday, the odds of that happening dropped to less than 50% (i.e., 44.4%), according to the [CME FedWatch Tool.](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?ref=yardeniquicktakes.com) The S&P 500 fell sharply on Thursday, led by AI-related and Financials sector stocks, but didn't breach its 50-day moving average (chart). In addition to second thoughts about Fed easing, investors are having second thoughts about the AI trade, as we've noted in recent *QT*s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-68.png) We had been expecting a pullback. On November 1, we observed that "\[w\]hile earnings are bullish, sentiment is bearish in the very short term. There are too many bulls." Now, we expect to see a significant drop in the bull-bear ratios when this past week's data are released this week (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-67.png) We are sticking with our 7000 target for the S&P 500 by the end of this year because we expect that investors will soon conclude that the many known unknowns about the AI trade will lead to a happy outcome (i.e., productivity-led growth) rather than an unhappy one (i.e., another Tech Wreck). As we have observed repeatedly over the past four years, the most widely anticipated recession of all time didn't happen. Now we suspect that the most widely predicted financial market implosion in history might not happen either. In this regard, we are happy to see that the front cover of *The Economist* this week is very bearish, which is bullish from a contrarian perspective (image). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-14-152142.png) Some of the air did come out of financial markets since the S&P 500 rose to a record high on October 29\. That actually reduces the likelihood of a bursting stock market bubble. The Nasdaq has fallen 4.4% since then. The Roundhill Meme Stock ETF lost 41.1% since October 14\. The price of gold has retreated 6.3% since October 20\. Bitcoin fell below its 200-day moving average last week and is now in a 24.7% bear market since this year's peak on October 6 (chart). On July 18, the GENIUS Act established stablecoin as the cryptocurrency most likely to be used for transactions, thus eliminating this role for bitcoin. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-69.png) The GENIUS Act might have burst the balloon inflated by financial genius Michael Saylor. He was featured on the front cover of the January 30, 2025 issue of *Forbes* as "The Bitcoin Alchemist" (chart). That honor has sometimes proved to be a curse (image). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-14-222243.png) The stock price of Saylor's company, Strategy, has plunged 55.7***%*** from this year's high on July 17 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-9.jpg) The Magnificent-7’s stock prices have lost some air too, falling 6.0% since October 29 (chart). During the pandemic, these seven stocks were prized for their strong cash flows and asset-light balance sheets. When the Fed tightened monetary policy, they were favored for their low debt burdens. Soon after ChatGPT was introduced in late 2022, they were once again regarded as winners, especially the cloud providers among them. But in recent months, investors have become concerned that the Magnificent-7 companies are spending too much on AI infrastructure. The concern is that they will have excess capacity. Ironically, some AI-related stocks (like CoreWeave) have been hit recently because building new data centers is taking longer than expected due to electricity shortages and other challenges. Another concern is that the demand for more AI cloud capacity has been driven by the computing power required to train Large Language Models rather than by final demand from consumers and businesses. Michael Burry has also charged that the hyperscalers should be depreciating their GPU chips over 2- to 3-year periods rather than longer ones. These are all legitimate concerns. However, they don't add up to an AI bubble that is about to burst, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-70.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: Quantum Leaps For Quantum Computing? URL: https://www.yardeniquicktakes.com/deep-dive-quantum-leaps-for-quantum-computing/ Last updated: 2025-11-14T03:03:31.000Z While most of the market’s focus is on artificial intelligence, many companies continue to work on quantum computing in the hopes of creating a computing system that’s far more powerful than traditional computers. Among the largest players, IBM, Microsoft, and Google are working to make the technology feasible by the end of the decade. The government has also recognized the national importance of quantum computing. It’s considering taking equity stakes in some of the industry’s smaller players in exchange for giving them grants. The stocks of a few of these smaller players have risen by more than 100% this year, leading some to wonder whether the industry is in its own bubble. Here’s an update on the latest news in this exciting industry. (1) *IBM gives a timeline.* By 2028 or 2029, quantum computers will solve problems that will “surprise and amaze” us, promises IBM’s CEO Arvind Krishna. Quantum computers will be able to calculate bond pricing, construct investment portfolios, and forecast corrosion on aircraft wings in real-time and more accurately than traditional computers. Quantum today is where AI and GPUs were in 2015, he told [CNBC.](https://www.youtube.com/shorts/AokJnvI0CnU?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FQPDn2KRnj3nwOyYTZjQUhPxqEq2-9zC9wzU884foGAFlVZLpQ09MQPnEhJuu%5Fg3BNUpBa5dMiY6tQ9oBaDetS9RTsrQ&%5Fhsmi=2) IBM has made [progress](https://thequantuminsider.com/2025/03/03/ibm-ceo-sees-something-remarkable-happening-in-quantum-over-next-three-to-five-years/?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FQPDn2KRnj3nwOyYTZjQUhPxqEq2-9zC9wzU884foGAFlVZLpQ09MQPnEhJuu%5Fg3BNUpBa5dMiY6tQ9oBaDetS9RTsrQ&%5Fhsmi=2) in improving coherence times, or how long a quantum bit maintains its quantum state. It can currently maintain that state for about 1/10 of a millisecond. When it can maintain that state for a full millisecond, quantum computers will be able to perform calculations that exceed traditional computers’ capabilities. IBM is developing smaller, specialized models tailored for specific business applications to run on its quantum computers. (2) *Google’s breakthrough.* Using a new quantum chip dubbed Willow, Google’s engineers ran an algorithm 13,000 times faster on its quantum computer than it would run on a traditional supercomputer. “The algorithm in question is called Quantum Echo and models a physics experiment in Nuclear Magnetic Resonance (NMR, the spectroscopic variant of the popular MRI), revealing internal molecular structures by detecting magnetic spins at the center of atoms,” Tom’s Hardware [reported](https://www.tomshardware.com/tech-industry/quantum-computing/googles-quantum-echo-algorithm-shows-worlds-first-practical-application-of-quantum-computing-willow-105-qubit-chip-runs-algorithm-13-000x-faster-than-a-supercomputer?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FQPDn2KRnj3nwOyYTZjQUhPxqEq2-9zC9wzU884foGAFlVZLpQ09MQPnEhJuu%5Fg3BNUpBa5dMiY6tQ9oBaDetS9RTsrQ&%5Fhsmi=2). The experiment had tongues wagging because it can be reproduced and verified, and because it was a real-use case for quantum computing. IBM and Microsoft have also introduced chips for the quantum world. IBM recently introduced its Loon and Nighthawk chips, while Microsoft in February introduced Majorana 1. (3) *The government declares quantum vital.* Several small quantum computing companies are in talks with the US government to exchange federal funding for equity stakes, the WSJ [reported](https://www.wsj.com/business/entrepreneurship/trump-administration-in-talks-to-take-equity-stakes-in-quantum-computing-firms-60ee5143?gaa%5Fat=eafs&gaa%5Fn=AWEtsqflAloTLkGBbqSWAFNlzFMPKNhu0kAeMuf3K7SmnBKdlTNLq4M6PHbUC5YkH8E%3D&gaa%5Fts=6914cae6&gaa%5Fsig=3rfXnn-nREwy02F2Z7YjXX5sb%5FqSat2L3DurwBK7H7JWEqiGDuZ4Z34BJSsghHB3LD1OMdmXW3TRJK-lBKf5wA%3D%3D&utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FQPDn2KRnj3nwOyYTZjQUhPxqEq2-9zC9wzU884foGAFlVZLpQ09MQPnEhJuu%5Fg3BNUpBa5dMiY6tQ9oBaDetS9RTsrQ&%5Fhsmi=2). The discussions suggest that the US government views quantum computing as vital to the country’s national interests and security. If successful, quantum computers could potentially crack security codes that are impenetrable to traditional computers and help discover new drugs, materials, and chemicals. National security was also cited when the US government took equity stakes in Intel and rare earth metals producer MP Materials. IonQ, Rigetti Computing, and D-Wave Quantum are among the companies reportedly in discussion with the government. Quantum stocks have risen sharply this year, including the shares of IonQ (30.3%), Rigetti (105.8), and D-Wave (245.1) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-5.jpg) Each of the companies recently reported Q3 results that illustrate their youth. D-Wave’s Q3 revenue grew to $3.7 million from $1.9 million a year ago, and the company reported an adjusted loss of $18.1 million, versus an adjusted loss of $23.2 million in the year-ago quarter. Rigetti’s Q3 revenue was $1.9 million, down from $2.4 million a year ago. Its operating loss of $20.5 million was up from a $17.3 million loss in Q3-2024\. IonQ’s Q3 revenue more than tripled from the same period last year to $39.9 million from $12.4 million, but its net loss ballooned to $1.1 billion, and its adjusted EBITDA loss was $48.9 million, up from a loss of $23.7 million in the year-ago quarter. Before investors get too excited about the government’s investment, they might want to wait and see how much equity the government requests in exchange for grants to companies that have yet to turn a profit. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: AI's Low-Tech Problem URL: https://www.yardeniquicktakes.com/deep-dive-ais-low-tech-problem/ Last updated: 2025-11-13T00:56:49.000Z With lofty valuations in AI-related stocks, it's understandable that investors are on edge about anything that might go wrong. Recently, concerns have centered on the ability to bring new AI data centers online at the volume AI providers require. While funding for construction is flowing, a lack of electricity and permitting — two very low-tech problems — might be the Achilles' heel of this otherwise high-tech industry. Demand for AI is growing unabated. On Tuesday, AMD CEO Lisa Su [told investors](https://www.cnbc.com/2025/11/11/amd-lisa-su-growth-ai-analyst-day.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2) that the company's AI data center revenue should grow by about 80% per year over the next three to five years. As a result, AMD's total revenue is forecast to increase by roughly 35% annually over the same period, which exceeded analysts' estimates. The company's stock price has been soaring (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-4.jpg) But AI data center provider CoreWeave threw cold water on any excitement after warning that its Q4 results would miss expectations because a developer failed to deliver data centers on time. Infrastructure that was expected to come online in Q4 will instead come online in Q1-2026 and Q2-2026\. The delay didn't cost the company any customers, and demand for space in its data centers is still insatiable, CEO Mike Intrator [told](https://www.cnbc.com/2025/11/11/coreweave-stock-core-scientific-delays.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2) CNBC. But the company did reduce its 2025 revenue forecast range to $5.05 billion to $5.15 billion, below analysts’ forecast of $5.29 billion. Microsoft CEO Satya Nadella also recently [raised concerns](https://datacentremagazine.com/news/microsofts-power-problem-ai-chips-are-sitting-in-inventory?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2) about construction delays. “The biggest issue we are now having is … the ability to get the \[data center\] builds done fast enough, close to power. So if you can't do that, you may actually have a bunch of chips sitting in inventory that I can't plug in. In fact, that's my problem today. It's not a supply issue of chips. It's actually the fact that I don't have warm shells to plug into.” A “warm shell” is a new data center ready for occupancy. We wonder if this is the beginning of many problems the industry will face trying to build and deliver data centers on time. Here’s a look at some of the numbers surrounding AI data center demand, supply, and electricity: (1) ‎*A building spree.* Even before AI hit the scene, the number of data centers in the US had been on the rise as more people and businesses increasingly relied on cloud computing to process, analyze, and store their ever-increasing data. The advent of AI pushed that trend into hyperdrive. Monthly spending on data center construction starts rose to a record $4.2 billion in August, based on a 12-month moving average. That's up 100% from the August 2024 level and 400% from August 2023, [ConstructConnect](https://news.constructconnect.com/data-center-spending-in-august-reaches-13b-as-costs-rise-constructconnect-report-finds?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2#:~:text=Data%20center%20construction%20spending%20hit,%25%20year%2Dover%2Dyear.)[ ](https://news.constructconnect.com/data-center-spending-in-august-reaches-13b-as-costs-rise-constructconnect-report-finds?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2#:~:text=Data%20center%20construction%20spending%20hit,%25%20year%2Dover%2Dyear.)reports. Spending ytd through August at $40 billion had already surpassed the full-year 2024 record (chart). Building has also gotten more expensive, with the average cost per square foot rising to $977 in August, up from $665 a year prior. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-64.png) The US leads the world in data centers, with 4,189 to date — far exceeding the number in any other country, according to the [Data Center Map](https://www.datacentermap.com/datacenters/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2). The UK has 511 data centers, followed by Germany (487), China (381), France (321), Canada (294), India (276), Australia (275), Japan (247), Italy (209), and others had even fewer—those tracked range from hyperscale data centers to edge data centers. (2) *A power problem.* US data centers consumed 183 terawatt-hours (TWh) of electricity in 2024, according to IEA estimates cited in a Pew Research Center October 24 [report](https://www.pewresearch.org/short-reads/2025/10/24/what-we-know-about-energy-use-at-us-data-centers-amid-the-ai-boom/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2). That works out to more than 4% of the country’s total electricity consumption last year. By 2030, consumption is projected to grow by 133% to 426 TWh. A third of data centers are in Virginia, Texas, and California, Pew reports. Because data centers are often geographically concentrated, they can tax electric grids. For example, about 26% of the total electric supply in Virginia is consumed by data centers. There are growing concerns that data center demands are driving up electricity prices today and will continue to do so in the future. In recent years, electricity rates have increased as utilities have replaced aging equipment to protect against extreme weather events and cyberattacks. The typical US household was billed $142 a month for electricity last year, up 25% from $114 a month in 2014 (chart). Consumers worried about their electric bills are unlikely to support the construction of new data centers in their communities. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-3.jpg) Access to electricity is also causing headaches for those building data centers. Utility connection delays of up to five years are the most significant obstacle for data center growth, reports [Bain & Company](https://datacentremagazine.com/news/data-centre-power-where-will-the-industry-be-in-2030?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2). (3) *Looking to the stars.* Currently, data centers receive their energy from traditional electricity sources. Natural gas-powered utilities supplied more than 40% of the electricity used by data centers in 2024\. Renewables, like wind and solar power, supplied 24% of the electricity, nuclear about 20%, and coal around 15%, Pew reported. Going forward, data center companies are looking at traditional sources as well as new ones to augment power supplies. Google Research is exploring space via its [Project Suncatcher](https://research.google/blog/exploring-a-space-based-scalable-ai-infrastructure-system-design/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8VdfAdcq-ct7d0ENROqJaeaC3SmOvexqkq9p9qLdMzpbsROUqJBNSpVLOFlqeSXCkYY%5FuN8gqVimh8DxylgiwnCuImCA&%5Fhsmi=2). The moonshot project is described as placing a constellation of solar-powered satellites carrying Google TPUs into low-earth orbit and connecting them via free-space optical links to create space-based AI infrastructure (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-65.png) To turn this idea into a reality, Google will need to overcome several challenges, including establishing high-bandwidth communication between the satellites, managing orbital dynamics, and protecting equipment from radiation damage. Placed in the right orbit, a solar panel can be eight times more productive in space than it is on Earth, producing power nearly continuously and reducing the need for batteries. Google believes that by the mid-2030s, the cost of launching satellites should fall enough to make the cost of launching and operating a space-based data center roughly comparable to the energy costs of a data center on Earth. It plans to launch two prototype satellites by early 2027 to test how its models and TPU hardware operate in space and validate the use of optical intersatellite links for distributed machine learning tasks. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Geniuses Of Stablecoin URL: https://www.yardeniquicktakes.com/weekly-webcast-geniuses-of-stablecoin/ Last updated: 2025-11-12T13:00:31.000Z Now that the GENIUS Act has established a framework for stablecoin issuance with safeguards for consumers, we expect stablecoin usage to proliferate. Because stablecoins are backed by liquid assets such as Treasury bills, their proliferation is likely to affect bond market dynamics. Because stablecoins can be used for transactions, they’re likely to shrink the markets for other cryptocurrencies that can’t be, like bitcoin. Because stablecoins are a new M1 component, they’re likely to reduce the Fed’s control over the money supply. How stablecoin’s uptake will alter monetary policy, interest rates, and the federal debt is hard to predict. Stephen Miran theorizes that stablecoin proliferation will lower the neutral interest rate, requiring the Fed to ease accordingly. We aren’t convinced.[](https://us02web.zoom.us/rec/share/%5FBl3vBsO7J9JmKuAxzZ2RBGLfQwO7vLBkxh7myKfkvC1UUfRHUkHAq7YNC2VlDjh.chSCykxfwAfwHjAX?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Home Stretch For The Holidays URL: https://www.yardeniquicktakes.com/home-stretch-for-the-holidays/ Last updated: 2025-11-12T03:34:25.000Z The S&P 500 closed at 5881.63 at the end of last year. It is up 16.2% since then to 6846.61 today (chart). That beats the average 10.4% ytd gain at this point in the year over the past 10 years. The average annual increase over the past 10 years was 12.3%. If this turns out to be an average year, then the S&P 500 would fall 3.5% over the rest of 2025 to 6605.07\. On the other hand, it would have to gain just 2.2% to hit our 7000 target at the end of this year, which would be a 19% gain for the year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-59.png) The index could reach our 7000 year-end target before year-end and could be even higher by the end of this year. The S&P 500 has been driven up primarily by forward earnings this year. The index's forward P/E started the year at 22.4 and is up just 2.7% since then to 23.0 currently. It would have to increase to just 23.6 to hit our 7000 target. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-63.png) We are still targeting 7700 by the end of next year. That's our base case scenario with a 50% subjective probability. We see a 30% chance of a meltup and a 20% chance of a meltdown through the end of next year. We are tracking the meltup scenario by monitoring the ratio of the S&P 100 to the S&P 500 (chart). The rapid rise in this ratio over the past couple of years is reminiscent of what happened during the Tech Bubble of the late 1990s. _This post is for paying subscribers only._ ### Bad Day For the Big Short, Thanks To Dip Buyers URL: https://www.yardeniquicktakes.com/bad-day-for-the-big-short-thanks-to-dip-buyers/ Last updated: 2025-11-11T03:02:08.000Z Today was not a good day to be short AI stocks like Nvidia (up 5.8%) and Palantir (8.8%). They both rebounded dramatically, along with other AI stocks following last week's selloff (chart). Investors and traders bought the dip again. It's hard to short stocks in a bull market. The Magnificent-7 rose 2.8% today after falling 3.4% last week. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-50.png) The AI trade remains the Big Story that might continue to frustrate the new Big Short, i.e., the positions of traders who believe AI is a bubble that will soon burst. We don't think so. AI is the latest evolution in the Digital Revolution, increasing the amount of data that can be processed, analyzed, and stored at ever-faster speeds and at ever-lower cost. So it feeds on itself, creating more demand for IT hardware and software as it is fed more and more data. Buzz Lightyear comes to mind when he declared, "To infinity and beyond." Will all the capital spending on AI infrastructure ever make any money? It already is, as evidenced by the rapid growth in cloud providers' revenues. Microsoft, Amazon Web Services, and Google Cloud all saw their cloud sales continue to soar in Q3-2025, with combined total revenue of $79 billion, up 26% y/y and an annual run rate of $316 billion. We see AI as an App with multiple applications, driving demand for cloud computing capacity. Of course, the demand for AI capacity will grow only if the AI App boosts the productivity and profits of the S&P 493, not just the Magnificent-7\. That may be starting to happen (chart). _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: November 10-14 URL: https://www.yardeniquicktakes.com/economc-week-ahead-november-10-14/ Last updated: 2025-11-10T19:30:54.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-09-175816.png) On October 29, Fed Chair Jerome Powell said, "\[W\]hat do you do if you're driving in the fog? You slow down." He was referring to the lack of economic data due to the government shutdown. The Fed and the financial markets now have been deprived of two monthly employment reports. Add to the shutdown casualties list the October PPI and CPI, which would've dispelled some of the fog. All this is complicating the debate about whether the Fed might cut rates next month for what would be a third time in 2025\. It also adds drama to Fed speaking engagements in the days ahead. They include Governors Michael Barr opining on artificial intelligence and innovation (Tue), Christopher Waller speaking on payments (Wed), and Stephen Miran (Wed) speaking generally in a fireside chat over in the UK. Regional Fed presidents speaking [include](https://www.marketwatch.com/economy-politics/calendar?gaa%5Fat=eafs&gaa%5Fn=AWEtsqfUwQvlD-LWAOmN-kLYuL1spiW5f2LMv-hf6%5FMzodBaUMqddi-YOkQN2NGl9So%3D&gaa%5Fts=6910daad&gaa%5Fsig=hzA4UevNMZeppt8gbqxPMohAZnJLjhlkf3vitiMvfo4d3QUoSJQiB13GZpsLHTSCw5HDzKk%5Fwm%5F88ONewcqZHg%3D%3D&ref=yardeniquicktakes.com): New York's John Williams (Wed, Thu), Philadelphia's Anna Paulson (Wed), Atlanta's Raphael Bostic (Wed, Thu), Boston's Susan Collins (Wed), St. Louis' Alberto Musalem (Thu), Cleveland's Beth Hammack (Thu), Kansas City's Jeff Schmid (Fri), and Dallas' Lorie Logan (Fri). In other words, the Federal Open *Mouth* Committee will be very vocal this week. Though the government won't be reporting official data in the week ahead, here's a look at other upcoming data releases likely to confirm that the economy is still growing and inflation remains above the Fed's 2.0% target: (1) *CPI Inflation*. The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) shows that the headline and core CPI inflation rates rose 2.96% and 2.99% y/y, respectively, in October. In recent months, the CPI core inflation rate has been stuck around 3.00% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-46.png) (2) *Small business survey*. October's small business owners' survey (Wed), compiled by the National Federation of Independent Business, is likely to show that uncertainty remains high due to the government shutdown (chart). That might continue to weigh on the survey's labor market indexes, which we monitor closely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/3YJk50U.png) (3) *Retail sales*. Last week's Redbook Retail Sales Index (Tue), covering the tail end of October, rose 5.7% y/y, confounding the economic bears. Odds are good that the next reading will show that consumers are spending and that layoffs aren't widespread enough to weigh on consumer spending (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-47.png) (4) *ADP weekly jobs data*. ADP's national employment report will have market participants eyeing its weekly preliminary employment growth estimate (Tue) for any glimpse of clarity about labor market conditions amid the economic fog. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: From AI Zen To AI Jitters URL: https://www.yardeniquicktakes.com/market-call-from-ai-zen-to-ai-jitters/ Last updated: 2025-11-10T15:28:29.000Z The S&P 500 peaked at a record high of 6890.59 on October 28 (chart). It is down 2.4% since then. It retested its 50-day moving average on Friday, falling slightly below it around noon. It then closed higher on the day on hopes that a compromise proposal from the Democrats might end the government shutdown. Negotiations are reportedly happening, but they remain tense and far from resolution. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-35.png) A week ago, we warned: "While earnings are bullish, sentiment is bearish in the very short term. There are too many bulls." A quick test of the 200-day moving average is possible and would amount to an 11% correction. That would be a buying opportunity. We are still aiming for the S&P 500 to end the year at or closer to a record high of 7000\. Investors are jittery about AI-related stocks, as evidenced by the 4.9% drop in the MAGS ETF since October 29 (chart). We are not in the AI bubble camp. The cash flow of the AI hyperscalers continues to exceed their rapidly rising capital spending, with a payoff manifest in the rapidly increasing revenues of the cloud providers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-45.png) Still unambiguously bullish is that the S&P 500 forward earnings per share continues to soar to record highs (chart). It is now $302.83 with the forward P/E at 22.2. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-41.png) Earnings were much stronger than industry analysts expected in Q1 and Q2\. The same can be said for Q3 (chart). At the start of the Q3 earnings season, they expected a 6.5% y/y increase in S&P 500 earnings per share. The quarter is currently on track to exceed 14.0%! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-43.png) We expect that the government shutdown will end soon, and certainly before Thanksgiving. That should relieve some of the stress in bank liquidity. As a result of the shutdown, the US Treasury's cash balance has risen, leading to a decline in bank reserves (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-44.png) Meanwhile, on the economic front, investors' jitters were exacerbated last week by a jump in October layoff announcements and by the weakness in the preliminary November Consumer Sentiment Index (CSI) (chart). The layoffs were concentrated in technology and warehousing. They were not widespread and reflected the impact of productivity-boosting AI and automation advancements on these two industries. The CSI has been a useless economic indicator since the pandemic. Besides, when American consumers are happy, they spend money. When they are depressed, they sometimes spend even more, as long as they remain employed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-37.png) The signs of weakness in the labor market are unlikely to convince the majority of FOMC voters to cut the federal funds rate again in December, as actual and expected inflation remain elevated (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-38.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Challenging The Challenger Report URL: https://www.yardeniquicktakes.com/challenging-the-challenger-report/ Last updated: 2025-11-09T23:13:58.000Z Bond prices rallied and stock prices fell this morning on news that layoffs rose sharply, according to the [Challenger Report](https://www.challengergray.com/wp-content/uploads/2025/11/Challenger-Report-October-2025.pdf?ref=yardeniquicktakes.com), which was titled "JOB CUTS SURPASS 1 MILLION; HIGHEST OCTOBER TOTAL SINCE 2003\. COMPANIES CITE COST-CUTTING, AI IN OCTOBER." That headline is somewhat sensational. It refers to the past 12 months through October. The actual number of layoffs during the month was 153,074, as the report notes in its first sentence (chart). So far, October's jump hasn't been confirmed by initial unemployment claims. The official data are available only through September 19 because of the government shutdown. But Bloomberg News [estimates](https://www.msn.com/en-us/money/markets/us-initial-jobless-claims-fell-last-week-state-data-suggest/ar-AA1Pwp6n?ref=yardeniquicktakes.com) that jobless claims decreased to about 218,000 in the week ended October 25 from a revised 231,000 in the prior week. Those are low readings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/4g7ONbU-1.png) Most of October's announced layoffs occurred in the warehouse and technology industries (chart). Automation and robotics are boosting productivity in warehousing. AI is doing the same in technology. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-30.png) Announced technology layoffs have been high over the past two years (chart). The industry might have hired too many workers in 2022 and 2023\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-31.png) There was a big jump in October's warehouse-related announced layoffs (chart). That's odd since the holiday season should keep warehouses very busy. Again, this spike is probably primarily attributable to productivity gains, especially in online retailers’ inventory management. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-34.png) Meanwhile, announced hiring plans also spiked higher in October, according to seasonally adjusted data (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/4d1X8el.jpg) Yesterday, the Federal Reserve Bank of New York released its quarterly report on consumer debt. The good news is that delinquencies remain very low for mortgage and HELOC debt (chart). However, delinquencies on credit card, student loan, and auto loan debt are signaling financial stress. That's mostly among low-income debtors. They may be forced to cut back on discretionary spending. However, we believe that Baby Boomers, who are retiring with a record net worth of $80 trillion, will continue to boost overall consumer spending. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-32.png) By the way, it's also good news that the percentage of senior loan officers tightening lending standards remains low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-33.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### More Thoughts On The Latest 'Big Short' & Other Matters URL: https://www.yardeniquicktakes.com/more-thoughts-on-the-latest-big-short-other-matters/ Last updated: 2025-11-06T02:48:18.000Z On Tuesday, investors sold AI-related stocks on news that Michael Burry had shorted Palantir and Nvidia. Today, investors realized that his most prominent short position by far is in Palantir, which currently has a forward P/E of 212.9\. Nvidia has a forward P/E of 32.7 (chart). Except for Tesla, the other Magnificent-7 have lower forward P/Es than Nvidia. Burry is famous for his "Big Short" bet on the collapse of the housing market during the Great Financial Crisis. His current stance seems more like a big short on Palantir than a bet that AI is a bubble about to burst. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-28.png) The stock market gave up some of its gains as the day progressed. The Supreme Court met to consider whether Trump's tariffs are unconstitutional. The judges asked Trump's lawyer questions that suggested they are leaning toward ruling against Trump's tariffs. That sent the 10-year bond yield higher since the Treasury would no longer collect those customs duties and would have to refund what was already collected (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Powell’s Swan Song URL: https://www.yardeniquicktakes.com/weekly-webcast-powells-swan-song/ Last updated: 2025-11-05T13:00:06.000Z The data-dependent Fed is operating as well as possible without the usual economic data releases from government agencies during the shutdown. The shutdown is the latest in a series of unusual challenges Jerome Powell has navigated admirably as Fed chair. When his term ends in May, he’ll no doubt be replaced by a Trump loyalist, who undoubtedly will push the FOMC’s other voting members to provide easy monetary policy. If the chair is outvoted, the resulting internal dissension would be unprecedented and seriously detrimental to the Fed’s credibility. … For now, Powell’s statements during his recent presser suggest that a December rate cut is far from certain. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### The 'Big Short' Is Shorting AI URL: https://www.yardeniquicktakes.com/the-big-short-is-shorting-ai/ Last updated: 2025-11-05T03:57:57.000Z Hedge fund manager Michael Burry was portrayed in the film *The Big Short*. He bet big against the housing market before the 2008 crash and made a fortune. Now, he is taking another "big short" position against Nvidia and Palantir, two widely held AI stocks (chart). A regulatory [filing](https://www.sec.gov/Archives/edgar/data/1649339/000164933925000007/xslForm13F%5FX02/infotable.xml?ref=yardeniquicktakes.com) showed that his hedge fund, Scion Asset Management, has bought put options on the two high flyers. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-23.png) Investors are sitting on huge stock market gains, and some might have taken profits today, especially in AI-related stocks, in response to Burry's filing news. In the October 27 *QuickTakes*, we wrote: "The AI mania should continue to fuel the bull market in the S&P 500 Semiconductor index until it doesn't. Significant pullbacks have often followed new record highs in the index. We've been recommending overweighting the S&P 500 Information Technology sector and the Semis for a long time. Both are getting a wee bit frothy." In Saturday's *QuickTakes*, we wrote: "While earnings are bullish, sentiment is bearish in the very short term. There are too many bulls." Today, the S&P 500 Information Technology and Communication Services sectors combined accounted for a record 45% of the S&P 500's market cap and 38% of its earnings (chart). So there is more earnings support for the current tech bubble than the one in the late 1990s. There isn't as much air in the current bubble. It isn't likely to burst, though it might leak some air from time to time. _This post is for paying subscribers only._ ### GDP IS HOT URL: https://www.yardeniquicktakes.com/gdp-is-hot/ Last updated: 2025-11-04T02:40:32.000Z The Atlanta Fed's GDPNow model estimate for real GDP growth in Q3-2025 is 4.0% (saar) today, up from 3.9% on October 27 (chart). After this morning's Manufacturing ISM Report on Business from the Institute for Supply Management, the nowcast of Q3 real gross private domestic investment growth increased from 4.4% to 4.6%. Of course, the model is based solely on data compiled by private-sector sources because the federal government shutdown has cut off the supply of government-reported data since early October. Before the shutdown, the Bureau of Economic Analysis revised the growth rate in Q2's real GDP up to 3.8%. Also before the shutdown, the Bureau of Labor Statistics revised payroll employment down significantly, with the result that it rose just 29,000 per month on average during the three months through August. Together, this suggests that whenever the government reports productivity, its growth rates for Q2 and Q3 should be very strong. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-14.png) Today's M-PMI report was relatively weak, with the overall index below 50.0 for the 8th straight month, at 48.7 (chart). All the major subindexes of the M-PMI were below 50.0. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/3yWsQfn.png) However, the M-PMI has been a poor indicator of real GDP growth over the past three years (chart). The latter has been growing faster than the M-PMI suggests. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: November 3-7 URL: https://www.yardeniquicktakes.com/economic-week-ahead-november-3-7/ Last updated: 2025-11-03T02:04:33.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/Screenshot-2025-11-02-191904.png) A big week of economic releases is coming up, but the government won’t be reporting them because it is closed for business. Nevertheless, the week ahead will still be a big one for private-sector economic data. On balance, they are likely to show that the economy is expanding, consumers are spending, and employment is still growing, albeit at a slow pace. Consider the following: (1) *Retail sales*. The weekly Redbook Retail Sales Index is released on Tuesday mornings. It is likely to confirm that consumers are continuing to spend on merchandise at a solid pace (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-9.png) (2) *Purchasing managers*. October's ISM national purchasing managers' indexes for the manufacturing (Mon) and non-manufacturing (Wed) sectors might show some strength, based on S&P Global's flash estimates (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-10.png) The regional business surveys conducted by five of the 12 Fed district banks suggest that the M-PMI might have rebounded to 50.0 in October (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-11.png) (3) *Employment.* October's ADP private payrolls report should show a modest increase of around 50,000 based on ADP's weekly estimates. That would be a welcome rebound from September's 32,000 decline. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-13.png) (4) *Layoffs*. October's Challenger announced job layoffs report (Thu) is likely to show an increase, especially among technology companies. A broader increase is unlikely since state data indicate that weekly initial unemployment claims remain subdued (chart). Bloomberg's latest estimate of US jobless claims is approximately 218,000 for the week ending October 25, 2025\. This marks a decline from the previous week's revised figure of 231,000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/4g7ONbU.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Super-Duper Earnings URL: https://www.yardeniquicktakes.com/market-call-47/ Last updated: 2025-11-03T02:12:14.000Z S&P 500 earnings per share continue to beat expectations. Q3 earnings per share are on track to rise to a new record high. They are driving the S&P 500 stock price index to new record highs. The Magnificent-7 are leading the way higher on both fronts. As a result, the S&P 500 market-weight index continues to outperform the equal-weight index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-7.png) On Friday, Amazon provided the latest amazing earnings report from the Magnificent-7\. Amazon shares jumped 9.6% after the online retail giant reported that AWS, its cloud computing unit, saw revenue increase 20% in Q3\. CEO Andy Jassy said that AWS is "growing at a pace we haven't seen since 2022" and that AI and core infrastructure are experiencing "strong" demand. This confirms our view that AI is essentially a high-powered app with myriad uses, which is significantly increasing demand for cloud computing. The profits aren't so much in monthly fees for AI software (i.e., large language models, or LLMs), but in providing cloud capacity in data centers to run the models. The Digital Revolution, which started in the 1960s, is all about processing more data, more quickly and more cheaply. As a result, more and more data are being processed. There is no limit to the supply of data. So the outlook for the Digital Revolution is to “infinity and beyond”! That's clearly a very bullish outlook for earnings, assuming that the demand for processing data is as open-ended as we suggest. That is a bet that AI will deliver on the promise of boosting the productivity and earnings of companies that are the customers of the cloud providers. The stock market is currently discounting this version of our Roaring 2020s scenario. As for where earnings stand now, S&P 500 companies’ aggregate forward earnings per share rose to yet another record high during the week of October 30 of $299.61 (chart). It is nearly at the $300 we have been predicting it would reach by the end of this year; clearly, the year-end level will be higher than that. We expect forward earnings to rise to $350 per share by the end of 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway.png) The Q3 earnings season is beating expectations, even though industry analysts didn't lower their estimates as they did before the Q1 and Q2 earnings seasons, which also beat expectations significantly (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-1.png) At the start of the current earnings season, industry analysts projected an increase of just over 6% (chart). The blended growth rate is over 10% so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-2.png) We also track the growth rate of earnings on a pro forma basis, i.e., apples-to-apples. It is up 13.8% y/y (so far) for Q3 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-3.png) Remarkably, S&P 500 forward revenues on a pro forma basis is up 7.5% so far for Q3 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-4.png) Q3's forward profit margin on a pro forma basis has also jumped to 13.8% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-5.png) Q3's earnings beats have been widespread among the 11 sectors of the S&P 500 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-6.png) While earnings are bullish, sentiment is bearish in the very short term. There are too many bulls (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/11/gateway-8.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: We Dissent URL: https://www.yardeniquicktakes.com/deep-dive-we-dissent/ Last updated: 2025-10-31T02:44:07.000Z ***The following is an excerpt from our October 27, 2025 Morning Briefing.*** The Fed will almost certainly cut the FFR by 25bps on Wednesday. It will probably do it again on December 10\. Apparently, Fed officials believe that the current 4.00% reading of the FFR is restrictive. That’s because they are collectively convinced that the long-run FFR is 3.00% ([*Fig. 12*](https://yardeni.com/wp-content/uploads/tc%5F20251027%5F12.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-8tz9itFBc83DqiMUXYdqR-TbwH6FYDrSBSmu17nN1n9ZBqj257VKiCZ1l%5FAbgV%5FTpOuQqFn2iclChvk7cSViH4egCpIQ&%5Fhsmi=2) below). This rate is also often called the “neutral FFR” or “r-star” (a.k.a. “r\*”), which is deemed to be the interest rate that achieves the Fed’s dual mandate of maximum employment with price stability. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/tc_20251027_12.png) Figure 12 The neutral FFR concept is a bad joke, if you’d like to know what we really think. Here’s why: _This post is for paying subscribers only._ ### Don't Feed The Animal Spirits URL: https://www.yardeniquicktakes.com/dont-feed-the-animal-spirits/ Last updated: 2025-10-30T03:07:02.000Z In his press conference today, Fed Chair Jerome Powell told financial market participants that today's 25bps cut in the federal funds rate (FFR) might not be followed by another one on December 10, when the FOMC votes on monetary policy again. "In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December," Powell said. "A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it." Indeed, there were two dissenters. One wanted a 50bps cut today, while another wanted no cut. Powell suggested that the Fed might be back in pause mode and once again in no hurry to lower the FFR further. "We're at a place now where we have, in fact, cut two more times ... we're 150 basis points closer to neutral, wherever that may be, than we were a year ago," he said at the news conference. "There’s a growing chorus now of feeling like maybe this is where we should at least wait a cycle, something like that." Some FOMC participants are probably concerned that easier monetary policy is increasing financial instability. They probably don't want to feed the animal spirits in the stock market. We side with them. The reaction of the bond market should certainly give Fed officials pause. The 10-year Treasury bond yield rose back over 4.00% today to 4.08% (chart). That's where it was before the Fed cut the FFR on September 17! The bond market isn't buying the Fed's cover story that interest rates were too restrictive. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-182.png) But what about the labor market? Yesterday, ADP announced that it will release a preliminary US estimate of the monthly ADP National Employment Report each Tuesday. The payroll processor said on Tuesday that private employers added an average of 14,250 jobs per week over the last four weeks, returning to net job growth after a weak spell. Nevertheless, many companies have been announcing headcount reductions, with some attributing that to AI. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Inflation: 3.0% Is The New 2.0% URL: https://www.yardeniquicktakes.com/weekly-webcast-inflation-3-0-is-the-new-2-0/ Last updated: 2025-10-30T21:47:57.000Z The Fed Put is back. Given the likelihood of two more reductions in the federal funds rate before year-end, we’re reducing the odds of our bullish base-case Roaring 2020s scenario from 55% to 50% and raising the odds of an even more bullish stock market meltup from 25% to 30%. Indeed, the stock market jumped Friday in reaction to a cooler-than-expected inflation report, since it buoys the case for Fed ease. Today, Dr Ed explains why further rate cuts are not needed now with both parts of the Fed’s dual mandate, unemployment and inflation, close to Nirvana. The Fed’s attempt to achieve the “neutral” FFR rate by easing is more likely to drive stock prices higher than to help the labor market. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Reality Check URL: https://www.yardeniquicktakes.com/reality-check/ Last updated: 2025-10-29T03:25:39.000Z Shares ofNokia soared by 23% today after the telecom equipment provider announced a billion-dollar partnership with artificial intelligence (AI) giant Nvidia. As part of the deal, Nvidia plans to invest $1 billion in Nokia in exchange for a 2.9% stake in the Finnish networking pioneer. Yardeni Research is seeking an investment from Nvidia. The funds will be used to build a data center in Dr Ed's backyard and to add a ballroom to the East Wing of his home in Long Island. That's just wishful thinking. But, for now, Cathy Wood has seen enough AI wheeling and dealing to warn that a "reality check" on AI valuations is coming. AI euphoria is once again causing the Magnificent-7 to outperform the Impressive-493 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-180.png) _This post is for paying subscribers only._ ### Just Another AI (Mania?) Day URL: https://www.yardeniquicktakes.com/just-another-ai-mania-day/ Last updated: 2025-10-28T03:19:39.000Z Today was just another day in the stock market. The S&P 500 rose to another record high of 6875.16\. Also closing at record highs were the Nasdaq, the DJIA, and the Russell 2000\. Been there, done it! More record highs are likely when the Fed cuts the federal funds rate by 25bps on Wednesday. On Thursday, President Donald Trump and Chinese President Xi Jinping are expected to meet. The stock market rose today on reports that they will agree on a framework for a potential trade deal. That would amount to a ceasefire in their trade war, with both the US 100% additional tariff on Chinese imports and severe Chinese restrictions on their exports of rare-earth minerals and magnets to the US postponed. Hooray! The stock market also rose on more AI news (hype?) today. Qualcomm made headlines today with a significant leap into the AI data center market, unveiling new chips that sent its stock soaring over 11%. It is collaborating with HUMAIN, a Saudi AI startup, to deploy 200 megawatts of AI infrastructure starting in 2026\. Qualcomm now aspires to be a serious contender against Nvidia and AMD in the AI accelerator space. The more competition, the merrier as the stock prices of all three rose. Semiconductor stocks were once viewed as very cyclical because their earnings were cyclical (chart). So the industry's forward P/E tended to be around 15.0 during the period between the Great Financial Crisis and the Great Virus Crisis. Now it is at 30.0 as forward earnings has soared to record highs over the past couple of years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-167.png) The forward earnings of the S&P 500 Semiconductor industry was cyclical because the forward profit margin of the sector was cyclical (chart). It had a boom/bust cycle. During good times, the companies sold lots of chips and built-up inventories, exacerbating downward pressure on their prices during the bad times. _This post is for paying subscribers only._ ### Economic Week Ahead: October 27-31 URL: https://www.yardeniquicktakes.com/economic-week-ahead-october-27-31/ Last updated: 2025-10-27T01:49:28.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/CleanShot-2025-10-26-at-15.14.50@2x.png) The week ahead will see central banks commanding the spotlight as the Federal Reserve, European Central Bank, Bank of Japan, and Bank of England weigh in on both interest rates and the balance of economic risks. All eyes will be on the Federal Open Market Committee, which is widely expected to deliver another 25bps rate cut on Wednesday. Given cooler-than-expected September CPI data, odds are rising that the Fed will cut rates for a third time this year in December as well. President Donald Trump, never one to cede center stage, will garner loads of attention as he leaves behind a shutdown US government and makes the rounds in Asia. The US President's long-awaited summit with Chinese leader Xi Jinping in South Korea on Thursday could mend fences between the two biggest economies, according to news reports this evening. US Treasury Secretary Scott Bessent said talks on the sidelines of the Asia-Pacific Economic Cooperation (ASEAN) Summit in Kuala Lumpur had eliminated the threat of Trump's 100% tariffs on Chinese imports, set to start on November 1\. Bessent also said he expects China to delay the implementation of its licensing regime for rare earth minerals and magnets by a year while the policy is reconsidered. Before then, Trump will be in Tokyo on Tuesday, where he and the new Japanese prime minister, Sanae Takaichi, will take the measure of each other. Though few expect fireworks, Japan's first female leader has talked of a "[renegotiation](https://www.bloomberg.com/news/articles/2025-09-28/japan-s-ldp-contender-takaichi-hints-at-review-of-us-trade-deal?ref=yardeniquicktakes.com)" of the US-Japan tariff deal, particularly the $500 billion "signing bonus" Trump is demanding. Trump will also meet Canadian Prime Minister Mark Carney in Seoul, where the ASEAN summit is taking place. Over the weekend, Trump raised tariffs on Canada by 10% in retaliation for a political ad by the Ontario province's premier that used 1987 [archival footage](https://www.reuters.com/business/media-telecom/ontario-premier-provokes-trumps-ire-once-again-with-reagan-ad-2025-10-25/?ref=yardeniquicktakes.com) of Ronald Reagan warning that tariffs "hurt every American." Amid uncertainty about when the US government will release economic data, markets are sure to look for economic clues in earnings results from Alphabet, Amazon, Apple, Chevron, Eli Lilly, ExxonMobil, Mastercard, Meta, Microsoft, NextEra, UnitedHealth, and Visa. Here's a list of economic reports most likely to offer some visibility into how the economy is faring: (1) *Consumer confidence*. The Conference Board's Consumer Confidence Index survey (Tue) likely remained steady in October around the 94 level. We'll be watching for signs of stabilization in the jobs availability data (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-162.png) (2) *Regional Fed business surveys*. October business surveys from the Dallas Fed (Mon) and the Richmond Fed (Tue) could fill in some blanks about how the economy is faring. The average of the three available surveys weakened this month but suggests that the ISM M-PMI might still rise above 50 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-163.png) (3) *Housing* *activity*. September's pending home sales (Wed) from the National Association of Realtors probably remained relatively weak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-164.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Fly Us To The Moon URL: https://www.yardeniquicktakes.com/market-call-fly-us-to-the-moon/ Last updated: 2025-10-25T16:24:37.000Z The major stock market indexes rocketed to new record highs on Friday. We are raising the odds of a meltup from 25% to 30%, reducing the odds of our bullish base-case scenario from 55% to 50%, while leaving the bearish alternative scenario at 20%. In our base-case scenario, the S&P 500 stock price index rises to 7000 by the end of this year and 7700 by the end of next year. Those targets would be exceeded sooner in a meltup, forcing us to raise our odds of a bearish outcome—i.e., a correction, a bear market, or a meltdown. September's cooler-than-expected CPI report on Friday morning increased the odds of two more Fed rate cuts before the end of this year. Since then, we've been humming Frank Sinatra's rendition of the [song](https://video.search.yahoo.com/yhs/search?fr=yhs-firearc-keyguardchr&hsimp=yhs-keyguardchr&hspart=firearc&p=Fly+me+to+the+moon+song&type=1745829567418391&ref=yardeniquicktakes.com#id=3&vid=6e477f58617f390c38baa4a224cc43e7&action=view) "Fly Me To The Moon." The CME FedWatch Tool reflects a 90% probability of two 25bps cuts before year-end, bringing the federal funds rate (FFR) down to 3.50%. It's a sure bet. The 2-year US Treasury yield had already declined from 3.60% at the beginning of October to 3.48% on Friday. However, the 10-year yield remained stuck around 4.00% (chart). The Fed may be making the same mistake as it did last year, when a 100bps cut in the FFR prompted a 100bps rise in the 10-year yield (along with mortgage rates). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-155.png) The S&P 500 is now up 15.5% ytd to 6791.69 (chart). On average over the past 10 years, the index has increased by a total of four percentage points in November and December combined. If it does so again this year, the index would rise to 7063 from Friday's close. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-156.png) After a brief correction earlier this year, momentum stocks have continued to lead the bull market higher, as they have since late 2023 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-160.png) The widespread concern about the sustainability of the bull market is that S&P 500 valuation multiples are elevated (chart). We don't think this poses a problem unless we are wrong about the resilience of the economy and a recession scenario becomes more likely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/4d0fU5V.png) Meanwhile, our bullishness has significant tailwinds coming from earnings. S&P 500 forward earnings per share rose to another record high of $298.52 last week (chart). At Friday's close, the forward P/E was 22.8\. Forward earnings is converging toward the analysts' 2026 consensus earnings estimate, which edged up last week to $305.03 per share. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-158.png) Both the S&P 400 MidCaps and the S&P 600 SmallCaps have yet to exceed their record highs hit at the end of last year. That's because their forward earnings have been stuck in the mud since mid-2022\. Their recent recoveries have been lackluster (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-159.png) Investors Intelligence Bull/Bear Ratio (BBR) probably rose above 4.00 this week. The result will be reported on Wednesday. Readings above 3.00 can be contrary indicators, suggesting that there are too many bulls and that a pullback is imminent. In our experience, the BBR measure works better as a buy signal when below 1.00 than as a sell signal when above 3.00. Flying to the moon is safer than flying closer to the sun, as the myth of Icarus—whose wax wings melted—reminds us. In our base-case scenario, the stock market is on Sinatra's moonshot course. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-161.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Economy Still Moving Forward URL: https://www.yardeniquicktakes.com/economy-still-moving-forward/ Last updated: 2025-10-24T02:42:34.000Z The government shutdown continues to shut off the supply of many economic indicators. Tomorrow's CPI inflation rate for September is an exception. It is widely expected to remain stuck at 3.0% on a y/y basis. Based on a few conversations with friends about their businesses, we won't be surprised if the CPI is hotter than that, since President Donald Trump's tariffs may still be boosting prices of consumer durable goods. Helping to hold down the headline CPI inflation rate during September were falling consumer energy prices. Today, however, oil prices surged 6% after President Trump imposed sweeping new sanctions on Russia's two largest oil producers, Rosneft and Lukoil. They marked the first severe Ukraine-related sanctions of Trump’s second term—and a significant shift from his earlier reluctance to target Moscow's energy industry (chart). At the same time, tensions are rising in Latin America. Venezuelan President Nicolás Maduro claims that his military has deployed 5,000 Russian-made anti-aircraft missiles amid growing US military activity in the Caribbean. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-152.png) Meanwhile, the available economic indicators suggest that the economy, in general, and consumer spending, in particular, continue to grow despite concerns about the labor market. The Redbook Retail Sales Index rose 5.0% y/y during the October 17 week (chart). _This post is for paying subscribers only._ ### Bubble, Bubble, Toil & Trouble URL: https://www.yardeniquicktakes.com/bubble-bubble-toil-trouble/ Last updated: 2025-10-23T03:31:41.000Z A few weeks ago, we observed a bubble in fears of a bubble. The fearmongers see an "everything bubble" that will soon burst. The expression "the bubble in everything" began gaining traction during the tenure of Federal Reserve Chair Janet Yellen (2014–2018), but it became widely associated with Jerome Powell's leadership and the monetary stimulus of the 2020–2021 pandemic era. In other words, we've seen this movie play out only a few years ago. Numerous bubbles burst, but they didn't cause a financial calamity or a recession. And here we are today, with the US MSCI and many other stock markets around the world at record highs (chart). Here we are today, with US real GDP at a record high. Except for the two-month pandemic lockdown recession in early 2020, the last US recession occurred 16 years ago! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-143.png) pandemic lockdown There are bubbles out there. They will burst because that's what bubbles do. However, they are unlikely to follow the script of the Great Financial Crisis. They are more likely to create buying opportunities in various asset markets, which is what happened when the previous everything bubble burst. Consider the following: (1) Margin debt rose over $1.0 trillion for the first time during the summer (chart). In the event of a severe pullback, the stock market becomes more vulnerable to margin calls and a bear market. That's what happened during the previous bear market in 2022\. However, it didn't last long, despite a sharp decline in margin debt. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-140.png) (2) Everyone agrees that valuation multiples are stretched. The S&P 500 forward P/E of the S&P 500 was 22.6 in September (chart). But that's where it was a few months after the end of the lockdown recession. Along the way, it fell to around 15.0 during the 2020 bear market and to 18.0 during the correction this past spring. Again, these selloffs provided great buying opportunities. Fears of a recession and actual recessions cause P/Es to drop. The economy has demonstrated its resilience since the pandemic. It is likely to remain resilient through the end of the Roaring 2020s, in our opinion. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Halloween Is Coming URL: https://www.yardeniquicktakes.com/weekly-webcast-halloween-is-coming/ Last updated: 2025-10-22T12:00:02.000Z Investors’ panic attack Thursday was another of many short-lived frights that haunt bull runs. Our economic analyses help us spot the difference between panic-generated minor pullbacks and scarier downturns like corrections and bear markets. Corrections tend to occur when investors fear a recession that doesn’t happen. Bear markets tend to be caused by recessions. Currently, the economy remains resilient, and a recession is unlikely, in our opinion. Plenty of frightening scenarios have been floating around in recent years, but our confidence in the resilience of the economy has helped us to expose them as phantoms. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### China's Economy Has A Few Major Problems URL: https://www.yardeniquicktakes.com/chinas-economy-has-a-few-major-problems/ Last updated: 2025-10-22T03:20:02.000Z China's economy is struggling with excessive debt, deflation, excess capacity, and a rapidly aging population. China continues to rely on exports to support economic growth. China has been increasingly accused of dumping its excess production in world markets. This is exacerbating trade frictions, especially with the US. The Chinese government's efforts to stimulate domestic consumption have largely failed to achieve this goal. The problem is that Chinese consumers are depressed because many of them are experiencing a significant negative wealth effect from the losses they incurred when China's property bubble burst. The stock market has also whipsawed them. Consider the following: (1) New home prices have been falling since mid-2022 (chart). They fell 2.2% y/y during September. This marks the 26th consecutive month of decline, reflecting persistent weakness in demand. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/3Vl0DG8.png) (2) The housing slump is dragging down consumer confidence and household spending (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-128.png) (3) Retail sales in China grew by 3.0% y/y in September 2025, marking the slowest expansionsince August 2024\. While the overall growth is positive, it reflects a cooling trend compared to the 3.4% increase in August. While some consumer categories are rebounding, others—especially discretionary goods—are losing momentum. Adjusted for the 0.8% y/y drop in China's CPI for goods, retail sales rose 3.8% (chart). However, this measure has been growing more slowly than industrial production since early last year, which is causing deflation. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-129.png) (4) The Peoples Bank of China has been providing a stimulative monetary policy by reducing bank reserve requirements and lowering its official interest rate. Yet the y/y growth in bank loans has dropped nearly in half over the past three years to 6.6% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-130.png) (5) China's bank loans rose to a record high of $38.0 trillion in September. That's a staggering amount of debt, and that is only bank loans (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-132.png) (6) Both short-term and long-term government interest rates remain depressed below 2.00% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-131.png) (7) China's major stock market indexes have been very volatile and nearly flat for 18 years (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-133.png) (8) China's stock market has performed very well this year, with the FTSE China index up 34.7% ytd. Technology (34.8%) has performed well, but even better-performing sectors include Basic Materials (77.7%), Health Care (67.6%), and Consumer Discretionary (48.3%). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-134.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Market Musings URL: https://www.yardeniquicktakes.com/market-musings/ Last updated: 2025-10-21T03:47:16.000Z Apple's stock price hit a new record high today on a report that sales of this year's iPhone models had started strongly. Shares of the tech giant climbed 3.9%, closing at $262.24 and helping the company surpass Microsoft to become the second largest in the US by market capitalization (chart). Only Nvidia is larger. That helped to lift the S&P 500 by 1.1%. The recent sharp drop in the index on October 10 in response to President Donald Trump's threat to impose an additional 100% tariff on China and the October 16 decline on regional bank worries have been almost completely reversed. The S&P 500 is only 0.3% below its October 8 record high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-126.png) Last Thursday's concerns about more cockroaches in the credit markets have been overcome by strong Q3 earnings reports from the big banks, falling oil prices, and expectations of another Fed rate cut on October 29\. A growing glut of oil and fear of a global economic slowdown have pushed US West Texas Intermediate crude prices to their lowest point since fuel markets were rebounding from the Covid crash (chart). That will help push headline consumer inflation rates down and boost consumers' purchasing power. _This post is for paying subscribers only._ ### Economic Week Ahead: October 20-24 URL: https://www.yardeniquicktakes.com/economic-week-ahead-october-20-24/ Last updated: 2025-10-19T23:06:22.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/Screenshot-2025-10-19-173107.png) We're entering yet another week of limited visibility on the economy thanks to the government shutdown. This leaves markets attempting to fill the statistical void with private surveys, comments from Federal Reserve officials, and the odd corporate report to gauge the balance of economic risks. This gives added weight to October's flash purchasing managers' index data (Fri) for both manufacturing and services. Just as important will be the delayed release of September's CPI (Fri). Fed speakers this week [include](https://www.federalreserve.gov/newsevents/calendar.htm) Governors Christopher Waller (Tue) and Michael Barr (Wed and Thu). This week will also be one of close credit market surveillance following bankruptcies at auto parts manufacturer First Brands Group and subprime auto lender Tricolor. JPMorgan CEO Jamie Dimon’s warning that "when you see one cockroach, there are probably more" in response to private credit concerns hardly instills confidence. Nor did regional Zions Bancorp’s telegraphing a $50 million Q3 loss. Such concerns sent the 10-year Treasury yield briefly below the key 4.00% level for the first time since April. Earnings reports from Netflix and Tesla could offer insights into the state of consumer demand. It's also a big week for aerospace and defense companies with Lockheed Martin, GE Aerospace, RTX, and Northrop Grumman reporting. On the international front, investors will pay close attention to the latest volleys in the US-China brawl over tariffs and restrictions on rare-earth materials. In Tokyo, we'll get greater clarity on whether Sanae Takaichi has the support of enough opposition parties to become Japan’s first female prime minister. Here's a look at the data releases most likely to influence views on the economy and whether the Federal Open Market Committee will vote to ease again at its October 28-29 meeting: (1) *CPI*. Notwithstanding the government shutdown, September's inflation data will be released this week on Friday. The headline and core CPI inflation rates (Wed) likely rose 2.99% y/y and 2.95% y/y during September, according to the [Cleveland Fed's Inflation Nowcast](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com). This would confirm our view that Trump's tariffs didn't boost inflation but did keep it from falling to the Fed’s target of 2.0% by now. The tariffs boosted the CPI durable goods inflation rate (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-106.png) (2) *Home sales*. In August, sales of previously owned homes essentially stalled at around 4 million units (saar) (chart). Since then, Fed Chair Jerome Powell has begun giving the housing industry what it wants, i.e., lower mortgage rates. Markets are keen to see whether September's report (Thu) hints at a recovery in housing activity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-110.png) The same goes for new home sales data for September (Fri), which jumped during August (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-111.png) (3) *Fed business surveys*. In August, the Chicago Fed's national activity index posted its best performance in five months, coming in at -0.12\. Its September survey (Thu) will be released the same day as the Kansas City Fed's read on its regional business activity, which showed a modest decline in September. The average of September's New York and Philadelphia Fed district surveys remained weak (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-108.png) September's averages of the prices-received and prices-paid indexes remained elevated in the New York and Philadelphia business surveys (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-107.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Did Santa Come Early To Wall Street? Is He Leaving Now? URL: https://www.yardeniquicktakes.com/market-call-did-santa-come-early-to-wall-street-is-he-leaving-now/ Last updated: 2025-10-19T22:42:37.000Z We've been monitoring the relationship between the S&P 500's ytd performance versus its comparable average of the past 10 years (chart). This year, the index has been much more volatile than the average and has outperformed the average by about five percentage points since early August. Does this mean that the traditional Santa Claus rally started early this year and is over already? Over the past 10 years, the Santa rally has added about four percentage points to the average annual percentage gain of the S&P 500 during November and December. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-96.png) Much will depend on investors' assessments of the credit markets. They were spooked last week (just ahead of Halloween) by news that Zions Bancorp incurred a $50 million charge-off in Q3 due to legal actions against two borrowers. Stock prices dropped sharply on Thursday, led by the KBW Regional Banking ETF (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-104.png) Investors have also been spooked by fears of trouble in the private credit market since First Brands filed for Chapter 11 bankruptcy protection **on** September 29, 2025, disclosing liabilities of between $10 billion and $50 billion and assets in the range of $1 billion to $10 billion. ETFs tracking the private credit market tumbled during September and are lower than the “Annihilation Days” which followed the April 2 “Liberation Day.” ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-101.png) On the other hand, ETFs that track the high-yield and investment-grade corporate bond markets have held up well so far this year and so has an ETF tracking senior loans (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/4cvqJ1u.jpg) We don't expect credit problems that will add up to serious systemic risk of an economy-wide credit crunch, which has often caused recessions in the past. We are encouraged to see that the Fed's data on commercial banks’ loan-loss reserves remains relatively stable so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-98.png) We also continue to be encouraged by the strength of S&P 500 companies’ collective earnings per share. They beat expectations significantly during Q1 and Q2 (chart). We expect they did do so again during Q3\. Industry analysts are currently expecting a 6.7% y/y increase. We expect a 10.0% gain. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-99.png) S&P 500 forward earnings per share rose to yet another record high last week, of $297.27; it has rapidly been converging toward analysts' 2026 consensus expectation, currently at $304.55, which it will match at year-end (chart). The current forward P/E—i.e., the multiple using forward earnings as the “E”—is 22.4. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-100.png) The recovery in the forward earnings of the S&P 400 MidCaps and S&P 600 SmallCaps remains disappointing compared to that of the S&P 500 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-105.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DISRUPTIVE TECHNOLOGIES: AI, Oracle & Big Brother URL: https://www.yardeniquicktakes.com/disruptive-technologies/ Last updated: 2025-10-18T03:41:35.000Z In this new world of AI, we tend to focus on all of the positives it can bring to our lives by doing things faster, smarter, and more efficiently. But there is also a darker side to AI: Governments and law enforcement agencies can use it to establish a surveillance state. To understand what happens when AI and technology are used to control populations, one needs only look at China. There, the government has used AI and other technologies to keep tabs on its citizens, particularly the minority Muslim population. Oracle is one of the US companies most closely associated with providing technology that enables government surveillance programs. It has also gained a much higher profile of late due to its close relationship with the Trump administration. Let’s take a look at Oracle CEO Larry Ellison’s views on AI, his many high-profile deals, and how the technology that his company creates has helped the Chinese government: _This post is for paying subscribers only._ ### Cockroaches URL: https://www.yardeniquicktakes.com/cockroaches/ Last updated: 2025-10-17T04:04:43.000Z "When you see one cockroach, there are probably more," JPMorgan CEO Jamie Dimon said on the company's earnings conference call earlier this week in relation to the First Brands and Tricolor Holdings fallout. These are two auto-related companies that have recently declared bankruptcy. First Brands, which is in the auto parts business, reportedly is facing a criminal investigation. Tricolor specialized in used car sales and subprime auto financing. Zions Bank said Wednesday evening that it faced a sizable charge due to bad loans to a couple of borrowers. Western Alliance then alleged on Thursday that a borrower had committed fraud. So far, that seems like a few cockroaches, not a significant infestation. Nevertheless, the KBW Regional Banking ETF fell sharply today. The regional banks account for approximately 7.8% of the Russell 2000 index, which also experienced a decline today (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-93.png) The Financial sectors of the S&P 500, S&P 400, and S&P 600 have been weak in recent days (chart). The larger banks that reported their Q3 earnings results on Tuesday and Wednesday mostly beat expectations, driven by better-than-expected investment banking revenues. They are included in the S&P 500. _This post is for paying subscribers only._ ### S&P 500 And Gold Price Racing Toward $10,000 By 2029? URL: https://www.yardeniquicktakes.com/s-p-500-and-gold-price-racing-toward-10-000-by-2029/ Last updated: 2025-10-16T15:11:03.000Z We first began writing about our Roaring 2020s scenario in 2020\. So far, so good. Both the S&P 500 and the price of gold have been roaring ahead to new record highs this year (chart). We wouldn't be surprised if both hit 10,000 by the end of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-77.png) The stock price index and the gold price have exhibited an inverse cyclical correlation, but their long-term upward trends have been remarkably similar. The ratio of the two has fluctuated around 1.7\. They appear to converge and become equal every 10-20 years, although the data are limited because the price of gold was fixed until President Richard Nixon stopped pegging it in 1971 (chart). _This post is for paying subscribers only._ ### DEEP DIVE: Slim Pickin's Among Economic Indicators URL: https://www.yardeniquicktakes.com/deep-dive-slim-pickins-among-economic-indicators/ Last updated: 2025-10-16T03:48:23.000Z **The following is an excerpt from our October 14 *Morning Briefing* for institutional investors. We are sharing it with our QuickTakes members today.** It isn’t easy being an economist when the government shutdown shuts off the flow of economic data. Nevertheless, the Fed is still open for business and issuing economic releases. So are several private-sector sources of economic indicators. On balance, the data we do have suggest that the economy is continuing to grow, the labor market is lackluster, consumers are consuming, and inflation may be stuck around 3.0% y/y. That should give pause to the members of the Federal Open Market Committee when they meet again to decide whether to lower the federal funds rate again on October 29\. The available data suggest that the economy remains resilient and continues to pass the latest stress tests, including the government shutdown, federal government layoffs, and the ongoing Trump Tariff Turmoil. Let’s glean what we can from the available slim pickings: (1) *Inflation.* On the inflation front, despite the shutdown, the Bureau of Labor Statistics (BLS) is working on September’s Consumer Price Index (CPI), which will be released on October 24, instead of Wednesday this week. The BLS reportedly will release September's Producer Price Index tomorrow. According to the Cleveland Fed’s Inflation [*Nowcasting*](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=385175838&%5Fhsenc=p2ANqtz-%5F2A0HLrqqSJQf8IqSlo3ogM%5F%5FVBhSXUxyYTTXb%5FsXFRwvnYyRKRZIRrcVonkPo4nGm28BMZ22hczTu2FfW7ktPWLbJxQ&%5Fhsmi=385175838) tracking model, the headline and core CPI inflation rates remained stuck at 3.00% y/y last month, with the former at 2.99% and the latter at 2.96% ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20251015%5F7.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=385175838&%5Fhsenc=p2ANqtz-%5F2A0HLrqqSJQf8IqSlo3ogM%5F%5FVBhSXUxyYTTXb%5FsXFRwvnYyRKRZIRrcVonkPo4nGm28BMZ22hczTu2FfW7ktPWLbJxQ&%5Fhsmi=385175838) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/tc_20251015_7.png) Figure 7 _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Trump Trade Turmoil, Again URL: https://www.yardeniquicktakes.com/weekly-webcast-trump-trade-turmoil-again/ Last updated: 2025-10-15T18:23:00.000Z The latest US–China aggressions have the financial markets worried about the high stakes of a trade war between the globe’s biggest trading nation and its largest economy. William observes that a disruption to global supply chains would have adverse consequences for earnings, economic growth, and central banks’ pursuit of their mandates. But given the severity of the consequences, we expect a quick de-escalation of the tensions, with both sides willing to negotiate. … Also: The German economy is contracting, with weak industrial production, exports, employment, and consumer sentiment. Yet the government’s stimulus measures do little to address the underlying structural causes. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Gold Is The New Bitcoin! URL: https://www.yardeniquicktakes.com/gold-is-the-new-bitcoin/ Last updated: 2025-10-14T22:51:58.000Z Investors are mining for gold and rare earth minerals. The SPDR Gold Shares ETF (GLD) and the VanEck Rare Earth & Strategic Metals ETF (REMX) are up 57.3% and 104.4% ytd ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20251015%5F1.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--6dr6So78cus8MOyUJFiIuc7CdNPy6eEOGMnnTeZhatZi-Hun%5FefNVS4sibuqJCE7pOQbCWW1cSy%5FupiQchfjDBjcA4g&%5Fhsmi=2) below). The trading volumes of both have increased sharply in recent weeks ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20251015%5F2.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--6dr6So78cus8MOyUJFiIuc7CdNPy6eEOGMnnTeZhatZi-Hun%5FefNVS4sibuqJCE7pOQbCWW1cSy%5FupiQchfjDBjcA4g&%5Fhsmi=2) and [*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20251015%5F3.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--6dr6So78cus8MOyUJFiIuc7CdNPy6eEOGMnnTeZhatZi-Hun%5FefNVS4sibuqJCE7pOQbCWW1cSy%5FupiQchfjDBjcA4g&%5Fhsmi=2)). Both have been benefiting from rising geopolitical tensions between the US and both Russia and China. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/tc_20251015_1.png) Figure 1 On October 21, 2024, we wrote: “Gold is traditionally viewed as a hedge against inflation, yet it has rallied to new highs as inflation has moderated. Perhaps gold is now a hedge against US economic sanctions. After Russia invaded Ukraine in February 2022, Russia’s foreign exchange reserves held by the US and its allies were frozen. Since then, some officials and commentators have proposed seizing those assets, which amount to nearly $300 billion, and using the proceeds to defend and rebuild Ukraine. Not surprisingly, China and other countries have been increasing their allocations of gold in their countries’ international reserves.” _This post is for paying subscribers only._ ### Will Next Year Be Another Good Year To Go Global? URL: https://www.yardeniquicktakes.com/will-next-year-be-another-good-year-to-go-global/ Last updated: 2025-10-14T03:24:03.000Z Go Global has outperformed Stay Home so far this year. Based on FTSE data, the US stock market index (up 11.8% ytd) has underperformed the World index (13.4%) so far this year in local currency (chart). Its underperformance has been worse in US dollar terms since the greenback has been weak this year. Among the outperformers this year, in local currency, have been South Korea (56.0%), Spain (38.3%), China (36.0%), Hong Kong (25.8%), Italy (23.3%), and Taiwan (22.9%). Interestingly, in China, Basic Materials (86.2%) and Health Care (75.1%) have been the best-performing sectors. In Spain, the financial sector (78.1%) has been the big winner. In Taiwan, Industrials (48.5%) outpaced Technology (26.2%) so far this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-74.png) It is relatively easy to overweight the rest of the world (ROW) in global portfolios because the US accounts for such a significant portion (65.0%) of the market capitalization of the All Country World MSCI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-69.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: October 13 - 17 URL: https://www.yardeniquicktakes.com/economic-week-ahead-october-13-17/ Last updated: 2025-10-13T01:29:46.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/image.png) As the latest episode of the “Trump versus Xi” series airs this week, it's perhaps fitting that the shuttered US government won't be releasing most key data for September. What happened last month, after all, may matter little if the two biggest economies engage in a trade war. The impact of the 130% tariff that President Donald Trump threatens to impose on China, effective November 1, would be an immediate bad shock for GDP, employment, and inflation in both countries. Or not. Trump doesn't seem to know whether he will meet with Chinese leader Xi Jinping in Seoul during the October 31-November 1 [Asia-Pacific Economic Cooperation summit](https://apec2025.kr/?menuno=1&ref=yardeniquicktakes.com). Thankfully, both Xi—who just tightened curbs on rare earths exports—and Trump suggest negotiations aren't dead. Given the disastrous consequences, it is likely that talks will resume. In a post on Truth Social this afternoon, Trump said that China's economic troubles would "all be fine" and insisted that the US "wants to help China, not hurt it." He added, "Don't worry about China, it will all be fine!" Trump also wrote: "Highly respected President Xi just had a bad moment. He doesn't want depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!" Here at home, we’ll [hear from](https://www.federalreserve.gov/newsevents/calendar.htm) Fed Chair Jerome Powell (Tue), who will share his latest take on the economic outlook. Also speaking this week: Fed Governors Michelle Bowman (Tue and Thu), Christopher Waller (Tue, Wed, Thu), Stephen Miran (Wed and Thu), and Michael Barr (Thu). Upcoming corporate earnings releases may provide valuable insights into the economy's performance. Large financial institutions reporting [this week](https://www.cnbc.com/2025/10/10/cramers-week-ahead-earnings-big-banks.html?ref=yardeniquicktakes.com) include BlackRock, Citigroup, Goldman Sachs, JPMorgan, and Wells Fargo (Tue). A day later, Bank of America and Morgan Stanley (Wed) report. Here’s a look at the data releases most likely to influence the Fed's thinking on the need for more rate cuts: (1) *CPI.* Notwithstanding the government shutdown, September's inflation data will be released this week. The headline and core CPI inflation rates (Wed) likely rose 2.99% y/y and 2.95% y/y during September, according to the Cleveland Fed's Inflation Nowcasting. This would confirm our view that Trump's tariffs didn't boost inflation but did keep it from falling to the Fed’s target of 2.0% by now (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-65.png) (2) *PPI.* The real drama surrounding the September PPI (Thu) is whether last month's surprising 0.1% drop was an aberration or an indication of receding inflationary pressures. We expect that September's PPI total final demand was closer to 3.0% y/y than 2.0% y/y (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-67.png) (3) *NFIB survey.* September's NFIB survey of small business owners (Tue) will be among the few sources of information about the labor market until the government reopens. We will be focusing on job openings and hiring plans (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-66.png) (4) *Regional Fed surveys*. We will be looking for any signs of a rebound in the NY Fed monthly business index (Wed) after the 20.6-points plunge in September to -8.7\. Meanwhile, the Philly Fed's October business index (Thu) will show whether the 24-point jump in September to 23.2, the highest reading since January, was a fluke or not. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Pullback, Correction, Or Meltdown? URL: https://www.yardeniquicktakes.com/market-call-pullback-correction-or-meltdown/ Last updated: 2025-10-12T16:17:37.000Z Trump Trade Turmoil hit the stock market hard on Friday as President Donald Trump raised the US tariff on Chinese imports from 30% to 130% in retaliation for China’s imposing severe export controls on its exports of rare earth minerals. This all happened ahead of a summit meeting between Trump and Chinese President Xi scheduled for later this month. On Friday, Trump said he might not attend, then changed his mind. If neither side were to blink, the US and Chinese economies would lead the global economy into a deep recession, if not a depression. But we expect that both sides will blink very soon given the extremely adverse consequences of a trade war between the world’s two biggest economies. The S&P 500 dropped 2.7% on Friday, led by a 3.8% plunge in the Magnificent-7 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-64.png) The S&P 500 fell close to its 50-day moving average on Friday (chart). If it doesn't find support there, it should do so at its 200-day moving average. That would mark a correction of roughly 10% from the indexes record high of 6753.72 on October 8. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-55.png) On October 8, the S&P 500 exceeded its 200-day moving average by 11.8% (chart). We doubt that the index will fall below this average during the current correction, assuming as we do that both sides will quickly negotiate a resolution of the trade conflict given the severity of the consequences to both. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-56.png) The Information Technology and Communication Services sectors of the S&P 500 remain particularly extended relative to their 200-day moving averages (chart). _This post is for paying subscribers only._ ### DISRUPTIVE TECHNOLOGIES: Banks Learn New Tricks URL: https://www.yardeniquicktakes.com/disruptive-technologies-banks-learn-new-tricks/ Last updated: 2025-10-11T00:00:09.000Z Banks are applying blockchain technology to traditional banking services, aiming to make them faster, cheaper, smarter, and more resilient. JP Morgan (JPM) is among the leaders through its Kinexys division, and the Society for Worldwide Interbank Financial Telecommunication (Swift) announced this week that it’s jumping on the bandwagon. Here’s a look at what these financial giants are doing: ### (1) Moving swiftly into the future Swift is working to develop a blockchain settlement system with Ethereum ecosystem developer Consensys and 30 financial institutions, including Bank of America, Citi, JPM, and Wells Fargo. The system will initially focus on real-time, 24/7 cross-border payments, but it is ultimately expected to support the trading of tokenized assets as well, a September 29 article in Cointelegraph reported. North of 11,500 institutions in more than 200 countries use Swift’s infrastructure to process transactions. _This post is for paying subscribers only._ ### DEEP DIVE: Is The US Economy Shock Proof? URL: https://www.yardeniquicktakes.com/deep-dive-is-the-us-economy-shock-proof/ Last updated: 2025-10-09T21:37:35.000Z ***The following is an excerpt from our Morning Briefing (Oct. 6, 2025) for institutional investors.*** ### **US Economy I: ‘Resilient’ Is Still the Right Word** Since a very short, two-month recession in early 2020, the US economy has continued to grow despite numerous shocks ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20251006%5F3.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FueQXcGUtME5Z1VUSF4wvorqY3HSu97na4tNudC4tOqzPk9o6M8Vpyg8SN7EFi9lxzJ9Gbqu3Ej6irJchf%5FpoJEcVekA&%5Fhsmi=2) below). The pandemic hit the US economy during February 2020 and quickly led to the March and April lockdowns that caused a recession during those two months. When the lockdowns ended, social distancing restrictions continued to weigh on the economy, but it continued to grow nonetheless. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/tc_20251006_3.webp) Figure 3 Global supply-chain disruptions hit the US economy hard during 2021 and 2022, triggering a big spike in US inflation, led by soaring consumer durable goods prices ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20251006%5F4.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FueQXcGUtME5Z1VUSF4wvorqY3HSu97na4tNudC4tOqzPk9o6M8Vpyg8SN7EFi9lxzJ9Gbqu3Ej6irJchf%5FpoJEcVekA&%5Fhsmi=2) and [*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20251006%5F5.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FueQXcGUtME5Z1VUSF4wvorqY3HSu97na4tNudC4tOqzPk9o6M8Vpyg8SN7EFi9lxzJ9Gbqu3Ej6irJchf%5FpoJEcVekA&%5Fhsmi=2)). To combat inflation, the Fed raised the federal funds rate from nearly zero on March 17, 2022 to 5.50% on July 26, 2023 ([*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20251006%5F6.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz-%5FueQXcGUtME5Z1VUSF4wvorqY3HSu97na4tNudC4tOqzPk9o6M8Vpyg8SN7EFi9lxzJ9Gbqu3Ej6irJchf%5FpoJEcVekA&%5Fhsmi=2)). The bond yield jumped from 0.50% on August 4, 2020 to 5.00% on October 19, 2023. This year, the economy was subjected to Trump’s Tariff Turmoil. And the latest shock is the government shutdown that started on Wednesday. _This post is for paying subscribers only._ ### Data Centers: Too Much of a Good Thing? URL: https://www.yardeniquicktakes.com/data-centers-too-much-of-a-good-thing/ Last updated: 2025-10-12T07:19:24.000Z The lure of riches and tight capacity today has money flooding into the construction of artificial intelligence (AI) data centers. Data center construction—just the cost of building the building—has increased to an annual rate of $43.0 billion, up 30% y/y and 322% higher than $10.2 billion four years ago (chart). Add in the costs of chips and servers, and you’re talking about real money. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-43.png) The irony is that, typically, the more money that floods into an area, the less likely any of the players will make the same juicy profits that attracted them, reaped in the years before the spending boom. Cloud providers like Microsoft, Alphabet, and Amazon enjoyed 20%-30% annual revenue growth rates last year. So it’s understandable that players like Oracle, xAI, Meta, and others would jump into the lucrative market. One of the biggest users of AI data center capacity is OpenAI. The company—which is expected to generate $13 billion in revenue this year but earn no profit—recently said it was likely to spend around $16 billion to rent computing servers alone this year, and that the number [*could rise to $400 billion*](https://www.wsj.com/tech/ai/openai-sam-altman-asia-middle-east-7b660809?mod=article%5Finline&utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) in 2029\. And now it too is building data centers for its own use. Let’s take a look at OpenAI’s grandiose plans and what the competition is doing: (1) *Moving beyond Microsoft.* In 2019, OpenAI entered into an arrangement to exclusively use Microsoft Azure as its cloud provider. But this year with Microsoft reportedly capacity constrained, OpenAI amended the contract, adding more vendors to its data center lineup despite Microsoft’s early investment in the company. In June, OpenAI [*announced*](https://www.reuters.com/business/retail-consumer/openai-taps-google-unprecedented-cloud-deal-despite-ai-rivalry-sources-say-2025-06-10/?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) plans to use Alphabet’s Google Cloud service, though the terms of the deal were not disclosed. More recently, CEO Sam Altman [*signed a $300 billion deal*](https://www.wsj.com/business/openai-oracle-sign-300-billion-computing-deal-among-biggest-in-history-ff27c8fe?mod=article%5Finline&utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) to purchase another 4.5 gigawatts of cloud-computing power from Oracle over five years. OpenAI has also shown a willingness to buy capacity from new players. In March, OpenAI signed a five-year contract worth $11.9 billion with CoreWeave. As part of CoreWeave’s IPO, OpenAI received shares worth $350 million. (2) *OpenAI gets into infrastructure.* Earlier this year, OpenAI, Oracle, SoftBank, and MGX announced plans to fund the $500 billion Stargate Project, which will develop AI data centers across the US. The first leg of the project is being developed by Crusoe Energy Systems in Texas; another five US sites have also been picked out. Since then, OpenAI has gone on a chip-buying spree. In late September, the company announced that it would use the $100 billion Nvidia is investing in OpenAI over the next decade to purchase chips from Nvidia. Under the terms of the deal, OpenAI will use Nvidia’s chips to deploy up to 10 gigawatts of computing power in AI data centers. “Usually … a cloud service provider buys from us, and \[OpenAI\] rents from a cloud service provider. And so now it’s going to be a direct partnership,” Nvidia CEO Jensen Huang [*said*](https://www.cnbc.com/2025/10/06/jim-cramer-openai-amd.html?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) on CNBC. Nvidia’s OpenAI partnership is “incremental” to the work the company has done with other AI providers such as Oracle and CoreWeave. Earlier this week, OpenAI committed to purchasing 6 gigawatts worth of AMD’s chips, starting with the MI450 chip next year. The ChatGPT maker will buy the chips either directly or through its cloud computing partners. (3) *Others building furiously, too.* Elon Musk’s xAI has built Colossus 1, a data center with 200,000 Nvidia chips, and is in [*the process*](https://www.wsj.com/tech/elon-musk-xai-memphis-tennessee-power-dec4c70d?gaa%5Fat=eafs&gaa%5Fn=ASWzDAhEf8kP-DUS09v6sZa2DpeT29CSSbfv%5F1h3Uwp1LolK4Xbe1r-OoYMrxAusmHE%3D&gaa%5Fts=68e5de80&gaa%5Fsig=lwCyeNBBYnEYS454t2xOYXV6HDUUwgjWbyN6GKNbUjLJMrgQuZ7kYYFkBNvlX9M2Su55lE1pnJzGGn1K1wu%5FBw%3D%3D&utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) of building Colossus 2, which is expected to be even bigger. Both are in Memphis and will be powered by an electrical plant that xAI is also building. All of this is being done to have the computer capacity to train xAI’s Grok. CEO Mark Zuckerberg says Meta Platforms will invest $65 billion into AI, mostly to build data centers this year. One of his projects in northern Louisiana is a 4 million-square-foot data center with two gigawatts of computing power that’s expected to cost $10 billion. In Indiana, Amazon is [*in the midst of building*](https://www.nytimes.com/2025/06/24/technology/amazon-ai-data-centers.html?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2#:~:text=On%201%2C200%20acres%20of%20cornfield,Credit...) around 30 data centers, which will consume 2.2 gigawatts of electricity. It is expected to serve a single customer, AI startup Anthropic (creator of Claude AI), in which Amazon has invested $8 billion. It’s part of Amazon’s Project Rainier, which will also include facilities in Mississippi and possibly North Carolina and Pennsylvania. Microsoft plans on spending $7 billion on its Fairwater project in Wisconsin, which will include 1.2 million square feet of space. Earlier this month, Google [*announced*](https://arkansasadvocate.com/2025/10/02/google-state-and-local-officials-mark-start-of-4-billion-ai-data-center-in-west-memphis/?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2#:~:text=p%3E%20Ruth%20Porat,Memphis%20%E2%80%9Cwhile%20protecting%20affordability.%E2%80%9D) the start of a data center project in Memphis that will involve $4 billion of investment through 2027\. Overall, the company has said it [*will spend*](https://www.cnbc.com/2025/07/15/google-to-invest-25-billion-in-data-centers-ai-infrastructure-in-pjm.html?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=2&%5Fhsenc=p2ANqtz--JhARAm3y2YkaRSezHnebP1fl%5FJ6Z89Uwvtc-B9vguJL8iixdtn8gEjnkzSoQxZlG1wqhqJnsYcVpTjfWi-2s0uayAAw&%5Fhsmi=2) $25 billion over the next two years on data centers and AI infrastructure in the mid-Atlantic and parts of the Midwest and South. (4) *A look at the numbers.* OpenAI is privately held, but many of the other cloud providers are public. Microsoft and Oracle are members of the S&P 500 Systems Software stock price index, which has climbed 24.8% ytd through Tuesday’s close (chart). The industry is expected to grow earnings by 15.2% this year and 14.3% in 2026\. Its forward P/E is 33.7, near the top end of its range in all periods except the 2000 dotcom bubble (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-44.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-45.png) Alphabet and Meta are in the S&P 500 Interactive Media Services stock price index, which has climbed 26.6% ytd (*c*hart). The industry is expected to grow earnings 21.5% in 2025 and 6.7% next year. At 23.6, the index’s forward P/E is near recent highs but still well below its highs around 30 back in 2020 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-46.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-47.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Still Roaring URL: https://www.yardeniquicktakes.com/weekly-webcast-still-roaring/ Last updated: 2025-10-08T12:00:10.000Z Sunshine during my tour of the West Coast and in the stock market last week. But everyone’s on the lookout for signs of an AI bubble. Jeff Bezos has a positive take on bubbles that makes sense to us: They accelerate funding and hasten AI’s tremendous benefits. Revisiting the BRAIN Revolution and our long-standing confidence in technology and its positive impact on the economy. … Also: Pandemics, tangled supply chains, and tariffs are no match for the resilient US economy in the Roaring 2020s. … And: The labor market is weak, but productivity is strong.[](https://us02web.zoom.us/rec/share/VnzlQH13dlx55rtWyDi%5FIRDp-WHPHNKPAnEo6eI07qz1U%5FwftuOtZpyunvwnh57o.Dz-CTOVxNhs3ixFF?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Sweet Spot For Financials URL: https://www.yardeniquicktakes.com/sweet-spot-for-financials/ Last updated: 2025-10-08T02:35:49.000Z Today, Oracle disclosed that its AI cloud business—particularly server rentals using Nvidia chips—is yielding very slim profit margins. That news weighed on the stock market, especially on technology stocks. Oracle's stock price fell 2.5%. The Magnificent-7 declined 1.1%. Financial stocks also dropped today. They tend to have more leverage and cyclical exposure, so when sentiment sours, they often fall harder than some defensive sectors. We expect the Q3 earnings reporting season, which is set to begin next week with the major banks, to calm investors' nerves. Cloud companies are likely to report that their business is strong, thanks to the growing demand for AI-related services. The banks should also provide good news. The S&P 500 Diversified Banks stock price index is at a record high for several compelling reasons (chart). For starters, the industry's forward earnings is at a record high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-34.png) Most importantly, the growth rate in commercial bank loans and leases is picking up (chart). They were up 4.7% y/y through the September 24 week, twice as fast as at the beginning of this year. This confirms our view that the pace of economic activity isn't slowing. It may actually be accelerating. _This post is for paying subscribers only._ ### Another Day Of AI Fun In The Sun For Semis URL: https://www.yardeniquicktakes.com/another-day-of-ai-fun-in-the-sun-for-semis/ Last updated: 2025-10-07T02:41:39.000Z Semiconductor stocks have certainly benefited from the AI boom. All those data centers being built will be filled with chips (chart). All those autonomous-driving vehicles will also be stuffed with chips, and so will humanoid robots. And they will all generate more data that will need to be processed. Today's AI winner was AMD. Shares of the chipmaker soared after the company announced a multibillion-dollar deal with OpenAI, closing out the day's trading session up more than 23%. The move will see AMD provide upwards of 6 gigawatts of GPUs to OpenAI over several generations, starting with its MI450 chips in H2 2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-32.png) _This post is for paying subscribers only._ ### GOOD MARKET CALL: Gold URL: https://www.yardeniquicktakes.com/good-market-call-gold/ Last updated: 2025-10-06T12:00:49.000Z From time to time, we will review and update some of our good market calls. We hope this provides a helpful perspective on our approach to market forecasting. Today, let's review and update our thoughts on the outlook for gold: (1) We first turned bullish on the price of gold on April 7, 2024\. We noted that it was breaking out above $2000 per ounce to new record highs (chart). We wrote that "$3,000-$3,500 per ounce would be a realistic price target for gold through 2025." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/3-Apr-07-2024-09-05-12-8124-PM.webp) We also noted that the price of silver is also moving to the upside after breaking out of a long-term consolidation pattern (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/4-Apr-07-2024-09-05-29-0172-PM.webp) (2) On October 21, 2024, we wrote: "Gold is traditionally viewed as a hedge against inflation, yet it has rallied to new highs as inflation has moderated. Perhaps gold is now a hedge against US economic sanctions. After Russia invaded Ukraine in February 2022, Russia's foreign exchange reserves held by the US and its allies were frozen. Since then, some officials and commentators have proposed seizing those assets, which amount to nearly $300 billion, and using the proceeds to defend and rebuild Ukraine. Not surprisingly, China and other countries have been increasing their allocations of gold in their countries' international reserves." The price of gold had risen to $2721 at the time. On January 30, 2025, we predicted that it would rise to $3,000. (3) On March 3, 2025, we first provided specific year-end targets for 2025 and 2026: "Meanwhile, the price appreciation of gold has been remarkably steady since late 2023 (chart). The recent pullback has been very moderate so far. We are targeting (not promising) a gold price of $4,000 per ounce by the end of this year and $5,000 by the end of 2026." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/2-Mar-04-2025-04-02-41-2017-AM.webp) (4) On July 14, 2025, we noted: "We are still bullish on gold, though we think that the current consolidation may continue through the summer. The price has continued to be contained by its ascending channel." (5) On September 2, 2025, we wrote: "We reckoned that President Donald Trump's attempts to reorder the world's geopolitical order, including America's relationships with its major trading partners, might be unsettling and bullish for gold. Similarly, his attempt to order the Fed to lower interest rates would compromise its independence and be bullish for gold. In addition, the bursting of China's housing bubble has had a significant adverse wealth effect on Chinese savers, who've flocked to gold as an alternative safe asset. Furthermore, the rising standard of living in India has increased wealth, thereby boosting demand for gold, which is widely regarded as a valuable asset." We added: "Our bullishness is supported by the 'Gold Put,' provided by central banks that are increasing the percentage of their international reserves in gold (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/3-Sep-03-2025-02-51-21-3157-AM.webp) We also noted: "Over the past couple of trading days, the volume in the SPDR Gold Trust ETF (GLD) has increased significantly (chart)." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/5-Sep-03-2025-02-52-06-3065-AM.webp) (6) So far, so good (chart). The price of gold is within shouting distance of our $4000 target for 2025\. We are now aiming for $ 5,000 in 2026\. If it continues on its current path, it could reach $10,000 by the end of the decade. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-23.png) (7) The price of silver has also soared and should continue to rise along with the price of gold, though both may be due for a pullback or at least a short period of consolidation (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/3uGosi3.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: October 6 - 10 URL: https://www.yardeniquicktakes.com/economic-week-ahead-october-6-10/ Last updated: 2025-10-06T01:52:56.000Z This is a quiet week for key economic data releases, but it is even quieter due to the ongoing government shutdown. For financial markets, this informational void is equivalent to flying blind. That also applies to Fed officials who are undecided about the need to vote for a rate cut at the October 28-29 FOMC meeting. This week will offer investors insights into the internal dynamics of the September 16-17 FOMC, which concluded with a 25-basis-point interest rate cut. The minutes of that meeting will be released on Wednesday. Financial markets are sure to tune into Fed speeches from Chair Jerome Powell (Thu), Governor Stephen Miran (Tue), Governor Michelle Bowman (Tue and Thu), Governor Michael Barr (Wed and Thu), and voting FOMC members Kansas City Fed President Jeff Schmid (Mon), St. Louis Fed President Alberto Musalem (Wed) and Chicago Fed President Austan Goolsbee (Fri). Japan, meanwhile, is set to name its first female prime minister. On Saturday, staunch conservative lawmaker Sanae Takaichi prevailed in the Liberal Democratic Party's election. For the LDP to retain power, Takaichi must form a governing coalition with opposition parties, many of which favor tax cuts. Any signs Tokyo is about to add to the developed world's most significant debt burden could trigger a strong response from the Bond Vigilantes. In the interim, here are the reports most likely to fill the void left by delayed government releases: (1) *Inflation expectations*: The New York Fed's September Survey of Consumer Expectations (Tue) will offer a timely update on whether August's increase in households' inflation expectations was a blip or evidence of a worrisome upturn (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-18.png) (2) *Mortgage applications*. Recent bond market volatility is causing considerable noise in the Mortgage Bankers Association's weekly data. Its new purchase index fell 1.0% during the week of September 26\. If the Fed continues to pivot toward rate cuts, a rebound in housing activity seems likely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-19.png) (3) *Used car prices*. The Manheim Used Vehicle Value Index (Tue) may be as good an indicator as the market will get of inflationary pressures in September for the time being. In August, the series rose 1.7% y/y. We will also be watching the Cleveland Fed’s [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com). It is currently showing that the core CPI inflation rate was still running hot at 2.95% y/y during September. October’s rate is 2.93% so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-20.png) (4) *Consumer sentiment.* With the stock market on a tear, the Fed cutting the federal funds rate, and Trump's tariffs making fewer headlines, the University of Michigan's preliminary consumer confidence survey for October (Fri) should rebound. At the very least, it should confirm that the low level of layoffs and positive wealth effect are helping to stabilize consumer sentiment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-21.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### A Bubble In Bubble Fears? URL: https://www.yardeniquicktakes.com/a-bubble-in-bubble-fears/ Last updated: 2025-10-05T16:09:08.000Z We are raising our year-end S&P 500 target back to 7000\. We started the year there, but lowered it earlier this year in response to Trump's Tariff Turmoil. We began raising our forecast again during the spring, when we concluded that the tariff issue would no longer impact the stock market by the end of the summer. We bet the resilience of the economy would boost S&P 500 earnings. So far, so good. We think that the V-shaped stock market rebound since April 9 is discounting the economy's resilience, which reduces the odds of a recession. The market is now experiencing a slow-motion meltup. We attribute this to the Fed's rate cut on September 17 and expectations of one or more cuts before the end of the year. As promised, we are increasing the odds of a meltup to 30% from 25% and reducing our base-case for a sustainable bull market (i.e., without a correction) to 50% from 55%. Our odds of a correction (or worse) remain at 20%. When the tech bubble in the stock market inflated during 1999, we don't recall as much chatter about a bubble as we are hearing today. From a contrarian perspective, it is comforting that there is a bubble in bubble fears. The Google Search index for "AI bubble" rose from zero in mid-September to 100 on October 2. We are counting on another better-than-expected earnings reporting season for Q3 over the next few weeks to support the stock market's rally to record highs. Industry analysts are currently predicting that the quarter's earnings will increase by 6.4% y/y (chart). We are expecting a 10.7% increase. We expect the large banks to start the season around mid-October with upside earnings surprises. In addition, we expect that the AI and cloud companies won't disappoint either. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-15.png) S&P 500 forward earnings per share for the S&P 500 rose to another new record high during the week of October 2 (chart). That puts the forward P/E at 22.7 based on Friday's close. (The recent downticks in the 2025 and 2026 earnings estimates reflect changes in the constituents of the S&P 500.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-16.png) The bubble in technology-related stocks today has less air than the one during 1999 (chart). Today, the S&P 500 Information Technology and Communication Services sectors account for a record 44.9% of the index's market capitalization and a record 37.4% of the index's forward earnings. During the Tech Bubble of 1999-2000, their combined market cap and forward earnings shares peaked at 40.7% and 23.8%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway.jpg) In the absence of government data on real economic activity, we will be giving even more weight to S&P 500 forward earnings as an economic indicator (chart). During September, it rose to a record high, showing a solid y/y increase of 9.8%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-17.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### What Is The Stock Market Discounting? URL: https://www.yardeniquicktakes.com/what-is-the-stock-market-discounting/ Last updated: 2025-10-03T00:19:53.000Z The stock market is discounting the ongoing resilience of the economy and corporate earnings. It is discounting that the odds of a recession over the rest of the Roaring 2020s are low. The longer the economy is expected to grow without a recession, the more sustainable high valuation multiples can be, since earnings growth can be expected to justify those valuations (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/48rwafv.png) High valuations don't cause bear markets. Instead, recessions cause bear markets by depressing both earnings and valuation multiples. Corrections occur when widely feared recessions cause valuation multiples to fall. However, those multiples quickly rebound when the expected recession doesn't happen, allowing earnings to continue growing. The S&P 500 experienced a correction earlier this year. Its forward P/E (i.e., the multiple using forward earnings as the “E”) fell from about 22.0 at the start of this year to 18.0 on April 8\. Now it is back above 22.6\. Leading the way down in the S&P 500’s correction was a sharp drop in the forward P/E of the Magnificent-7 stocks from 31.0 to 22.0\. It is now back at 30.4 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-13.png) Usually in recessions and bear markets, the forward P/E of the S&P 500 falls into the single digits (chart). During the previous bear market, the forward P/E bottomed at 15.1 on October 22, 2022\. That was a relatively high P/E, which occurred because the most widely anticipated recession of all time was a no-show. _This post is for paying subscribers only._ ### Russell 2000 Is For Losers, But Is Currently Winning URL: https://www.yardeniquicktakes.com/russell-2000-is-for-losers-but-is-currently-winning/ Last updated: 2025-10-02T06:05:22.000Z The Russell 2000 small-cap stock price index is outperforming the S&P 600, another small-cap index (chart). The former includes many more companies that are losing money than the latter. This is yet another sign of mounting speculative froth in financial markets in response to the Fed's 25bps cut in the federal funds rate on September 17. The S&P 600's requirement that companies demonstrate positive earnings before being included acts as a screening tool, filtering out many of the most speculative or financially distressed businesses that are often found in the broader Russell 2000. The percentage of companies in the Russell 2000 Index that lose money has generally been quite high in recent years, often hovering around40%. The similar percentage for the S&P 600 is closer to 20%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway-2.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Meet Bonnie URL: https://www.yardeniquicktakes.com/weekly-webcast-meet-bonnie/ Last updated: 2025-10-01T19:35:45.000Z Our Roaring 2020s outlook has been on target since the beginning of the decade. Over the past two quarters, GDP growth and consumer spending have been robust, and the recession widely anticipated for three years and as recently as April never showed. The Fed’s September interest-rate cut—made proactively in response to weak payroll stats—was probably a mistake that could stoke price inflation and financial speculation. While unemployment is low, AI is disrupting some areas of the labor market. The Fed’s rate cut won’t help former tech workers now driving for Uber. … The good news: Consumer spending should remain strong as Baby Boomers work down substantial nest eggs and support the spending of their adult progeny.[](https://us02web.zoom.us/rec/play/Uq0PKZfHy%5Fc%5F4j3VKODmTjaYBtcU1rRyoHmmLw3-6QMBOyNbfDsvMK0GwOuuQxCjaLsvE5KHRQuqJxQS.cwm-1vPdgOb2Bqko?eagerLoadZvaPages=sidemenu.billing.plan%5Fmanagement&accessLevel=meeting&canPlayFromShare=true&from=my%5Frecording&continueMode=true&componentName=rec-play&originRequestUrl=https%3A%2F%2Fus02web.zoom.us%2Frec%2Fshare%2FZRkHbCPlQ7pE-NAOjTGgoaHRKnp0BQtKIltxt06jQul2pxgPDERCO001LAI2CWij.2T-esPr8%5F9K5K8Vm&ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Another Bad JOLTS For Job Market URL: https://www.yardeniquicktakes.com/another-bad-jolts-for-job-market/ Last updated: 2025-10-01T05:15:46.000Z The S&P 500 SPDR ETF (SPY) closed today at 666 (chart). I have fond memories of that number. I wrote on March 16, 2009: "We’ve been to Hades and back. The S&P 500 bottomed last week on March 6 at an intraday low of 666\. This is a number commonly associated with the Devil. . . . The latest relief rally was sparked by lots of good news for a refreshing change, which I believe may have some staying power. . . . I'm rooting for more good news, and hoping that 666 was THE low." The same day, the Fed's first round of quantitative easing was expanded to $1.25 trillion in mortgage-related securities and $300 billion in Treasury bonds. On July 27, 2009, I wrote: "I prefer meltups to meltdowns. The S&P 500 has been on a tear ever since it bottomed at the intraday low of 666 on Friday, March 6\. I should have known immediately that this devilish number was the bear market low. It took me a few days to conclude that it probably was the low. . . . I felt like Tom Hanks in 'The Da Vinci Code.' Subsequently, when I told this story to our accounts, I said that I called the bottom in stocks more as a symbolist than as an investment strategist." So what does the latest 666 mean? Might it be signaling a market top this time? If so, then we can see that happening for the Magnificent-7, as investors struggle to fathom whether all their spending on AI infrastructure will ever be profitable. Meanwhile, the S&P 493 should continue rising on solid earnings. On balance, the S&P 500 should end the year at a new high of around 6800. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/10/gateway.png) Now for some more devilish news out of the labor market today. Among the most real-time indicators of this market are the three jobs availability series included in the Consumer Confidence Index (CCI) survey (chart). In September, the "jobs-plentiful" series fell to 26.9%, while the "jobs-hard-to-get" series rose to 19.1%. _This post is for paying subscribers only._ ### DEEP DIVE: Where Is the Neutral Interest Rate? URL: https://www.yardeniquicktakes.com/deep-dive-where-is-the-neutral-interest-rate/ Last updated: 2025-09-30T04:53:37.000Z In his post-FOMC press conference on September 17, Fed Chair Jerome Powell stated that Fed policy remains tight notwithstanding the latest rate cut: “What we can say is this, that over the course of this year we've kept our policy at a restrictive level—and people have different views—but a clearly restrictive level, I would say.” In other words, monetary policy remains tight. How does he know this? Real GDP rose 3.8% (saar) during Q2 to a record high, and it is on course to increase 3.9% during Q3, according to the latest estimate of the Atlanta Fed’s [GDPNow](https://www.atlantafed.org/cqer/research/gdpnow?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=382251534&%5Fhsenc=p2ANqtz-8Xm5YsW6%5FX8aFWB1Ehv0g40Fzz920Zo6AhYDHgx8Z4F3yLRJxrOmxlqycNu3bejk1r0I4p7keatF5MLoUzllsY9AJ%5F6g&%5Fhsmi=382251534) tracking model (chart). The major stock market indexes are at record highs. S&P 500 earnings is at a record high. Gold is at a record high. True, the labor market is sending mixed signals, but that’s mostly related to structural labor supply issues, as we’ve previously discussed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-152.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: September 29 - October 3 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-29-october-3/ Last updated: 2025-09-29T01:30:22.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/Screenshot-2025-09-28-152218.png) Monthly employment reports have been suspenseful enough in recent months, but the real drama surrounding September's hotly anticipated figures is whether they will even be released on Friday. They won't be if the government shuts down on October 1 amid partisan bickering. Assuming the data come out, we expect them to show that the economy remains more buoyant than the conventional wisdom acknowledges given how surprised the financial markets were by last week's upward revision to Q2's real GDP growth rate. It's now up from an initial 3.3% (saar) to 3.8%. Additionally, the upward revision to Q2's consumer spending now places the series at a 2.6% pace, compared to the initially reported 1.6% rate. Increases in spending on services like transportation, finance, and other categories suggest that Americans are generally working and feel confident enough about wage trends to make purchases. Layoffs remain low, meanwhile, as evidenced by last week's reading on initial unemployment claims, which declined 14,000 to 218,000 for the week ended September 20. We'll hear lots of jabbering from several members of the Federal Open Mouth Committee this week. The reports coming out this week—such as consumer confidence (Tue), Job Openings and Labor Turnover (Tue), purchasing managers' activity (Wed and Fri), and factory orders (Thur)—could influence FOMC members’ views on whether interest rates should be cut again before year-end. But we don’t expect the releases to increase the odds of another Federal Reserve rate cut anytime soon. Here's a look at the upcoming economic reports most likely to influence FOMC members’ thinking: (1) *Employment report*. Three months ago, the 75,000 payrolls gain we expect in September (Fri) would've left the stock market unhappy. But after the drama surrounding the last two jobs reports, such a gain—and a 4.3% unemployment rate—would be the economic equivalent of comfort food. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-147.png) (2) *Consumer confidence*. After weakening in August, the Conference Board's Consumer Confidence Index survey (Tue) may show improvement in September. Labor market conditions aren't as dire as feared. The Trump administration is striking tariff deals. Stock prices are rising. The Fed cut the federal funds rate. So confidence should be improving. We will be watching the survey's labor market indicators for signs of stabilization (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-148.png) (3) *JOLTS*. With all eyes on the health of the US labor market, we expect the August JOLTS report (Tue) to confirm that labor market conditions remained solid last month. August's jobs plentiful series suggests that the month's job openings remained elevated (chart). Initial claims (Thu) should also confirm that layoffs remain low. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-149.png) (4) *PMI surveys*. The volatility we've seen in purchasing managers' readings is likely to persist. The ISM US Manufacturing PMI (Wed) increased to 48.7 in August, but remained below the 50.0 mark. The ISM Services PMI (Fri) did expand in August, coming in at 52\. The S&P Global flash estimates of the two PMIs edged down in September but remained solidly above 50.0 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-150.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Nothing To Fear But Overvaluation & A Shutdown URL: https://www.yardeniquicktakes.com/market-call-46/ Last updated: 2025-09-29T00:44:14.000Z The financial markets have become jittery lately due to concerns about high valuation multiples, particularly among AI stocks, and a potential government shutdown. President Donald Trump reportedly will meet with the top four congressional leaders at the White House on Monday as the threat of a government shutdown on October 1 looms. Meanwhile, investors are once again wondering whether the massive spending on AI infrastructure by the "hyperscalers" will ever pay off. It's a reasonable concern, as AI is an application that generates increased demand for data processing and storage to infinity and beyond. If so, that will require lots of capital spending to infinity and beyond. Alternatively, the novelty of AI might wear off once everyone has had a chance to discover its applications or to abandon its usefulness. That might leave hyperscalers with excessive data center capacity. Another possibility is that the next generation of GPU chips will be even faster and operate at room temperature, reducing the water and electricity demand of data centers. That means today's state-of-the-art chips could become obsolete before they've generated any profits. The hyperscalers are included in the Magnificent-7, which collectively sport a weekly Buffett Ratio of a record 8.2 (chart). They've driven the ratio to a record 3.2 for the S&P 500\. Excluding them, the ratio for the S&P 493 is 2.4\. As a result, we expect to see the bull market broaden, boosting the relative performance of the Impresssive 493\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/4dXtiJx-1.jpg) Meanwhile, the 10-year US Treasury bond yield rebounded off 4.00%, just before the Fed cut the federal funds rate on September 17, to 4.20% currently, on better-than-expected economic news this past week (chart). We are sticking with our 4.25%-4.75% range for this yield and extending it through Q1-2026. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-17.jpg) In the forex market, the DXY dollar index has been holding support at its uptrend line that starts in 2011 (chart). We expect that better-than-expected US economic growth and falling odds of Fed rate cuts will lift the dollar. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/45m95cZ-2.png) The weak dollar so far this year has boosted the price of gold. There are also numerous other bullish factors, including central bank buying and rising geopolitical risks. When the price rose above $3,000 early this year, we targeted $4,000 per ounce by the end of this year and $5,000 per ounce by the end of next year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-144.png) The S&P 500's bull market continues to be supported by S&P 500 forward earnings, which is still rising to record highs. It did so last week, despite small dips in analysts' consensus expectations for earnings in both 2025 and 2026\. Our colleague, Joe Abbott, explains that the w/w drops are misleading due to changes in the S&P 500 index resulting from quarterly rebalancing. Here is S&P's [press release](https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20250905-1479730/1479730%5Fsept2025-1500rebalance.pdf?ref=yardeniquicktakes.com) of the index changes effective with the September 22 market open. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-145.png) Finally, sentiment has turned quite bullish according to the Investors Intelligence Bull/Bear Ratio (chart). That hasn't been confirmed yet by the AAII Bull/Bear Ratio. However, sentiment is getting a bit frothy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-151.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Message To The Fed: Repent, Oh Ye Of Little Faith URL: https://www.yardeniquicktakes.com/message-to-the-fed-repent-oh-ye-of-little-faith/ Last updated: 2025-09-29T00:43:50.000Z The Fed just won't listen to us. Last year, we warned Fed officials not to cut the federal funds rate (FFR) because we had more confidence in the economy than they did. We also observed that inflation remained above their 2.0% inflation target. We predicted that the 10-year Treasury bond yield and mortgage rates would likely rise rather than fall if the Fed lowered the FFR. They ignored us last year and proceeded to cut the FFR by 100bps between September 18 and December 18\. However, the bond yield rose by 100bps (chart). This year could be déjà vu all over again. The Fed ignored us again and cut the FFR by 25bps last Wednesday. Once again, the bond yield rose from 4.00% to 4.18% today. The Bond Vigilantes are getting restless! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-138.png) Today's revision to Q2's real GDP growth rate, from 3.3% (saar) to 3.8%, confirms that the economy is in excellent shape (chart). Real consumer spending was revised up significantly from 1.6% to 2.5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-139.png) The current quarter's growth rate is tracking at 3.3%, according to the Atlanta Fed's GDPNow tracking model (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-140.png) Of course, the Fed lowered the FFR last week in response to weak payroll employment data, including a significant downward benchmark revision. However, today's initial unemployment claims report suggested that layoffs remain very low (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-141.png) The upward revision in real GDP and the downward revision in employment suggest that productivity growth will be revised higher. The Fed lowered the FFR last week to revive demand, which doesn't need reviving given the strength of real GDP growth during Q2 and Q3\. The weakness in the labor market is likely structural, with several factors depressing the supply of workers, and AI possibly weakening the demand for entry-level employees. The Fed's easing is unlikely to fix the structural problems plaguing the labor market. Demand for goods and services doesn't need to be stimulated, but by doing so, the Fed risks boosting inflation and bond yields, and increasing the risk of financial instability, including a possible meltup in the stock market followed by a meltdown. We propose that monetary policy be outsourced. We'd like to reiterate our previous offer to do what the Fed does for half the price. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Q3's Earnings Season Is Coming URL: https://www.yardeniquicktakes.com/q3s-earnings-season-is-coming/ Last updated: 2025-09-29T00:44:39.000Z Before you know it, September will be over. It is likely to defy the month's reputation of being a bad one for stocks (chart). Instead, the S&P 500 rose to a new record high of 6693.75 on Monday, September 22\. October has also experienced some painful stock market setbacks, although the month has often provided good buying opportunities following poor September performances. Q3's earnings reporting season occurs in October. We expect it will be a positive one for the market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-134.png) The rebound in the stock market since this year's low on April 8 (when it bottomed at 4982.77) has been extraordinary. That's mainly because the Q1 and Q2 earnings seasons (during April and July) were much better than expected (chart). We are expecting similar "earnings hooks" (i.e., upturns in the data series as actual results are incorporated) for Q3 and Q4. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-135.png) Q2's upbeat earnings surprises weren't limited to the Information Technology and Communication Services sectors, in general, or the Magnificent-7 and the AI stocks, in particular. The Financials and Consumer Discretionary sectors also beat expectations (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-136.png) Analysts' consensus expectations for S&P 500 earnings during Q3 haven't changed much since the start of the Q2 earnings reporting season (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-137.png) Financials should be among the sectors that beat earnings expectations for Q3\. That's especially likely for the big banks, which are experiencing better loan growth (chart). Also boosting their earnings is the steepening yield curve and mounting investment banking business. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-14.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Is The Fed’s Policy Restrictive? URL: https://www.yardeniquicktakes.com/weekly-webcast-is-the-feds-policy-restrictive/ Last updated: 2025-09-29T00:45:05.000Z The Fed’s 25-basis-point cut in the federal funds rate last week doesn’t change our S&P 500 price targets or our subjective probabilities of a meltup (25% odds) or correction (20%) by year-end. Today, Dr Ed explores the reactions to the rate cut in the markets for stocks, bonds, the dollar, and gold as well as the significant takeaways from the FOMC’s September 17 meeting. Notably, the post-meeting Dot Plot and press conference revealed less dovishness than many investors had expected. … Also: Dr Ed opines on the weird notion of an indeterminable “neutral” federal funds rate used to determine the restrictiveness of Fed monetary policy. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! ### Powell's Irrational Exuberance Moment URL: https://www.yardeniquicktakes.com/powells-irrational-exuberance-moment/ Last updated: 2025-09-29T00:45:46.000Z During a speech in Providence, Rhode Island today, Fed Chair Jerome Powell was asked whether he and his colleagues give any weight to the impact of their monetary policies on financial markets. He responded: "We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we're trying to achieve.” Then he opined that "by many measures, for example, equity prices are fairly highly valued." However, he then added that this is "not a time of elevated financial stability risks." We are inclined to agree with the Fed chair, although he triggered our contrary instincts with that last statement. Financial crises tend to be Black Swans, i.e., events that occur unexpectedly, especially when irrational exuberance is widespread and intensifying. In a December 5, 1996 speech, former Fed Chair Alan Greenspan famously asked, "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions ...?" Currently, the weekly S&P 500 forward price-to-sales ratio is at a record high of 3.19 (chart). The S&P 500 forward price-to-earnings ratio is at a near record high of 22.8\. The Tech Bubble burst after it reached a peak of 25.0 in late 1999. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-128.png) During the Tech Bubble, the market-cap share of the S&P 500 Information Technology and Communication Services sectors combined rose to 40%, while the earnings share peaked at 23% (chart). This time, the former is at a record 44% with the latter also at a record high, of 37%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-13.jpg) The good news for now is that weekly S&P 500 forward earnings per share has been rising at a faster pace in recent weeks (chart). This suggests that Q3 earnings will rise to another record high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-133.png) Meanwhile, the recent jump in the breadth of positive three-month changes in forward revenues is remarkable (chart). It belies the widespread perception that the economy is slowing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-130.png) The same can be said for the recent big jump in the percent of S&P 500 companies with positive three-month percent changes in forward earnings (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-131.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Investing In The World URL: https://www.yardeniquicktakes.com/investing-in-the-world/ Last updated: 2025-09-29T00:46:09.000Z It's a big world with lots of investment opportunities. We continue to favor the United States, but it's hard to overweight the US when it already accounts for 64.7% of the market capitalization of the All Country World (ACW) MSCI (chart). That's up from a low of 42.0% in late 2009\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-116.png) We can also observe the outperformance of the US by tracking the ratios of the US MSCI stock price index to the ACW ex-US MSCI stock price index in both local currency and in US dollars (chart). Both remain on solid uptrends even though the US has been a global underperformer so far this year, especially in dollars. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/3QAyTN7.png) As we've noted before, the forward earnings of the US MSCI has been outperforming the rest of the world's forward earnings since the end of the Great Financial Crisis (chart). It is still doing so, which is why the US has outperformed in previous years. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-118.png) The same can be said for forward revenues (chart). The companies in the US MSCI have been able to grow their revenues much faster than companies in the rest of the world. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-127.png) The companies in the US MSCI collectively also have had a higher forward profit margin than companies in the rest of the world (chart). Currently, the US margin is 13.9%, compared to 9.9% for the rest of the world. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-121.png) The only problem is that buyers must pay up for those superior US earnings, revenues, and margins: The US MSCI's forward P/E has been trading at an increasing premium compared to the rest of the world (chart). It is currently 23.2 versus 14.9. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/47mOKog-1.png) Since the start of the bull market on October 12, 2022, the US MSCI has risen 87.4%, trailing only Taiwan (120.4%) and Spain (119.8%), both in local currencies (chart). So far this year, the US has been an underperformer. That's even truer when the performance of overseas stock markets is adjusted for the weaker dollar. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-125.png) We have been drilling down into the FTSE sectors around the world on a ytd basis. (See our [FTSE Country Sector Performance](https://yardeni.com/charts/ftse-country-sector-performance/?ref=yardeniquicktakes.com).) One conclusion is that the outperforming sectors of the Developed World FTSE so far this year are those that tend to grow fastest in developed economies, namely Technology, Financials, and Telecommunications (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-123.png) In the Emerging Markets FTSE, the top outperformer is Basic Materials (chart). That makes sense since many EMs are commodity producers. Also performing well are the Consumer Discretionary, Telecommunications, and Health Care sectors. These sectors tend to prosper in countries with relatively young and rapidly growing populations. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-124.png) The table below is a useful tool for tracking country and sector performances. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-126.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: September 22 - 26 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-22-26/ Last updated: 2025-09-22T01:34:07.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/Screenshot-2025-09-21-170831.png) The week ahead will offer timely clues about both the American consumer and inflation. The economic releases this week might also influence financial market expectations about another Fed rate cut as soon as the October 28-29 Federal Open Market Committee (FOMC) meeting. The federal funds futures market was expecting three 25bps rate cuts over the next six months last week before Thursday's upbeat initial unemployment claims cut the outlook for cuts to two (chart). We are back in the none-and-done camp for the rest of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-115.png) The main data releases include weekly jobless claims and personal income, which include the Fed's preferred inflation measure. Before then, August updates on existing and new home sales could be illuminating. The same can be said about August durable goods. There will also be ample opportunities to hear from Fed officials, including a speech by Fed Chair Jerome Powell (Tue) on the economic outlook. A day earlier (Mon), the lone dissenter at last week’s FOMC meeting, Governor Stephen Miran, will speak to the Economic Club of New York. Miran—the Trump administration economist rushed onto the Federal Reserve Board by the Senate in time for last week's FOMC vote—wanted a 50-basis-point cut, making him the only dissenter. Here's a look at this week's economic reports with the most significant potential to put another Fed rate cut in play—or not: (1) *PCED inflation rate*. President Donald Trump, of course, has been urging the Fed to cut the federal funds rate down to 1.00% to add "rocket fuel" to the economy. However, the PCED (Fri) could show that core inflation—excluding food and energy—remained at a still-elevated annual rate in August (chart). The Cleveland Fed's Inflation Nowcasting model is showing a 3.0% y/y increase in last month's PCED inflation rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-111.png) (2) *Weekly jobless claims*. Miran and his fellow doves could see their rocket-fuel dreams tempered somewhat by yet more evidence that layoffs remain low. While there's lots of noise in the employment data these days, weekly initial unemployment claims in the neighborhood of 231,000 would reduce the urgency for another Fed rate cut (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-112.png) (3) *Consumer confidence*. The Conference Board's September Consumer Confidence Index (Fri) follows news last week that its Index of Coincident Economic Indicators rose 0.2% m/m in August to another record high. We will focus on the job availability series (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-113.png) (4) *Housing market*. Odds are that the August readings on existing and new home sales (Tue and Wed) remained weak, while the inventory of unsold homes remained elevated (chart). The Fed's rate cut last week may not provide significant support to the housing market for the rest of the year if bond yields move higher. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-114.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Party Like It's 1999!? URL: https://www.yardeniquicktakes.com/market-call-party-like-its-1999/ Last updated: 2025-09-21T16:54:35.000Z The DJIA, S&P 500, Nasdaq, and Russell 2000 all rose to record highs this past week. All were boosted by the Fed's decision to cut the federal funds rate by 25bps on Wednesday. Is the stock market back on the road to the same irrational exuberance that inflated the Tech Bubble of 1999, which was followed by the Tech Wreck of the early 2000s? Will the theme song for 2026 be "[Party Like It's 1999](https://video.search.yahoo.com/yhs/search;%5Fylt=AwrEmJh.IM5oBUE6f0I0nIlQ;%5Fylu=c2VjA3NlYXJjaARzbGsDYXNzaXN0;%5Fylc=X1MDMTM1MTE5NTcwMARfcgMyBGZyA3locy1mYy01MTkxBGZyMgNzYS1ncC1zZWFyY2gEZ3ByaWQDcnBhb1VvZ3NRRGEzcHBmdldRMlFRQQRuX3JzbHQDMARuX3N1Z2cDMTAEb3JpZ2luA3ZpZGVvLnNlYXJjaC55YWhvby5jb20EcG9zAzEEcHFzdHIDcGFydHkgbGlrZSBpdHMgMTk5OQRwcXN0cmwDMTkEcXN0cmwDMjcEcXVlcnkDcGFydHklMjBsaWtlJTIwaXRzJTIwMTk5OSUyMHlvdXR1YmUEdF9zdG1wAzE3NTgzMzkyMDkEdXNlX2Nhc2UD?p=party+like+its+1999+youtube&ei=UTF-8&fr2=sa-gp-search&fr=yhs-fc-5191&hsimp=yhs-5191&hspart=fc&type=fc%5FA8284D1DCCB%5Fs58%5Fg%5Fe%5Fd%5Fneqyk2bqq%5Fc999¶m1=7¶m2=eJwtjslqwzAYhF9FxwQk%2BdcaKzq1MX6A0lOFDo6jOML7htM%2BfXEIcxlmvoGp4s1Z%2F5UxACXS1GHfOevD%2BFvz6zg67PfaYV86640xDvs4OOu1oYwLqgTlcg%2Br0Dvr19lhvxbO%2Brb%2Fi01TJIoCOmyxu%2FXbjLoFMaBg0RY7LS16anlExTA0YQvXOi6JEicqNDrUj6VtMGpiHVAVyro%2FovIx9W1ImAT6EpqLezHF92S%2FNcf31XUO08szUFIKAGK4ORHGciCpueQkN2mWyc%2BMfaRy58sd5sAVAUOY%2FgY4S3NWmgLTP%2F%2FMslQg&ref=yardeniquicktakes.com#id=38&vid=cce3da71e238b62a795c754bf48e808e&action=view)!"? Perhaps. However, the S&P 500 has been driven to new highs this year by better-than-expected earnings. S&P 500 forward earnings per share rose to a record $294.91 during the September 18 week, on its way to converging at year-end with the analysts' consensus for 2026 (chart). The latter continues to rise, reaching $304.88 this past week. (FYI: Since forward earnings is the time-weighted average of analysts’ consensus estimates for the current and following years, it always matches the following year’s estimate at year-end.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-104.png) The rally in the S&P SMidCaps (i.e., S&P 400 MidCaps and S&P 600 SmallCaps) may finally be getting some support from those indexes’ forward earnings too (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-105.png) Meanwhile, the S&P 100 MegaCaps continue to outperform the S&P 500, as they did during the Party of 1999 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/3s5Btk0.png) September, which has the worst track record for the S&P 500, isn't over yet, but the month is a winner so far this year (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-98.png) The S&P 500 may not be tracking its average seasonal pattern, but the 2015-now index is closely tracking the 1980-2010 index (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-109.png) One of the main differences between now and then is that the S&P 500 forward P/E has been significantly higher now compared to then (chart). It is currently 22.0, not much below the 25.0 peak of the 1999 Tech Bubble. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-110.png) The Roaring 2020s remains our base-case scenario for the remainder of the decade. We are still targeting the S&P 500 to get to 7700 by the end of next year. If the stock market parties like it's 1999 in response to the Fed's monetary easing, then we might get there sooner as a result of a meltup that could be followed by a meltdown. If so, the hangover this time isn't likely to be as severe as the one that followed the Party of 1999, in our opinion. Indeed, we expect that the Roaring 2020s will be followed by the Roaring 2030s. Since the 1920s, there have been four Roaring decades, i.e., with the S&P 500 rising over 200% (chart). We may be in a fifth now, to be followed by a sixth during the 2030s. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-102.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Postpartum Impressions URL: https://www.yardeniquicktakes.com/postpartum-impressions/ Last updated: 2025-09-29T00:58:46.000Z Please see [Dr Ed's op-ed ](https://www.ft.com/content/0fdb84da-8cc5-46d7-84be-e9488752edd7?ref=yardeniquicktakes.com#comments-anchor)in today's **Financial Times titled "*Why it might be the time to repeal the Fed’s dual mandate: Should 3% be the US central bank's new inflation target?" As expected by everyone, the FOMC delivered a 25bps cut in the federal funds rate (FFR) yesterday. There was only one dissenter among the FOMC's voting members. That happened to be Stephen Miran, who wanted a 50bps cut. President Donald Trump has publicly called for the Federal Reserve to cut the FFR down to **1**.00%, describing such a move as "rocket fuel" for the US economy. That would also lower government borrowing costs, allowing the administration to finance the high and rising deficits expected from his spending and tax-cut bill. In their latest Summary of Economic Projections (released yesterday), FOMC participants indicated that they collectively believe that 3.00% is the "long-run" neutral rate for the FFR (chart). That's 2.00ppts above Trump's wish. It's at least 1.00ppts lower than our 4.00%-4.50% estimate, that is based on the fact that it seems to be working toward achieving the Fed's dual mandate of maximum employment with stable prices without raising the risk of financial instability. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-92.png) Fed officials voted for the rate cut because of the recent weakness in payroll employment data. Some of them might also have been spooked by the 263,000 spike in initial unemployment claims during the first week of September (chart). We viewed it as an aberration that occurs from time to time. Sure enough, jobless claims fell 33,000 to 231,000 last week. So layoffs remain low. In addition, short-term unemployment (i.e., under 27 weeks) is falling along with continuing unemployment claims (which terminate after 26 weeks of unemployment). That may be due to an increase in long-term unemployment and/or fewer people losing their jobs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-93.png) Meanwhile, the Conference Board reported today that the Index of Coincident Economic Indicators (CEI) rose 0.2% m/m in August to yet another record high (chart). That's not surprising since S&P 500 forward earnings is also rising in record high territory, and suggests that September's CEI will do so as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-94.png) So far, the average of two of the regional business surveys conducted by five of the Fed's regional banks remained in expansion territory during August, suggesting that the national ISM manufacturing purchasing managers index should be doing the same soon (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-95.png) The averages of the two surveys' prices-paid and prices-received indexes are topping, suggesting that tariff-related inflationary pressures are abating (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-97.png) This morning's financial market action suggests that the latest batch of data is showing economic strength that might once again convince Fed officials that there is no rush to lower the FFR again. The 10-year Treasury bond yield has risen back to 4.11%. The DXY dollar index is up 0.5%. The price of gold is down due to the strength of the dollar. The S&P 500 is up 0.7%, while the Russell 2000 is up 1.43%. That all makes sense to us. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Fed Cuts By 25 Basis Points, Ho-Hum URL: https://www.yardeniquicktakes.com/fed-cuts-by-25-basis-points-ho-hum/ Last updated: 2025-09-18T11:54:40.000Z Why didn't stock prices rise today? Why didn't the 10-year US Treasury bond yield fall below 4.00%? Why did the price of gold slip? The financial markets had clearly already fully discounted today's 25-basis-point cut in the federal funds rate. In addition, the FOMC's Dot Plot wasn't as dovish as some market participants might have expected. Seven of 19 meeting participants expected no further rate reductions this year, and two more expected only one more cut. And they show that most Fed officials don't expect to make many more reductions next year under their current outlook for solid—if somewhat slower— economic activity. Furthermore, Fed officials presented a united front, suggesting that they are signaling their support for the Fed's independence. Eleven of 12 Fed voters backed the 25bps cut. Fed governor Stephen Miran, who served as a senior White House adviser until his confirmation to the central bank board this week, was the lone dissenter. He favored a larger half-point cut. Even Governors Christopher Waller and Michelle Bowman didn't dissent, as they had at the last meeting, because they both favored a 25bps back then. In his post-meeting press conference, Fed Chair Jerome Powell remained basically noncommittal about further rate cuts. - He stressed that future decisions are not on a "preset path" and will be determined on a meeting-by-meeting basis, depending on incoming data. - While inflation has eased from its highs, it remains "somewhat elevated" above the Fed's 2% target. Powell acknowledged that tariffs are beginning to push up prices in some sectors. He said the Fed's baseline expectation is that these tariff-related price increases will be a one-time event. Still, he emphasized that it is the Fed's job to ensure they do not become a persistent inflation problem. - Powell highlighted a softening labor market, noting that job gains have slowed and the unemployment rate has edged up to 4.3%. He referred to the current state of the labor market as a "curious balance," where both the supply of workers and the demand for them have declined. Powell attributed some of this slowdown to new immigration policies. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: An Open Letter to Scott Bessent URL: https://www.yardeniquicktakes.com/weekly-webcast-an-open-letter-to-scott-bessent/ Last updated: 2025-09-17T12:00:47.000Z A recent article by Treasury Secretary Scott Bessent takes aim at the Fed for its use of unconventional monetary tools and its mission creep. Today, Dr Ed addresses the Treasury secretary in an open letter, detailing where they agree and diverge on the Fed’s role and what monetary and fiscal policies are needed to sustain the Roaring 2020s scenario that both support. While an original aim of the Fed was to promote financial system stability, Bessent’s push for lower interest rates risks a stock market meltup and upward pressure on inflation and bond yields. … Also potentially destabilizing: The administration’s highly unconventional Genius Act, which would use stablecoins backed by US Treasury bills to increase demand for Treasuries and fund the federal debt. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Like Throwing Gasoline On A Fire URL: https://www.yardeniquicktakes.com/like-throwing-gasoline-on-a-fire/ Last updated: 2025-09-16T19:56:34.000Z The FOMC is likely to cut the federal funds rate (FFR) by 25bps tomorrow. Among the meeting participants, there might be one or more dissenters to the decision who favor a 50bps cut and one or more dissenters opposed to any cut. The Summary of Economic Projections may also indicate that FOMC participants are divided on whether and when further cuts might be necessary. Tomorrow's rate cut isn't really needed. Still, a majority of the FOMC is likely to view it as an insurance policy against further weakening of the labor market, even though GDP continues to grow at a solid pace and inflation remains almost a point above the Fed's 2.0% y/y target. More often than not in the past, monetary easing cycles started when the previous tightening of monetary policy triggered a financial crisis that quickly turned into an economy-wide credit crunch and a recession. Easing at such times is clearly warranted. But the Fed cut the FFR by 100bps at the end of last year even though there was no credit crunch and no recession (chart). That makes another round of rate cuts in this cycle more likely to cause inflation to remain above the Fed's target, while fueling speculative fires in the stock market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-90.png) Today, in response to stronger-than-expected August retail sales, up 0.6% m/m, the Atlanta Fed's estimate for Q3's real GDP growth rate was revised up from 3.1% to 3.4%. The estimate for real consumer spending was revised up from 2.3% to 2.7%. _This post is for paying subscribers only._ ### DEEP DIVE: An Open Letter to Scott Bessent URL: https://www.yardeniquicktakes.com/deep-dive-an-open-letter-to-scott-bessent/ Last updated: 2025-09-15T21:23:06.000Z ### **Dear Scott,** ### ### **I Wholeheartedly Agree** Thank you for your public service as Secretary of the Treasury of the United States. I read your recent excellent [article](https://www.international-economy.com/TIE%5FSp25%5FBessent.pdf?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=380482273&%5Fhsenc=p2ANqtz--aqVXm2CyUHRSYF-MZ8JQ9PaSmoA316y8jIiXQvht7G8FIM8fU2Ulwy4vbahgRi6yKh2QmySG1vmZ2AcC22Lq6lboASw&%5Fhsmi=380482273) in *The International Economy* titled “The Fed’s New ‘Gain-of-Function’ Monetary Policy.” I agree with much of your criticism of the Fed. In addition, I believe that we share the same optimistic “Roaring 2020s” outlook for the US economy, and we both hope that the Fed doesn’t screw it up. In an internal [memo](https://assets.realclear.com/files/2024/02/2353%5Fkeysquare.pdf?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=380482273&%5Fhsenc=p2ANqtz--aqVXm2CyUHRSYF-MZ8JQ9PaSmoA316y8jIiXQvht7G8FIM8fU2Ulwy4vbahgRi6yKh2QmySG1vmZ2AcC22Lq6lboASw&%5Fhsmi=380482273) to your colleagues at Keysquare Capital Management dated January 31, 2024, you wrote: “Our base case is that a re-elected Donald Trump will want to create an economic lollapalooza and engineer what he will likely call ‘the greatest four years in American history.’ Economist Ed Yardeni believes that post-Covid America has the potential to have a boom similar to the ‘Roaring Twenties’ of a century ago. We believe that a returning President Trump would like this to be his legacy. In this scenario, the greatest risk factor, in our opinion, would be a sudden rise in long-end rates.” In your recent article, you criticize the Fed for attempting to manage the economy with unconventional monetary tools. You rightly observe that the Fed successfully ended the Great Financial Crisis of 2008 by implementing the first round of quantitative easing (also known as “QE1”) in late 2008 and early 2009\. In that round, the Fed purchased $1.25 trillion in mortgage securities and $300 billion in Treasuries. QE1 was consistent with what arguably is the primary job of any central bank: to provide liquidity during such crisis periods. Indeed, the Fed was created at the end of 1913 in response to previous financial crises. Its original central mission was to maintain financial stability. We both agree that the Fed’s subsequent three rounds of quantitative easing (QE2, QE3, and QE4) were a mistake. When the federal funds rate was cut to zero on December 16, 2008, Fed officials should have acknowledged that monetary policy could do no more to stimulate the economy, leaving fiscal policy to do the heavy lifting. Instead, the Fed implemented QE2 in November 2010, committing to purchase $600 billion in long-term Treasury securities by the middle of 2011\. Fed officials said that their economic model estimated that in effect this would lower the federal funds rate below the so-called “zero lower bound” by as much as 75 basis points. Other central banks around the world adopted similar unconventional policies, including actual negative-interest-rate policies. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: September 15 - 19 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-15-19/ Last updated: 2025-09-15T02:06:49.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/Screenshot-2025-09-14-171104.png) Central banks take the spotlight this week as monetary policymakers from Washington to Tokyo cut to the chase on the balance of economic risks. Though the Federal Reserve's two-day meeting (Tue-Wed) is the main event, rate decisions by the Bank of Canada (Wed), the Bank of England (Thu), and the Bank of Japan (Fri) may reveal much about the degree to which US tariffs are disrupting economies around the world. The same goes for rate calls in Brazil, Indonesia, Norway, and Taiwan. There's little doubt in financial markets that the Federal Open Market Committee (FOMC) will cut the federal funds rate by 25 basis points on September 17\. And odds are there will be no dissenting votes this time, as weaker employment data give Fed Chairman Jerome Powell economic cover to make President Donald Trump’s day. Though Trump wants a bigger move, we remain convinced that a 50-basis-point cut is unlikely at this time. Yet all in all, this will be a unique FOMC meeting. For one thing, Senate Republicans are racing White House economic adviser Stephen Miran onto the Fed Board in time to argue in favor of Trump's desire for sharply lower rates. Might Miran dissent in favor of a 50-basis-point easing? Also, the courts are fast-tracking a decision on whether Trump can fire Governor Lisa Cook for alleged mortgage fraud. Over in Tokyo, the BOJ is also navigating uncharted territory. A couple of months ago, most economists figured Governor Kazuo Ueda would hike rates by 25 basis points to 0.75% on September 19\. Now, almost none do amid tepid economic growth and uncertainty over China's growth trajectory and Trump's trade war plans. Here's a look at this week's economic reports that are most likely to impact the Fed's thinking about the economy: (1) *Retail sales*. August data on retail sales (Tue) could match July’s 0.5% m/m increase. Reasons to expect the rise include a 6.6% y/y increase in the Redbook retail sales index through the week of September 5, private wages and salaries in personal income rising 0.3% m/m to a new record high during August, and the strength of the forward revenues of the S&P 500 Retail Composite (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-80.png) (2) *Industrial production*. August industrial production (Tue) likely remained lackluster given weaker manufacturing hours worked and the 48.7 reading of the ISM manufacturing index last month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-8.jpg) However, since 2001, the y/y growth rate in industrial production has been consistently weaker than the growth rate of real GDP goods (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-81.png) (3) *Import prices*. Import prices (Tue), especially those from China, have had a deflationary impact on consumer durable goods prices in recent years, until both rose sharply during the 2022-23 inflation spike (chart). Now, Chinese exporters to the US are cutting their prices in an effort to offset tariff-fueled price increases in US consumer durable goods. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-84.png) (4) *Composite cyclical indicators*. A soft August reading is likely from the Conference Board’s Index of Coincident Economic Indicators (Thu). That's because payroll employment and industrial production were weak in the previous month. On the other hand, our favorite weekly coincident index of the economy is the S&P 500’s forward earnings, which has recently been rising at a faster clip, reaching record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-79.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: The Oracle Of Austin URL: https://www.yardeniquicktakes.com/market-call-45/ Last updated: 2025-09-14T21:39:28.000Z Last Wednesday, Larry Ellison, the executive chairman and chief technology officer of Oracle, saw his net worth jump by $101 billion—the biggest one-day increase ever recorded on the Bloomberg Billionaires Index—to $382 billion. That happened after the company announced at its quarterly earnings conference that Google's Gemini AI models would become available on Oracle's cloud infrastructure. That sent the company's stock soaring by 40% (chart). In the August 10 *QT*, we wrote: "The sky seems to be the limit for the cloud providers. More and more of us are using AI's large language models, such as Gemini, GROK, ChatGPT, Claude, and Copilot, as tools to conduct research, write software, create content, and work more productively. These AI tools are all processing and storing our interactions with them in the cloud and learning from these interactions to become more useful to us. As the tools become more useful, the cloud companies earn more, and they must spend more to expand their data center capacity. Our collective ability to process more data leads us all to create more data to process. And so on. So the sky really is the limit!" ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-76.png) Also having a good move to the upside last week was the S&P 500 Investment Banking & Brokerage stock price index (chart). It has been rising into record-high territory in recent weeks. We've recommended overweighting the S&P 500 Financials since the start of the current bull market in October 2022\. We've done the same for the Information Technology, Communication Services, and Industrials sectors of the S&P 500\. So far, so good. _This post is for paying subscribers only._ ### 25 Or 50, To Be Or Not To Be? URL: https://www.yardeniquicktakes.com/25-or-50-to-be-or-not-to-be/ Last updated: 2025-09-11T15:57:56.000Z Following yesterday's cooler-than-expected PPI and today's as-expected CPI, expectations are that the FOMC will cut the federal funds rate by 25 basis points on September 17, with no dissenting votes among voting members. Following today's jump in last week's initial unemployment claims, meeting participants might consider a 50-basis-point cut, but we doubt that they will opt for that, as the majority would likely dissent. Instead, the committee might signal the likelihood of more rate cuts in its Summary of Economic Projections. Speaking of projections: We are raising our year-end S&P 500 target from 6600 to 6800\. That’s our base-case scenario with a subjective probability of 55%. We currently assign a 25% subjective probability to a meltup that lifts the S&P 500 to 7000 by year-end 2025 and 20% odds to a correction in the index by the end of this year. If the Fed lowers the federal funds rate on September 17 and signals more rate cuts ahead, we will increase our odds of a meltup and decrease our odds of a correction. We are still not convinced that the economy needs to be stimulated by the Fed. Inflation remains closer to 3.0% y/y than to the Fed's 2.0 target. Real GDP is growing solidly despite the recent downward revisions in payroll employment. The unemployment rate remains between 4.0% and 4.3%. All this implies that either real GDP will weaken significantly and the jobless rate soon will rise sharply, or that productivity growth is making a strong comeback. We pick Door #2! Consider the following: _This post is for subscribers only._ ### WEEKLY WEBCAST: The Good, The (Not So) Bad & The (Relatively) Ugly URL: https://www.yardeniquicktakes.com/weekly-webcast-the-good-the-not-so-bad-the-relatively-ugly/ Last updated: 2025-09-10T12:00:12.000Z Our Roaring 2020s economic scenario and expectations for inflation and the labor market suggest that the Fed probably shouldn’t cut interest rates this year, although one cut might be warranted if upcoming inflation reports are more subdued than we expect. Yet a rate cut next week, after the FOMC meets Wednesday, is practically a foregone conclusion. Stimulating an economy that doesn’t need stimulation won’t create more workers to address the undersupply that’s constraining the demand for labor, Dr Ed explains. Plus, cutting rates when it’s not necessary could cause stock prices to melt up and destabilize the broader financial system. … Plus, a look at the debt crises attracting Bond Vigilantes’ attention in the UK, France, and Japan.[](https://us02web.zoom.us/rec/share/jk-%5F1%5Fsq%5FG4z3SBf%5FqaeYtl89sgyWDdlddLDCYp5mMe5QMf2f2ftZ6QbiJ46gA0.xIFbD004k0uwQsXd?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Lots Of News URL: https://www.yardeniquicktakes.com/lots-of-news/ Last updated: 2025-09-09T20:34:09.000Z There was a lot of news today that, on balance, didn't move the needle much in the financial markets, which are marking time until August's PPI and CPI reports are released on Wednesday and Thursday, respectively. Let's review all the non-events today: (1) *Gold & geopolitics*. The nearby futures price of gold jumped to yet another record high of $3,707 per ounce this morning on news that Israel attacked the leadership of Hamas in Doha, Qatar. Profit-taking pared some of the gain by early afternoon. The gold spot price is on track to reach our $4,000 target by the end of this year (chart). That has been our target since the price rose above $3,000 earlier this year. We turned bullish on gold when it rose above $2,000 last year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-57.png) On September 6, Bloomberg reported that the People’s Bank of China increased its gold holdings in August for a 10th month, in a continued push to diversify its reserves away from US dollars. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-62.png) (2) *Uncertainty*. There has been considerable uncertainty since Donald Trump won the 2024 presidential election in November. Uncertainty remained high after he imposed tariffs earlier this year. The Uncertainty Index, compiled by the National Federation of Independent Business (NFIB), reached a record high of 110 in October 2024, just before the election (chart). It has remained elevated but was down to 93 in August. Apparently, many of us are learning to live with high uncertainty resulting from Washington's erratic policymaking. As we've observed many times before, it is impressive how well the US economy and stock market perform *despite* Washington's meddling. _This post is for paying subscribers only._ ### Earnings-Led Meltup? URL: https://www.yardeniquicktakes.com/earnings-led-meltup/ Last updated: 2025-09-09T02:59:35.000Z _This post is for paying subscribers only._ ### MARKET CALL: Apocalypse Now? URL: https://www.yardeniquicktakes.com/market-call-apocalypse-now/ Last updated: 2025-09-08T03:26:08.000Z President Donald Trump on Saturday amplified his promises to send National Guard troops and immigration agents to Chicago by posting a parody image from "Apocalypse Now" featuring a ball of flames as helicopters zoom over the nation's second-largest city. "I love the smell of deportations in the morning," Trump wrote on his social media site. "Chicago about to find out why it's called the Department of WAR." On Thursday, 475 mostly South Korean nationals were arrested at a Hyundai facility in Georgia. They will be returned to South Korea on a chartered flight. That kind of news certainly will convince other would-be undocumented immigrants to stay in their home countries or to go back there if they are working illegally here. Also, US employers will be less likely to hire them. No wonder that the number of foreign-born workers in the labor force fell by 1.5 million from March through August down to 32.2 million (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-43.png) Trump's DOGE, tariff, immigration, and deportation policies are discombobulating the US labor market. They are certainly reducing the supply of foreign-born workers and causing employers to refrain from hiring them. The supply of workers may be a greater concern for the US economy than a weakening demand for labor. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: September 8 - 12 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-8-12/ Last updated: 2025-09-08T02:02:42.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/Screenshot-2025-09-07-210450.png) On Tuesday at 10:00 a.m., the Bureau of Labor Statistics (BLS) will publish its preliminary benchmark revision for March 2025 employment data. This coincides with the release of the Quarterly Census of Employment and Wages (QCEW) data for Q1-2025. The preliminary revision will estimate how much the monthly payroll report overstated (or understated) actual job growth between April 2024 and March 2025\. The final benchmark revision will be incorporated in the January 2026 employment report in February 2026\. The revision is expected to range between -450,000 and -750,000, suggesting that productivity might be revised upward over this period. Furthermore, that would confirm widespread expectations of a Fed rate cut on September 17\. The 10-year Treasury bond yield could fall below 4.00%, though not if the PPI and CPI inflation rates run hotter than expected later this week. The first look at August inflation comes not a moment too soon, following last Friday's weaker-than-expected employment report. The anemic 22,000 payrolls gain increased the odds of a Fed rate cut. All that stands between the financial markets and the liquidity jolt they crave are reasonably tame figures for August's PPI (Wed) and CPI (Thu). Yet tame figures aren’t a given. Wall Street, meanwhile, will have a busy week on the tech front: Apple is expected to unveil a variety of new iPhone models. AMD, Broadcom, Meta, and Nvidia are slated to make closely watched presentations at a Goldman Sachs [*conference*](https://www.bloomberg.com/news/articles/2025-09-07/ceos-eyeing-tech-deals-record-flock-to-key-goldman-confab?ref=yardeniquicktakes.com)in San Francisco. Oracle, Adobe, and the original meme stock GameStop will report earnings. Overseas, markets will pay close attention to Japanese leadership intrigue after Prime Minister Shigeru Ishiba said he's stepping down. Investors in Europe will brace for the possible collapse of France's government following a no-confidence vote (Mon) targeting Prime Minister Francois Bayrou. At home, here's a look at the week’s economic releases with the most significant potential to influence the outlook for Fed policy over the remainder of this year: (1) *PPI.* August's PPI (Wed) is expected to be up 0.3% m/m following July's 0.9% jump. On a y/y basis, the PPI rose 3.3% in July. The PPI excludes tariffs, but goods inflation likely rose as the costs of imported materials and parts have been boosted by tariffs, as shown by the recent jumps in the regional indexes of prices paid and received (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-5.jpg) (2) *CPI.* August's CPI (Thu) may show that underlying inflation pressures are enough to keep the pace of Fed easing moves up for active debate. The [Cleveland Fed's Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model expects the headline and core CPI inflation rates to increase 2.84% y/y and 3.05%, respectively. Again, the regional indexes of prices paid and received are also showing upward pressure on the CPI inflation rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-6.jpg) (3) *Initial jobless claims*. With initial unemployment claims (Thu) hovering around the four-week average in the vicinity of 231,000, the rate of layoffs remains low. The trouble for businesses is more the availability of labor than weakening demand. (4) *NFIB survey*. Given the widening range of options on the health of the labor market, surveys provided by groups like the National Federation of Independent Business (NFIB) take on greater importance. In July, NFIB’s small business optimism measure rose to 100.3, the highest level since February. Yet so did the uncertainty index, rising to a five-month high of 97 (chart). Such conflicting signals show why the trajectory of the Fed's rate moves isn’t as straightforward as markets believe. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/3YJk50U.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Weekly Roundup - September 7th URL: https://www.yardeniquicktakes.com/weekly-roundup-september-7th/ Last updated: 2025-09-07T12:00:36.000Z [US Labor Market Is In BalanceAugust’s employment report was released this morning. It was weaker than expected. The month’s payrolls rose by just 22,000\. June’s number was revised down by 27,000 to a decline of 13,000, while July’s number was revised up by 6,000 to 79,000\. August’s big losers were![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-268.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1535924407980-e425c7be1b9b)](https://www.yardeniquicktakes.com/us-labor-market-is-in-balance/) [Flocking Doves Tomorrow?Stock prices rose again today as the 10-year bond yield fell. Investors anticipate that tomorrow’s employment report for August will be weak. If so, then it is a sure bet that the FOMC’s majority will turn dovish and will vote to cut the federal funds rate on September 17\. Indeed,![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-269.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1549589465-442e6195e54b)](https://www.yardeniquicktakes.com/flocking-doves-tomorrow/) [Stock Market Oblivious To Weak Economic DataThe S&P 500 rose today despite a batch of weak economic indicators over the past two days. Investors perceive that bad news is good news if it increases the chances of a Fed rate cut on September 17\. Indeed, the odds of that happening are now 97.6%, according![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-270.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1704223592999-ef8aa2131036)](https://www.yardeniquicktakes.com/stock-market-oblivious-to-weak-economic-data/) [WEEKLY WEBCAST: What Could Possibly Go Wrong (with special guest Jim Lucier of Capital Alpha)September has a long history of being a tough month for the stock market. This has been particularly true over the past decade, based on the average year-to-date percentage change in the S&P 500 during Septembers (chart). But when September was weak in the past, it often provided buying![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-271.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1499750310107-5fef28a66643-8)](https://www.yardeniquicktakes.com/weekly-webcast-europes-debt-trap/) [Gold Is Shining More Brightly Than Ever BeforeWe turned bullish on gold last year when the spot price of the shiny metal decisively rose above $2,000 per ounce (chart). We attributed this new bull market in gold to Russia’s invasion of Ukraine in February 2022\. In response, the United States and its allies froze the international![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-272.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1646627927874-be8c13d0ae1a)](https://www.yardeniquicktakes.com/gold-is-shining-more-brightly-than-ever-before/) [ECONOMIC WEEK AHEAD: September 2 - 5This week is chock-a-block with data reports, all building up to Friday’s pivotal employment report. The August jobs release will offer a reality check of sorts following July’s surprisingly soft reading and significant downward revisions to results for May and June. It could determine whether the Federal Open Market Committee![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/icon/circle-approved-yri-273.png)Yardeni QuickTakesEd Yardeni![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/thumbnail/photo-1558025137-0b406e9cc169-15)](https://www.yardeniquicktakes.com/economic-week-ahead-september-2-5/) ### US Labor Market Is In Balance URL: https://www.yardeniquicktakes.com/us-labor-market-is-in-balance/ Last updated: 2025-09-05T21:32:14.000Z August's employment report was released this morning. It was weaker than expected. The month's payrolls rose by just 22,000\. June's number was revised down by 27,000 to a decline of 13,000, while July's number was revised up by 6,000 to 79,000\. August's big losers were goods producers (-25,000), professional & business services (-17,000, with temporary help services down 9,800), and government (-16,000) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-34.png) Yet, the unemployment rate edged up only slightly from 4.2% in July to 4.3% last month, suggesting that the labor market remains at full employment. The unemployment rates for workers aged 25 years or more remained relatively unchanged below 4.0% (chart). The jobless rate for teens fell to 13.9%, while it increased to 9.2% for workers aged 20 to 24\. It is getting tougher for college graduates to find jobs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-36.png) Over the past three months, payroll gains averaged just 29,300 per month (chart). That is low, but it might be close to the new "breakeven" pace necessary to keep the unemployment rate from rising. Labor force growth has been weak due to limited immigration and increasing deportations. Therefore, the labor market needs to create fewer jobs to maintain a low unemployment rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-37.png) During August, the supply of labor (i.e., the labor force) matched the demand for labor (i.e., household employment plus job openings) (chart). The difference between the two is one of Fed Chair Jerome Powell's favorite labor market indicators. It shows that the job market is in equilibrium currently. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-38.png) A few pundits have recently described the labor market as being in a "don't-fire-don't-hire" mode. That's not an accurate description. During August, 5.3 million workers were hired (chart). It was matched by 5.3 million in separations, with quits at 3.2 million and layoffs at 2.1 million. These are all relatively normal readings! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-39.png) As noted above, employment in temporary help services fell during August (chart). It has been falling for the past couple of years, providing a misleading indicator of the economy's weakness. It is likely to continue to decline if AI reduces the demand for temporary workers, as seems likely. An increase in productivity would offset that. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-40.png) Our Earned Income Proxy rose only 0.3% m/m as wages rose by the same amount, while hours worked were unchanged in August (chart). If productivity growth offsets the slowdown in employment growth, then real wages should increase at a faster pace in the coming months, thus boosting consumption growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-4.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Flocking Doves Tomorrow? URL: https://www.yardeniquicktakes.com/flocking-doves-tomorrow/ Last updated: 2025-09-05T01:23:30.000Z Stock prices rose again today as the 10-year bond yield fell. Investors anticipate that tomorrow's employment report for August will be weak. If so, then it is a sure bet that the FOMC's majority will turn dovish and will vote to cut the federal funds rate on September 17\. Indeed, the odds are up to 99.4%, according to the [CME FedWatch Tool.](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?ref=yardeniquicktakes.com) Stock investors must be thinking that if the report is better than expected, that's bullish for earnings. So another postponement in rate cutting by the Fed is no problem for the stock market. If the jobs report is weak, then the FOMC will deliver a Fed Put in two weeks. So the consensus is that there is no downside, only upside. Our main objection to a rate cut is that it will probably fuel a meltup in the stock market, especially if most of the data up ahead confirm the resilience of the economy. Indeed, real GDP is on track to increase 3.0% during Q3 after rising 3.3% in Q2, according to the Atlanta Fed's GDPNow (chart). The Citigroup Economic Surprise Index is solidly in positive territory at 25.8 today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-32.png) The above explains why both stock and bond prices rallied today following the release of August's ADP report, which showed private payrolls rising by just 54,000 during the month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-29.png) _This post is for paying subscribers only._ ### Stock Market Oblivious To Weak Economic Data URL: https://www.yardeniquicktakes.com/stock-market-oblivious-to-weak-economic-data/ Last updated: 2025-09-07T07:57:21.000Z The S&P 500 rose today despite a batch of weak economic indicators over the past two days. Investors perceive that bad news is good news if it increases the chances of a Fed rate cut on September 17\. Indeed, the odds of that happening are now 97.6%, according to the [CME FedWatch Tool.](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?ref=yardeniquicktakes.com) That's a sure thing. We've been at 40% and are now raising that to a still skeptical 60%. We might have to join the consensus if Friday's employment report doesn't surprise to the upside, as we expect. Today's JOLTS report for July showed a downtick in job openings, but this series remains relatively high (chart). The ratio of job openings to the number of unemployed workers was 1.0 during July. The paces of both hirings and quits haven't changed much over the past year, suggesting that the labor market hasn't changed much either. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-3.jpg) On the other hand, net hirings (i.e., hirings minus separations) rose just 19,000 during July, following a drop of 74,000 during June (chart). These are even weaker readings than shown by payroll employment. We still believe that the weakness in the latter from May through July reflected employers' caution due to uncertainty about tariffs. We expect employers to expand their payrolls in the coming months, as their sales and earnings remain strong despite the uncertainty. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-15.png) Another set of weak indicators came out yesterday for July's construction spending (chart). Total spending reached a record high of $2.22 trillion in May 2024\. It is down only 3.6% since then through July. On the weak side have been nonresidential and residential construction. Public construction spending and spending on home improvements have been relatively stronger. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-20.png) Another weak report was yesterday's manufacturing purchasing managers survey for August (chart). The M-PMI edged up but remained below 50.0\. It has been below this level almost every month since November 2022\. New orders rose above 50.0, but both production and employment were below that level. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-22.png) Now for some good news: Retailers mostly beat consensus analysts' expectations for the Q2 revenues and earnings per share of the companies in the S&P 500 Retail Composite industry. The forward revenues per share of this composite jumped over the past couple of weeks to a new record high through the week of September 3 (chart). That augurs well for retail sales in August. It confirms our view that consumer spending remains resilient, as does the overall economy. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-18.png) Investors agree with our upbeat view of consumers, as evidenced by the strength in the S&P 500/400/600 Retail Composite stock price indexes. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-19.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: What Could Possibly Go Wrong (with special guest Jim Lucier of Capital Alpha) URL: https://www.yardeniquicktakes.com/weekly-webcast-europes-debt-trap/ Last updated: 2025-09-05T21:02:23.000Z September has a long history of being a tough month for the stock market. This has been particularly true over the past decade, based on the average year-to-date percentage change in the S&P 500 during Septembers (chart). But when September was weak in the past, it often provided buying opportunities for year-end rallies. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Gold Is Shining More Brightly Than Ever Before URL: https://www.yardeniquicktakes.com/gold-is-shining-more-brightly-than-ever-before/ Last updated: 2025-09-03T03:04:24.000Z We turned bullish on gold last year when the spot price of the shiny metal decisively rose above $2,000 per ounce (chart). We attributed this new bull market in gold to Russia's invasion of Ukraine in February 2022\. In response, the United States and its allies froze the international reserves of Russia's central bank. That convinced the central banks of countries with autocratic governments, which are naturally hostile to the US, to increase their gold purchases. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-11.png) Earlier this year, when the price of gold was slightly below $3,000, we projected that it might remain in the rising channel that started in late 2023, reaching $4,000 by the end of this year and $5,000 by the end of 2026 (chart). So far, so good. Today, the spot price of gold broke out of a recent consolidation pattern to a new record high of over $3,500\. The nearby futures contract hit $3,600 today. We reckoned that President Donald Trump's attempts to reorder the world's geopolitical order, including America's relationships with its major trading partners, might be unsettling and bullish for gold. Similarly, his attempt to order the Fed to lower interest rates would compromise its independence and be bullish for gold. In addition, the bursting of China's housing bubble has had a significant adverse wealth effect on Chinese savers, who've flocked to gold as an alternative safe asset. Furthermore, the rising standard of living in India has increased wealth, thereby boosting demand for gold, which is widely regarded as a valuable asset. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-10.png) Our bullishness is supported by the "Gold Put," provided by central banks that are increasing the percentage of their international reserves in gold (chart). International gold reserves currently account for 15.0% of international reserves, according to the IMF. That's up from 9.0% when Russia invaded Ukraine. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: September 2 - 5 URL: https://www.yardeniquicktakes.com/economic-week-ahead-september-2-5/ Last updated: 2025-09-01T18:26:46.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/Screenshot-2025-09-01-093413.png) This week is chock-a-block with data reports, all building up to Friday's pivotal employment report. The August jobs release will offer a reality check of sorts following July's surprisingly soft reading and significant downward revisions to results for May and June. It could determine whether the Federal Open Market Committee (FOMC) proceeds with a rate cut at its September 16-17 policy meeting. The July jobs data led to two dissenting votes at the July 29-30 FOMC meeting. Since then, more Fed officials appear to have become comfortable with the possibility of an easing move at the September 16-17 meeting. Underwhelming data on consumer spending and confidence have many investors betting the full-employment half of the Fed's dual mandate will take precedence over worries about tariff-driven inflation. Markets will be on the lookout for any such hints at public speaking events by Fed officials. They include St. Louis Fed President Alberto Musalem (Wed), who's currently a voting FOMC member. A day later (Thu), voting members Chicago Fed leader Austin Goolsbee and New York Fed President John Williams will hit the podium. Yet the real verbal fireworks could come from Stephen Miran's confirmation hearing (Thu) before the Senate Banking Committee. Trump named his loyal Council of Economic Advisers chairman to serve out the remaining term of Governor Adriana Kugler, through January 31, 2026\. Republicans are rushing Miran onto the Board in time for this month's FOMC meeting, where he could bolster a majority vote to ease. Here are the data reports this week most likely to fill in the blanks for Fed officials on the fence: (1) *Employment*. The wait for the August jobs data (Fri) should end with a 100,000 increase in payrolls. That’s not a barnburner of a report, but it’s enough of a gain to allay fears that the economy is veering toward recession. Initial unemployment claims data (Thu) continue to show that layoffs remain low and the duration of unemployment isn’t surging. Nor are recent JOLTS (Wed) trends indicative of labor market weakness (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-1.png) (2) *Purchasing managers' surveys*. Early in this holiday-shortened week, markets will get a telling update from the Institute for Supply Management (ISM), which releases its August manufacturing purchasing managers index (M-PMI, Tue). In July, it contracted for its fifth consecutive month to 48.0\. August's regional business surveys suggest that the M-PMI might have rebounded closer to 50.0 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway.png) Also suggesting solid August readings for both the M-PMI and non-manufacturing purchasing managers index (NM-PMI, Thu) are the flash estimates provided by S&P Global (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-2.png) (3) *Challenger layoffs*. The Challenger and ADP reports (Thu) on August layoffs and private-sector payrolls will provide a good warm-up act for Friday's payrolls extravaganza. Initial unemployment claims (Thu) continue to show that layoffs remain subdued (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/4g7ONbU.png) (4) *Productivity &* *unit labor costs*. Q2's real GDP growth rate was revised up from 3.0% (saar) to 3.3%. As a result, Q2's productivity growth rate should be similarly revised higher from 2.3% (chart). Q2's unit labor costs inflation rate should be revised down from 1.6%. We expect these data will increasingly support our Roaring 2020s (and 2030s) scenario, in which productivity growth boosts real GDP growth and keeps a lid on inflation, with real wages rising along with profits. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/09/gateway-3.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Market Call: What Could Possibly Go Wrong In September? URL: https://www.yardeniquicktakes.com/market-call-what-could-possibly-go-wrong-in-september/ Last updated: 2025-08-31T20:43:19.000Z September has a long history of being a tough month for the stock market. This has been particularly true over the past decade, based on the average year-to-date percentage change in the S&P 500 during Septembers (chart). But when September was weak in the past, it often provided buying opportunities for year-end rallies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-159.png) So, might the latest top in the S&P 500 have been hit on Thursday, August 28, at 6501.86? Probably. Notably, Nvidia reported great earnings on Wednesday, yet the market's AI bellwether stock sold off on Thursday and Friday. Then again, profit-taking before a long holiday weekend isn't unusual. Furthermore, the bull-bear ratios remain relatively subdued, suggesting that any pullback in September is unlikely to be a correction or the start of a bear market (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-154.png) However, the uncertain future of the Fed's monetary policy (and even the Fed itself!) and now Trump's tariffs are likely to weigh on the stock market over the next few weeks. Overseas, France appears to be on the verge of a debt crisis that could topple the government, while Germany's manufacturing sector may be falling into a recession. Japan's bond yields are soaring. Here is more: (1) *The Fed & the economy*. The CME FedWatch Tool indicated that the latest probability of a 25-basis-point Fed rate cut at the September 17 meeting of the FOMC is 86.4%. Our subjective odds are 40%. Friday's data supported our none-and-done-in-2025 stance based on our view that the economy doesn't need a rate cut, especially with inflation closer to 3.0% y/y than the Fed’s 2.0% target. Friday's personal income report showed a robust gain in consumer spending (0.5%) and a solid increase in personal income (0.4%), led by a substantial gain in private wages and salaries (0.7%) (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-155.png) Also on Friday, the Atlanta Fed's GDPNow model tracked Q3's real GDP growth rate at 3.5%, up from 2.2% (chart)! It rose 3.3% during Q2. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-156.png) (2) *The Fed & inflation*. July's headline and core PCED inflation rates showed gains of 2.6% and 2.9% y/y in Friday's personal income report. The monthly increases in the core inflation rate have been rising for the past four months, led by the "supercore" inflation rate for PCED services less energy and housing (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-157.png) (3) *The Fed's independenc*e. Also unsettling the financial markets will be the ongoing attack on the Fed by the Trump administration. The September 17 meeting of the FOMC is likely to confirm that the attacks are cracking the foundation of the Fed. If the majority votes to cut the federal funds rate or to hold off on doing so, there will be at least two dissenters either way, if not more. If the Fed cuts the rate even though the data don't warrant such easing, the Bond Vigilantes are likely to protest. (4) *Trump's tariffs.* As we anticipated, a US appeals court ruled on Friday that most of President Donald Trump's tariffs are illegal. The court allowed the tariffs to remain in place through October 14, giving the Trump administration a chance to file an appeal with the US Supreme Court. "If these Tariffs ever went away, it would be a total disaster for the Country," Trump wrote in a Truth Social post. "If allowed to stand, this Decision would literally destroy the United States of America." The Bond Vigilantes might start acting up again if they can no longer look forward to a significant reduction in the federal deficit attributable to tariff revenues. (5) *European turmoil.* France appears to be on the edge of a political and debt crisis. French markets tumbled after Prime Minister Bayrou unexpectedly called for a confidence vote on September 8 to approve his debt-cutting plan. His proposal was roundly rejected by opposition parties, who said they would relish the opportunity to cut short his minority government's time in office. Germany's industrial output fell in June to its lowest level since the pandemic in 2020, extending last year's declines amid weakening foreign demand and increasing competition from China (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-158.png) (6) *Japan's debt crisis*. The Bond Vigilantes have been pushing bond yields up rapidly in Japan (chart). Inflation is rising. The prospect of fresh fiscal stimulus following the ruling coalition's defeat in July's upper house election is raising concerns about increased debt issuance. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-160.png) (7) *Gold*. No wonder that the price of gold seems set to climb to new record highs, perhaps reaching our year-end target of $4,000 an ounce (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-161.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: The Chair Has Spoken URL: https://www.yardeniquicktakes.com/deep-dive-the-chair-has-spoken/ Last updated: 2025-08-31T20:44:00.000Z ***The following is an excerpt from our Morning Briefing dated August 22, 2025.** ### The Fed I: Markets Hear Powell Cooing. We expected Fed Chair Jerome Powell to sound neither dovish nor hawkish [*when he spoke*](https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) at the Fed’s Jackson Hole Symposium on Friday. We expected him to be owlish, expressing the need to wait and watch for further data before committing to another round of monetary policy easing. The financial markets expected that he would be dovish, and they were right, sort of. Investors have believed that a Fed rate cut is likely in September ever since the weaker-than-expected July employment report. We’ve been pushing against this scenario. Powell did not push against it. He did not try to reset expectations. So that made the markets even more convinced that a rate cut is coming. In previous discussions of monetary policy this year, Powell repeatedly said that the Fed is in no hurry to lower interest rates. He didn’t say that on Friday. The sentence in Powell’s speech that fueled Friday’s big stock market rally was the following: “Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” In other words, the FOMC might cut the federal funds rate at the September meeting. Needless to say, Powell included lots of hedge clauses in his speech. Immediately after he threw more gasoline on the stock market’s meltup, he noted: “Monetary policy is not on a preset course. FOMC members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach.” Those were his concluding remarks on the near-term outlook for monetary policy, which remains data dependent. Powell did not mention that before the next FOMC meeting in September, there will be two important inflation indicators and another employment report. Presumably, the FOMC’s decision in September will depend on these data points. We continue to think they could confirm that inflation remains stuck around 3.0%—a full percentage point above the Fed’s 2.0% inflation target. We are also anticipating that payroll employment rose 100,000 in August. That would be an increase from 73,000 in July (which likely will be revised) and confirm our view that the weakness in payroll gains during May and June was attributable to Trump’s Tariff Turmoil, which has abated since then. Powell did discuss the current employment and inflation situations: (1) *Employment*. On the employment front, Powell noted that payroll jobs growth slowed to an average pace of only 35,000 per month over the past three months, down from 168,000 per month during 2024 ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). But he also observed that the slowdown in jobs growth hasn’t “opened up a large margin of slack in the labor market” ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F2.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). The unemployment rate, he noted, has been historically low and broadly stable over the past year ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F3.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904)). “Other indicators of labor market conditions are also little changed or have softened only modestly, including quits, layoffs, the ratio of vacancies to unemployment, and nominal wage growth” ([*Fig. 4*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F4.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904)). ![](https://media.licdn.com/dms/image/v2/D4E12AQGItBZ7V4sxWA/article-inline_image-shrink_1000_1488/B4EZj42z.uHoAU-/0/1756521775685?e=1761782400&v=beta&t=VqS_toUNlDJbNCyegtY-pS7132xIKFAPJkyaTK1UzAQ) Figure 1 ![](https://media.licdn.com/dms/image/v2/D4E12AQEUKuOw5jpemg/article-inline_image-shrink_1000_1488/B4EZj43GgwGcAU-/0/1756521851559?e=1761782400&v=beta&t=uX4xxuozC6AZBjIZHH_1YIOe1Qbn9ADqB51xiAVorfs) Figure 2 Most importantly, in our opinion, Powell stated that “\[l\]abor supply has softened in line with demand, sharply lowering the ‘breakeven’ rate of job creation needed to hold the unemployment rate constant. Indeed, labor force growth has slowed considerably this year with the sharp falloff in immigration, and the labor force participation rate has edged down in recent months” ([*Fig. 5*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F5.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below and [*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F6.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904)). In other words, slower monthly payroll employment growth is not an obvious trigger for Fed easing. ![](https://media.licdn.com/dms/image/v2/D4E12AQEPPomlDTMWnw/article-inline_image-shrink_1000_1488/B4EZj43XFzIQAQ-/0/1756521919397?e=1761782400&v=beta&t=qpIDzxcLXlwF8NjCunV4d6GVQD5Wvy5rGfdjhSig3_0) Figure 5 Yet oddly, Powell concluded that “while the labor market appears in balance,” it “suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.” In our opinion, that’s an odd conclusion. (2) *Inflation*. On the inflation front, Powell noted that the current estimate for July’s core PCED inflation rate shows an increase of 2.9% y/y. He said that “is based on the latest available data.” It was 2.8% in June ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F7.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). He estimated that core prices of goods increased 1.1%, “a notable shift from the modest decline seen over the course of 2024” ([*Fig. 8*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F8.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). He noted that housing services inflation is falling, while nonhousing services inflation is “a bit above what has been historically consistent with 2 percent inflation” ([*Fig. 9*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F9.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904)).\` ![](https://media.licdn.com/dms/image/v2/D4E12AQE1sTAFlLRv1Q/article-inline_image-shrink_1000_1488/B4EZj43lS3IIAQ-/0/1756521977658?e=1761782400&v=beta&t=cwAWOq3mx1twMEzxU-K14fbj5nqKDO---5FeA0ryf1c) Figure 7 ![](https://media.licdn.com/dms/image/v2/D4E12AQH3QVAKzQTLaw/article-inline_image-shrink_1000_1488/B4EZj43zYaHgAU-/0/1756522035665?e=1761782400&v=beta&t=264YIsmWo6rpGkrfCTte_SRn8SVXqCYrUQTy6q9N7t8) Figure 8 He clearly and convincingly implied that the increase in core goods inflation is mainly attributable to tariffs. He reckons that will be a transitory phenomenon: “A reasonable base case is that the effects will be relatively short-lived—a one-time shift in the price level.” He acknowledged that the tariff situations are evolving, which “prolong\[s\] the adjustment process.” For example, Trump is now considering imposing tariffs on furniture imports. Powell also recognized that the tariffs could cause a more persistent inflation problem if they trigger a wage-price spiral. Powell briefly mentioned inflationary expectations and concluded that they are not worrisome: “Measures of longer-term inflation expectations, however, as reflected in market- and survey-based measures, appear to remain well anchored and consistent with our longer-run inflation objective of 2 percent” ([*Fig. 10*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F10.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). ![](https://media.licdn.com/dms/image/v2/D4E12AQEfNf5tIKtvJg/article-inline_image-shrink_1000_1488/B4EZj44NehIUAQ-/0/1756522142294?e=1761782400&v=beta&t=eI6vjD-XvZW9Hy094QgJhWS_0zyY9dd5h_xY8NDdZLE) Figure 10 All eyes will be on July’s PCED inflation rate, which will be released on August 29\. The core rate could be a bit hotter than Powell is expecting. The Cleveland Fed’s [*Inflation Nowcasting*](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) is tracking it at 3.0% y/y. August’s CPI will be released on September 11\. Its core inflation rate is tracking at 3.1%. If the FOMC eases on September 17 following such numbers, Powell will have to explain that the committee has judged that tariffs are having a transitory impact on keeping inflation around 3.0%, but it should soon be falling to 2.0%. The Bond Vigilantes might not be persuaded. August’s employment report will be released on September 5\. Naturally, all eyes will be on the month’s payroll employment gain (or loss). Just as important may be the revisions in the June and July numbers. Again, we are expecting a gain of about 100,000, which should be close to Powell’s breakeven monthly pace. ### The Fed II: Fueling a Meltup. In his speech, Powell mentioned the word “stability” 11 times in the context of monetary policy’s dual mandate, which is to maintain low and stable unemployment and inflation rates. He did not mention that these can’t be achieved without financial stability. A week ago, in our [*Morning Briefing*](https://yardeni.com/wp-content/uploads/mb%5F20250818.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904), we wrote: “Stocks will rise on expectations of another rate cut before the end of the year. What could be a better development for the stock market than another Fed Put when the economy doesn’t need the Fed’s help?! In this scenario, the Fed could very well fuel a wild meltup in the stock market. Valuation multiples would get even more stretched than they are already.” Friday’s wild rallies in the S&P 500 and the Nasdaq confirmed our assessment. So did the broadening of the stock market rally to riskier risk-on assets such as the Russell 2000 and “story stocks” that have a good narrative but no earnings to show. We concluded our analysis a week ago as follows: “For the Fed, a stock market meltup increases the likelihood of financial instability. The Fed’s legal mandate is to keep both unemployment and inflation rates low. To do so requires financial stability. That should be the Fed’s third mandate since the Fed originally was created to avert financial crises.” Powell did not mention that lowering interest rates might weaken financial stability. The notion was barely mentioned in the minutes of the July 29-30 meeting of the FOMC: “In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring. Several participants noted concerns about elevated asset valuation pressures.” That’s all, folks! Expectations for a quarter-point rate cut in September surged following Powell’s speech, according to the CME Group’s [*FedWatch*](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) tool. Friday’s powerful and broad stock market rally in response to Powell’s comments suggests that investors are delighted with the prospect of another Fed Put, especially if the economy doesn’t really need it. Highly elevated valuation multiples were even more elevated after Powell’s speech, which hinted that the Fed is now ready to consider cutting rates again. We are sticking with our targets for the S&P 500 of 6600 by year-end 2025 and 7700 at the end of next year. That’s our base-case scenario with a subjective probability of 55%. We currently assign a 25% subjective probability to a meltup that lifts the S&P 500 to 7000 by year-end 2025 and 20% odds to a correction in the index by the end of this year ([*Fig. 11*](https://yardeni.com/wp-content/uploads/tc%5F20250825%5F11.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=378038904&%5Fhsenc=p2ANqtz--oSbbSrMuSenfZUihWnfKwP11iKh4w9IHDeFvViNHK-elfJCasfz8kXYQI9YPz7SPpGF9whdtwsyMiSvWi3Hta1w5Aiw&%5Fhsmi=378038904) below). ![](https://media.licdn.com/dms/image/v2/D4E12AQHW7hvOJ-Kz1Q/article-inline_image-shrink_1000_1488/B4EZj44iGtIMAQ-/0/1756522226601?e=1761782400&v=beta&t=QW4kov0ZXFfKGzg1zIc50Y2PFDtJoKMGDdK2nf-7rhE) Figure 11 Deep Dives (for paid members of QuickTakes) are occasional excerpts from our flagship research service which is available on a complimentary trial basis [here](https://share.hsforms.com/1QzLPSpDiSheMzwcRNaVQ7g5dbnp?ref=yardeniquicktakes.com). ### Is Fed About To Stimulate A Hot Economy? URL: https://www.yardeniquicktakes.com/is-fed-about-to-stimulate-a-hot-economy/ Last updated: 2025-08-31T20:44:34.000Z The bull market in stocks is making everyone who owns stocks richer. Gallup reported that 62% of Americans were invested in the stock market at the end of 2024 (chart). That's the highest since the end of 2008\. We think the bull market is having a significant positive wealth effect on consumers who own equities, more than offsetting the debt effect on them of rising credit delinquencies. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-146.png) At the end of Q1-2025, American households owned $46.7 trillion in equities and mutual fund shares (chart). The Baby Boomers held 54% of that total. They are the richest retiring generation in history, with a combined net worth of over $82 trillion. They will spend more of their retirement assets and transfer a larger portion of these assets to their children (while the Boomers are alive) and to their descendants (after they have passed away). Yet many of them are still seeing their net worth increase thanks to the bull market in stocks, which pushed the S&P 500 to yet another record high today! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/48LCZZG-1.png) If the Fed cuts the federal funds rate on September 17, as widely anticipated, then the stock market will continue to rise as valuation multiples continue to melt up. The positive wealth effect will continue to stimulate the economy, which doesn't really need to be stimulated. Consider the following: (1) Today's initial unemployment claims report confirmed yet again that layoffs remain low (chart). The duration of unemployment may be stabilizing, as suggested by the decline in continuing claims in the latest report. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-147.png) (2) Today, Q2's real GDP growth rate was revised up by 0.3% percentage points to 3.3% (saar). Even more impressive is that real gross domestic income (GDI) increased 4.8%. Both GDP and GDI rose to record highs during Q2 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-152.png) (3) Corporate cash flow remained at a record high of $4.0 trillion (saar) during Q2 (chart). That is helping to boost capital spending, especially on information technology. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-149.png) (4) The Citigroup Economic Surprise Index jumped today to 26.8 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-151.png) (5) The regional business surveys conducted by five of the 12 Federal Reserve district banks showed that inflationary pressures are building. The average of the prices-paid indexes jumped in August to 56.0, the highest reading since October 2022 (chart). The average of the prices-received indexes is lower at 24.5, suggesting that many companies are absorbing the increasing costs of tariffs and/or offsetting them with productivity gains. More companies may start to pass their costs on to consumers in the coming months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-13.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Update: Stay Home Versus Go Global URL: https://www.yardeniquicktakes.com/update-stay-home-versus-go-global/ Last updated: 2025-08-31T20:45:07.000Z Nvidia reported better-than-expected earnings and revenue after the stock market closed today. Revenue growth has now exceeded 50% for nine straight quarters. Nvidia is one of several mega-cap technology stocks that have fueled the bull market in the US, causing it to outperform overseas stock markets. The outperformance was briefly interrupted earlier this year, but the US market seems to be back on its winning track. We continue to recommend a Stay Home investment strategy rather than a Go Global one. We've been doing so since 2010, and it has worked out very well. The US now accounts for a whopping 72.0% of the market capitalization of the All Country World MSCI stock price index (chart). That's up from 50.0% in 2010\. So, perversely, it is becoming easier to overweight the rest of the world, as it accounts for a relatively small 28.0% share of the world's market capitalization. We don't deny that foreign stocks are cheaper and that there are opportunities to diversify globally. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-143.png) In addition to tracking the market-cap shares on a global basis, we also monitor the ratio of the US MSCI stock price index to the All Country World ex-US MSCI stock price index in local currency and in US dollars (chart). These two ratios tell the same story. The ratios did fall earlier this year, particularly in dollar terms. However, they seem to be back on their long-term uptrends. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3QAyTN7.png) We've often observed that the outperformance of the US in the global stock market derby is fundamentally based on the outperformance of the US MSCI forward earnings compared to the forward earnings of the rest of the world (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3DNzRxM.png) The weaker dollar exacerbated the underperformance of the US earlier this year in dollar terms (chart). We've noted that the DXY dollar index exaggerated the weakness of the dollar this year because it is a fixed-weight index that assigns the euro a 57.6% weight. Also in the DXY are the yen (13.6%), the pound (11.9%), the loonie (9.1%), the krona (4.2%), and the Swiss franc (3.6%). The MSCI currency ratio hasn't been as weak. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/47jWwzb.png) On a ytd basis, the dollar has been weak against the euro and the Mexican peso but strong relative to most other major currencies (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-145.png) The major attraction of foreign stocks is that they are cheaper than American ones (chart). The forward P/E of the S&P 500 is 22.8, while the All Country World forward P/E is 14.7\. These valuation multiples have been increasingly diverging since 2012\. The US has been winning the global doubleheader, as both its forward earnings and forward P/E have outperformed those of the rest of the world. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/47mOKog.png) The rest of the world outperformed the US earlier this year, as evidenced by the ytd gains of several countries, including Spain, South Korea, South Africa, China, and Germany. But the US may be catching up again owing to better-than-expected earnings. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-144.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: The Chair Has Spoken URL: https://www.yardeniquicktakes.com/weekly-webcast-the-chair-has-spoken/ Last updated: 2025-08-31T20:45:49.000Z Fed Chair Powell’s eagerly awaited speech at the Fed’s Jackson Hole Symposium on Friday fanned stock investors’ hope that the FOMC would lower the federal funds rate in September—despite Powell’s hedges and the fact that upcoming data releases will figure into the decision. Notably absent in his speech was mention of the Fed’s need to maintain financial system stability if it is to achieve either goal of its dual mandate. Easing in September could test that stability, test the Fed’s commitment to its 2.0% inflation target, and test the Bond Vigilantes’ patience. But it would be good for the stock market. We’re maintaining our targets for the S&P 500 price index of 6600 by year-end 2025 and 7700 by year-end 2026. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! ### Economy Is Growing, While Job Indicators Remain Solid URL: https://www.yardeniquicktakes.com/economy-is-growing-while-job-indicators-remain-solid/ Last updated: 2025-08-31T20:46:21.000Z The monthly Consumer Confidence Index (CCI) survey includes the most timely monthly indicators of the labor market. August's survey was released today (chart). The jobs-plentiful series remained relatively high at 29.7%. The jobs-available series fell to 50.3%, which is above its average over time of 48.2%. That drop was matched by an uptick in the jobs-hard-to-get series to 20.0%. In our opinion, these stats confirm that the labor market remains in relatively good shape. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-135.png) The present situation component of the CCI closely tracks the spread between the jobs-plentiful and jobs-hard-to-get series (chart). Consumers seem to be saying that the economy is doing better than the labor market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-136.png) The increase in the jobs-hard-to-get series indicates that it is getting harder for the unemployed to find jobs. So the duration of unemployment is increasing, putting some upward pressure on the unemployment rate (chart). On the other hand, initial unemployment claims remain low, confirming that layoffs are not a significant issue in the labor market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3AJZP75.jpg) Meanwhile, retail sales growth remains strong, according to the weekly Redbook retail sales index through the week of August 22 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-141.png) Today's durable goods orders release for July showed several solid upticks in major manufacturing industries (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-140.png) The Atlanta Fed's GDPNow model is tracking Q3's real GDP growth rate at 2.2% (saar). Several important components of GDP are growing at faster rates, including fixed business equipment and consumer spending on goods (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-142.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Is the Bull Market In Stocks Finally Broadening? URL: https://www.yardeniquicktakes.com/is-the-bull-market-in-stocks-finally-broadening/ Last updated: 2025-08-31T20:47:49.000Z The Magnificent-7 stocks have been leading the charge of the current bull market that started on October 12, 2022\. They are all in the Nasdaq 100, which is up 117.9% so far since the start of the bull market, beating all the other major US stock market indexes (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-133.png) The Mag-7's market capitalization share of the S&P 500 has doubled during the current bull market from 16% to 32% (chart). The stock market has indeed become more concentrated, but that doesn't mean that the rest of the market has languished. The S&P 493, the S&P 400 MidCaps, and the S&P 600 SmallCaps have had impressive gains too, just not as impressive as the Mag-7 and the Nasdaq 100. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/4gj5ukG-1.png) The S&P 1000 SMidCaps have clearly lagged behind the S&P 500 since the start of the current bull market. They outperformed last Friday on expectations of another Fed easing cycle. However, they've disappointed many times before since the second half of the 2010s (chart). We aren't convinced they are set to outperform the S&P 500 on a sustainable basis. However, we would take some of the profits in the large-cap sectors we've favored (Information Technology, Communication Services, Industrials, and Financials) and rotate into their SMidCap equivalents, which have lower valuation multiples. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/45jiKj3.png) We are seeing signs that S&P 500 company earnings gains are broadening (chart). The percentages of S&P 500 companies with positive three-month changes in forward revenues and forward earnings have increased significantly in recent weeks. That suggests that the S&P 493 should do well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-131.png) The forward earnings of the S&P 500 continues to soar to new record highs, while the forward earnings of the SMidCaps continue to meander below their 2022 highs (chart). However, the latter edged up over the past couple of weeks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-134.png) We doubt that the valuation gap between the SMidCaps and the LargeCaps will narrow much unless SMidCap forward earnings stop flatlining and start rising to new record highs (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3s39wt7.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3OpdFPw.png) The outperformance of the S&P 100 relative to the S&P 500 is starting to remind us of the late 1990s Tech Bubble (chart). The Fed eased on September 29, 1998, and again on October 15 and November 17 of that year in response to the Long-Term Capital Management financial crisis. That Fed Put helped to inflate the Tech Bubble during 1999. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3s5Btk0-1.png) Will it be different this time? The Fed Put may be back on September 17, when the FOMC is widely expected to cut the federal funds rate. That could fuel a meltup in stock prices. However, there is less air in today's Tech Bubble than in the 1999 Tech Bubble because the forward earnings of the S&P 500 Information Technology and Communication Services sectors currently accounts for 36.9% of the S&P 500's forward earnings versus an early-2000 peak of 24% (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-12.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### ECONOMIC WEEK AHEAD: August 25-29 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-25-29/ Last updated: 2025-08-25T01:09:08.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/Screenshot-2025-08-24-190245.png) Now that Fed Chair Jerome Powell is talking the talk of easing, markets are on the lookout for whether upcoming data are walking the walk. A Fed rate cut next month isn't a done deal, no matter what Powell hinted at last Friday at Jackson Hole. A lot can happen in a few weeks. Before the Federal Open Market Committee (FOMC) meets September 16-17, policymakers will see a fresh batch of employment and inflation data. This could put a stronger-than-usual spotlight on July's PCED inflation rate (Fri) and any other data that might alter Fed views on either end of its dual mandate of full employment and price stability. In this context, Fed Governor Christopher Waller's economic outlook speech this week (Thu) will garner considerable attention. Waller, of course, is one of the two governors who dissented in favor of an easing move at the July 29-30 FOMC meeting. Markets will also scrutinize comments by regional Fed bank presidents, including New York's John Williams (Mon). Though neither Lorie Logan of Dallas (Mon) nor Tom Barkin of Richmond (Tue) is currently a voting FOMC member, comments by both could make headlines. Nvidia's earnings report (Wed) may also prove to be one of the week's top events (chart). Following the market's powerful post-Powell speech rally on Friday, news on how the globe's most valuable company is navigating tariffs imposed by the US, headwinds from China's trade curbs, and the rapids of the AI boom should be very interesting. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-124.png) Here's a look at economic reports most likely to change the odds of a Fed rate cut on September 17: (1) *PCED inflation rate*. Last Friday, Powell highlighted the importance of the core PCED inflation rate (Fri), which he estimated is increasing at a roughly 2.9% y/y rate. That's a touch higher than the 2.8% rate in June (chart). The Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model suggests a 3.0% PCED inflation rate is likely. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-125.png) (2) *New home sales.* July new home sales (Mon) probably remained weak, given that there was a 9.8 months' supply of new homes on the market in June (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-126.png) (3) *Consumer and business surveys*. The Conference Board's Consumer Confidence Index report (Tue) will provide one of the first insights into August's labor market. We will be focusing on the job availability series (chart). We expect that the "jobs plentiful" series, which is highly correlated with JOLTS job openings, will indicate that job vacancies remain relatively high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-127.png) August's regional business surveys from the Dallas Fed (Mon), Richmond Fed (Tue), and Kansas City Fed (Thu) are likely to confirm those from the New York Fed and Philadelphia Fed showing a pickup in business activity (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-128.png) (4) *Jobless claims*. The latest weekly initial unemployment insurance claims (Thu) should continue to signal that layoffs remain low. However, continuing claims might edge higher again, signaling that the duration of unemployment is increasing. This reflects an increasing skills mismatch between unemployed workers and job openings, in our opinion. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Stocks Discounting Fed Put URL: https://www.yardeniquicktakes.com/market-call-stocks-discounting-fed-put/ Last updated: 2025-08-31T20:48:50.000Z Ever since the release of the weaker-than-expected July employment report at the start of this month, stock investors have been betting that the Fed Put is back in play and that it will probably be implemented at the FOMC's meeting on September 16-17\. Fed Chair Jerome Powell had been pushing back against this notion since early this year by saying that the Fed is in no rush to lower interest rates. However, he didn't do so in his Jackson Hole speech on Friday. Instead, he said, "Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance." In other words, the FOMC might cut the federal funds rate at the September meeting. As a result, stock prices soared on Friday (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-122.png) Powell didn't mention that between now and the next FOMC meeting, a few indicators, including August's CPI and employment reports, might convince the FOMC to hold off on easing if they are hotter than expected, as we think likely. That's still our base-case scenario. That's why we are sticking with our associated targets for the S&P 500 of 6600 by year-end 2025 and 7700 at the end of next year. We assign that base-case scenario a subjective probability of 55%. We currently assign a 25% subjective probability to a meltup that lifts the S&P 500 to 7000 by year-end 2025 and 20% odds to a correction in the index by the end of this year. A meltup will be more likely if the Fed eases in September, as widely expected. We expect that the bull market will be increasingly earnings-led rather than valuation-led through 2026\. Both Q1-2025 and Q2-2025 S&P 500 earnings were much better than expected (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-119.png) The S&P 500 net earnings surprise during Q2-2025 was very strong at 8.8% (chart). The best "beats" occurred in the Consumer Discretionary sector, which augurs well for a continuation of consumer-led economic growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-123.png) S&P 500 forward earnings per share rose to yet another new record high during the week of August 21 as industry analysts raised their 2025 and 2026 earnings estimates (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-120.png) Both S&P 500 revenues per share and earnings per share rose to record highs during Q2-2025 (chart). The profit margin edged up to 13.5%, which is impressive considering that the tariff-related costs of doing business increased during the quarter. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-10.jpg) There's not much to worry about in the coming weeks other than a meltup in the stock market if the Fed eases or a pullback if the Fed doesn't do so. Trump's tariffs might be invalidated in court in the coming weeks, with an unpredictable market impact. Overseas, we are watching Japanese government bond yields soaring again (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-117.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### DEEP DIVE: Stock Market Discounting Fed Put, Which The Economy Does Not Need URL: https://www.yardeniquicktakes.com/deep-dive-stock-market-discounting-fed-put-which-the-economy-does-not-need/ Last updated: 2025-08-24T16:57:37.000Z ***The following is an excerpt from our Morning Briefing dated August 18, 2025.** ### **Exercising Fed Put Would Fuel Stock Market Meltup.** Stock investors have been joyously discounting a Fed rate cut in September following the release of July’s weaker-than-expected employment report. The S&P 500 rose to yet another record high on Thursday. It is up 3.4% since the close on August 1—the day of the disappointing jobs report—through Friday’s close. There hasn’t been a similar party in the bond market since then, as the 10-year Treasury yield has risen 10 basis points over the same period ([*Fig. 6*](https://yardeni.com/wp-content/uploads/tc%5F20250818%5F6.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=376857093&%5Fhsenc=p2ANqtz-%5Fr%5FY5Sh5xB8y5eSx4M7ReRaaNdw3-6bhQW6NtJOick5diwjEpPFs%5FluxC34Kw8L1L7cAGfFvnRiSsTjAQXFFuallOheQ&%5Fhsmi=376857093) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/tc_20250818_6.webp) Figure 6 Notwithstanding my concerns about an adverse bond market reaction to a Fed rate cut in September, I am not as sure about what the bond yield will do as I am about what stock prices will do. Stocks will rise on expectations of another rate cut before the end of the year. What could be a better development for the stock market than another Fed Put when the economy doesn’t need the Fed’s help?! In this scenario, the Fed could very well fuel a wild meltup in the stock market. Valuation multiples would get even more stretched than they are already. On a weekly basis, the Buffett Ratio rose to a record 3.1 during the August 14 week using the forward price-to-sales ratio of the S&P 500 ([*Fig. 7*](https://yardeni.com/wp-content/uploads/tc%5F20250818%5F7.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=376857093&%5Fhsenc=p2ANqtz-%5Fr%5FY5Sh5xB8y5eSx4M7ReRaaNdw3-6bhQW6NtJOick5diwjEpPFs%5FluxC34Kw8L1L7cAGfFvnRiSsTjAQXFFuallOheQ&%5Fhsmi=376857093) below). That same week, the forward P/E of the index rose to 22.5 ([*Fig. 8*](https://yardeni.com/wp-content/uploads/tc%5F20250818%5F8.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=376857093&%5Fhsenc=p2ANqtz-%5Fr%5FY5Sh5xB8y5eSx4M7ReRaaNdw3-6bhQW6NtJOick5diwjEpPFs%5FluxC34Kw8L1L7cAGfFvnRiSsTjAQXFFuallOheQ&%5Fhsmi=376857093) below). It would need to rise only another 11% to match its record high of 25.0, hit just before the Tech Wreck of 2000. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/tc_20250818_7.webp) Figure 7 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/tc_20250818_8.png) Figure 8 _This post is for paying subscribers only._ ### Waiting For The Chair To Speak URL: https://www.yardeniquicktakes.com/waiting-for-the-chair-to-speak/ Last updated: 2025-08-21T22:24:48.000Z Stock and bond prices have been marking time over the past couple of weeks, waiting for Fed Chair Jerome Powell to speak tomorrow at 10 a.m. at the Jackson Hole Symposium. Meanwhile, today's batch of economic indicators supports our view that a Fed rate cut may not be warranted at the September 16-17 meeting of the FOMC if the other indicators released in the coming days also confirm that the economy doesn't need lower interest rates. The July FOMC minutes released yesterday explained why all but two of the committee's members voted to leave the federal funds rate unchanged. We expect they will offer similar explanations for the same decision at their September meeting: - "In their discussion of inflation, many participants observed that overall inflation remained somewhat above the Committee's 2 percent longer-run goal." - "In their discussion of the labor market, participants observed that the unemployment rate remained low and that employment was at or near estimates of maximum employment. Several participants noted that the low and stable unemployment rate reflected a combination of low hiring and low layoffs." - "In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring. Several participants noted concerns about elevated asset valuation pressures." Consider the following batch of indicators released today: _This post is for paying subscribers only._ ### Gold & Other Commodities URL: https://www.yardeniquicktakes.com/gold-other-commodities/ Last updated: 2025-08-24T06:35:25.000Z On balance, there aren't a lot of inflationary pressures in the commodity markets. Precious metals are on top of the leaderboard so far this year among the major commodity price gains (chart). Platinum, gold, and silver are ranked #1, #2, and #3\. These shiny metals have become safe havens for many investors as a result of unsettling geopolitical crises in the Middle East and Eastern Europe. Global trade tensions have also heightened demand for these metals. US tariffs on steel have boosted the price of this commodity. Lithium is also up ytd, by a percentage in the double digits, on supply concerns. The price of copper has been volatile this year. It is currently up 11.0% ytd. Iron ore is also up, but not by much, due to sluggish growth in China. That could change once the Chinese start building a $167 billion Tibetan mega dam, the largest one on Earth. Grain prices are flat to down so far this year on record corn and soybean yields. The price of a barrel of crude oil is down this year on weak global demand and ample supplies. It may have more downside if there is a ceasefire between Russia and Ukraine. Natural gas is down despite Trump's deal with Europeans to buy more US natural gas. There is plenty of it and it will take some time before Europe is a major buyer of US gas. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/3N6ulLz.jpg) The spot price of gold has been consolidating its 2025 gain since the spring (chart). It topped out at a record high on April 22, i.e., before the US bombed Iran's nuclear facilities on June 21\. The abating of Trump's Tariff Turmoil and the prospects of a ceasefire in the war between Russia and Ukraine have put a lid on the gold price for now. The price appears to be aiming to find support at the bottom end of the upward channel that started in late 2023, before moving to new record highs. We are still targeting a gold price of $4,000 per ounce by the end of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-104.png) The price of gold has been rising ever since the US froze the foreign exchange reserves of Russia after the country invaded Ukraine in February 2022\. The central banks of countries that don't share America's values and interests have been buying more gold and selling dollars (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-106.png) During June, international reserves rose to a record $16.4 trillion, consisting of $13.9 trillion of currencies and $2.5 trillion of gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-107.png) By the way, helping to keep a lid on oil prices is the flattening of Chinese crude oil imports (chart). That may be because the Chinese are driving more EVs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-108.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Another Candidate For Fed Chair URL: https://www.yardeniquicktakes.com/weekly-webcast-another-candidate-for-fed-chair/ Last updated: 2025-08-20T12:00:26.000Z Dr Ed is sticking to his guns: He has contended since early last year that the US economy is too resilient and inflation is not close enough to 2.0% for Fed officials to muck around with easing. The widespread expectation that they will ease anyway in September is lifting stocks, and the actual event may cause a stock market meltup. The bond market’s reaction to unwarranted easing is tougher to gauge. If it causes the Bond Vigilantes to drive up yields, the Fed’s reputation as inflation fighters could be shot. Recent inflation data suggest inflation could use some fighting, as Trump’s tariffs may be keeping it elevated above the Fed’s target 2.0% and services inflation remains hot. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Dueling Fed Mandates URL: https://www.yardeniquicktakes.com/dueling-fed-mandates/ Last updated: 2025-08-20T02:17:57.000Z The Fed is required by law to keep inflation low and stable while also maintaining full employment. Achieving that dual mandate isn't always easy. Currently, the labor market is at full employment, but there are a few signs of weakening. Inflation was on track to fall to the Fed's 2.0% inflation target, but has been stuck around 3.0% recently. Some Fed officials believe that Trump's tariffs are only temporarily boosting inflation and that the Fed should ease as soon as possible to avert any further weakening of the labor market. Other Fed officials are opposed to easing until they can be more certain that inflation is declining to 2.0%. Fed Chair Jerome Powell has sided with the hawks and has been insulted almost daily in recent months by President Donald Trump for not cutting the federal funds rate as Trump demands. On Friday, Powell will speak at the Fed's annual Jackson Hole conference. He will probably remain hawkish because inflation remains elevated. If so, we side with him. Consider the following: (1) *Inflation: purchasing managers surveys.* The sum of the national purchasing managers' indexes for manufacturing and non-manufacturing is a good six-month leading indicator of the PPI final demand inflation rate (chart). The former suggests that inflationary pressures have increased and will persist through the end of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-97.png) (2) *Inflation: consumer durable goods*. Tariffs undoubtedly have boosted durable goods inflation in both the CPI and PCED (chart). From the mid-1990s through the pandemic lockdowns, durable goods prices usually deflated. They were falling again following the inflation surge of 2022 and 2023\. Since the spring, durable goods prices have been rising again as a result of Trump's tariffs. _This post is for paying subscribers only._ ### Foreign Investors Aren't Following The Dollar-Is-Bad Script URL: https://www.yardeniquicktakes.com/foreign-investors-arent-following-the-dollar-is-bad-script/ Last updated: 2025-08-19T12:00:42.000Z By most accounts, almost everyone is bearish on the dollar. Nearly everyone is selling dollars to buy euros and gold, according to this widely held view. Global investors are rebalancing their equity portfolios out of US stocks into European stocks. The only problem with this narrative is that the monthly capital flows data collected by the Treasury International Capital System (TICS), which was updated on Friday, show that US foreign net capital inflows rose to a record-high $1.74 trillion in the 12 months through June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-92.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 18 - 22 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-18-22/ Last updated: 2025-08-17T23:11:07.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/Screenshot-2025-08-17-153145.png) Wolf pack sightings aren’t uncommon in Grand Teton National Park. But this week, Fed Chair Jerome Powell may find himself fending off a large pack of them again as Federal Reserve officials gather for their annual retreat in Jackson Hole, Wyoming. The two-plus weeks since July's week employment surprise have given economic pessimists room to roam. Weaker-than-expected data, though, now confront hotter inflation sightings. Given the core CPI rising 3.1% y/y in July and the most significant jump in producer prices in three years—0.9% m/m—markets are waiting with bated breath for Powell's speech (Fri). In the days before that, Fed Governors Michelle Bowman and Christopher Waller, the dovish dissenting duo, will speak in Wyoming (Tue and Wed, respectively). Both dissented with the majority decision not to ease at the Federal Open Market Committee’s (FOMC) July meeting. Though they’ll be speaking at a blockchain symposium, it's hard to see either rate-cut advocate missing a perfectly timed opportunity to opine that the economy needs a rate cut. We maintain that it’s not howling for an immediate rate cut whatsoever but is more resilient than the July dissenters think. At the margin, the minutes of the July 29-30 FOMC meeting (Wed) could fill in some blanks about how dug in the doves were and how intransigent the inflation hawks might've been in late July. Here's a look at the data releases this week that are most likely to influence the hawks and doves on the Federal Open Market Committee: (1) *Housing starts*. High mortgage rates, lots of economic uncertainty, and a glut of homes for sale probably weighed on July housing starts (Tue) (chart). They likely dropped a bit from June's 1.32 million unit pace (saar). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-87.png) (2) *Existing home sales*. July existing home sales (Thu) were probably weak as well. Despite the resilience of the economy, generally speaking, data on pending sales volumes and home contract cancellations suggest that affordability remains a big problem in the housing market (chart). Home prices are just too d@mn high! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-88.png) (3) *Jobless claims*. Given the recent surge in pessimism about the labor market, weekly data on initial unemployment insurance claims (Thu) have rarely been more important. We expect jobless claims to hold to levels close to last week’s 224,000 and, in turn, allay fears that layoffs are rising. The data point that may matter most to the Fed’s September decision is continuing unemployment claims, which have been hinting that the duration of unemployment might be increasing (chart). The problem in the labor market is that it is taking longer to find a job. But if labor saving technologies are the cause of that problem, it’s one that the Fed’s easing can't fix. And ditto if the cause is employers’ hesitancy to hire now given the all the tariff-related uncertainty. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-91.png) (4) *Leading indicators*. The Index of Leading Economic Indicators (LEI) (Thu) has been a misleading indicator of an impending recession since late 2022 (chart). The S&P 500 is one of the 10 components of the LEI. It has been much more accurate about the economic outlook than has the LEI. It is currently at a record high, and so is the Index of Coincident Economic Indicators. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-90.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Will Powell Be Hawkish, Dovish, Or Owlish In The Grand Tetons? URL: https://www.yardeniquicktakes.com/market-call-44/ Last updated: 2025-08-17T17:05:41.000Z The 2025 Jackson Hole Economic Policy Symposium will focus on "Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy." The symposium is scheduled for August 21-23\. It's an annual event hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, bringing together central bankers, policymakers, economists, and academics to discuss important economic issues and long-term policy challenges. Fed Chair Jerome Powell will speak at 10 a.m. on Friday, August 22\. His speech is titled "Economic Outlook and Framework Review.” So he will likely discuss the current controversies about the economy, the labor market, inflation, and how the Fed should respond to them. Will he turn more dovish in reaction to July's weak jobs report? Or will he remain hawkish by reiterating that the Fed is in no rush to cut the federal funds rate because inflation remains about a percentage point above the Fed's 2.0% y/y inflation target? _This post is for subscribers only._ ### Hot PPI Inflation & Cold Jobless Claims URL: https://www.yardeniquicktakes.com/hot-ppi-inflation-cold-jobless-claims/ Last updated: 2025-08-14T16:49:45.000Z We've acknowledged that the odds of a Fed rate cut have increased since the release of July's cold employment report and July's lukewarm CPI report so far this month. But we've also noted that more economic indicators will be released before the next FOMC meeting in mid-September. So we haven't abandoned our increasingly contrary view that "none-and-done in 2025" is still a likely outcome for the Fed's rate cuts. That's because we haven't lost our confidence in the resilience of the economy nor in the FOMC's commitment to lower the inflation rate to 2.0% y/y. Today's PPI and unemployment claims reports confirmed our position. Consider the following: (1) *PPI for final demand*. The Producer Price Index for final demand rose 0.9% m/m in July. It advanced 3.3% y/y, the most significant 12-month increase since rising 3.4% in February 2025 (chart). This greater-than-expected increase was not directly attributable to tariffs because, unlike the CPI, the PPI does not include imports! But rising costs attributable to intermediate goods purchased by domestic producers (such as steel and aluminum) might have boosted the PPI. Then again, most of the rebound in PPI inflation during July was attributable to services (up 4.0%), not to goods (1.9%). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-79.png) _This post is for paying subscribers only._ ### In Defense of the US Dollar URL: https://www.yardeniquicktakes.com/in-defense-of-the-us-dollar/ Last updated: 2025-08-14T16:01:34.000Z Like the late comedian Rodney Dangerfield, the dollar has been getting "no respect" recently. A few officials of the Trump administration want to see a weaker dollar. America's adversaries would like to replace it as a key currency. Doomsayers predict a major dollar crisis in response to the huge US trade and federal government deficits. We remain constructive on the dollar for the following reasons: (1) The DXY dollar index remains in an upward channel, though it is retesting the lower bound of that channel (chart). DXY is a fixed-weight index that measures the value of the US dollar against a basket of six major foreign currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. The euro makes up nearly 58% of the index. It is unlikely that the euro will replace the dollar as the leading reserve currency, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/45m95cZ-1.png) (2) The US has the largest and most diversified capital markets in the world. Foreign investors are attracted to the liquidity and relative safety of the US capital markets. Indeed, over the past 12 months through May, their US net capital inflows attributable to private plus official foreign accounts totaled a record $1.76 trillion (chart)! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-75.png) (3) Foreign official accounts have been minor contributors to US net capital inflows. The recent record $1.7 trillion in net inflows (on a 12-month basis) has come mostly from private foreign accounts (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-76.png) (4) Private foreign accounts had record net purchases of US equities over the past 12 months through May totaling $597 billion! Net purchases of US bonds totaled a whopping $941 billion (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-77.png) (5) Private foreign accounts held a record $9.0 trillion in US Treasuries during May (chart). Foreign official accounts' total holding of US Treasuries has been relatively flat at around $4.0 trillion since 2012\. So recent years' growth in overseas demand has come from private foreign accounts. As global wealth has increased, so has the demand for US Treasuries, which remain the safest asset in the world. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-3.jpg) (6) The US dollar accounted for 57.7% of foreign exchange reserves during Q1-2025, according to IMF data (chart). The euro accounted for 20.1%, while the yen accounted for only 5.1%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/43AzcfB.jpg) (7) Some of the recent weakness in the dollar might reflect the fact that gold's share of international reserves has been increasing since the US froze Russia's reserves when the country invaded Ukraine in 2022 (chart). The central banks of countries hostile to US interests have been buying more gold and holding onto fewer dollars as a result. That has been bullish for the price of gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-4.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### What's In Style? URL: https://www.yardeniquicktakes.com/whats-in-style/ Last updated: 2025-08-17T17:31:30.000Z Are SMidCaps coming back into fashion? They had a good day today. They outperformed the LargeCaps. The S&P 500 LargeCaps was up 0.3%, while the S&P 400 MidCaps and the S&P 600 SmallCaps rose 1.6% and 2.0% (chart). The Russell 2000 SmallCaps rose 2.0% as well. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-72.png) That led lots of market commentators to declare after the close that the SMidCaps may be finally starting to outperform the LargeCaps. That's something they haven't done consistently since roughly 2018 (chart). And there have been lots of similar calls since then that haven't panned out. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-69.png) Of course, the explanation for why the SMidCaps might outperform the LargeCaps for a while is that they should do better if the Fed is about to lower the federal funds rate some more, as is widely expected. They are certainly cheaper than the LargeCaps (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-71.png) The problem is that the SMidCaps are cheap for a reason. Their forward earnings have been in a coma (i.e., flatlining) since 2022 (chart). The forward earnings of the S&P 500 has been rising to new record highs since mid-2023! We doubt that the forward earnings of the SMidCaps will finally start rising just because the Fed starts easing again. The Fed did so at the end of last year, cutting the federal funds rate by 100bps from September 19 through December 19, 2024\. Yet SMidCaps continued to underperform. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-70.png) Nevertheless, among the sectors, SMidCaps could outperform LargeCaps in the Financials and Industrials, in our opinion (charts). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-73.png) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-74.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Will Trump's Tariffs Get Tariffried By The Courts? URL: https://www.yardeniquicktakes.com/will-trumps-tariffs-get-tariffried-by-the-courts/ Last updated: 2025-08-13T21:56:52.000Z The Trump administration is becoming increasingly concerned that the US Court of Appeals for the Federal Circuit in Washington, D.C., might soon rule that President Donald Trump lacks the legal authority to impose tariffs as he has been doing. That's our takeaway from a [letter](https://x.com/scottlincicome/status/1954938747163914727?ref=yardeniquicktakes.com) dated August 11 sent to the Clerk of the Court by two of the administration's top lawyers. It involves a challenge to President Trump's authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). (Hat tip to Jim Lucier of Capital Alpha Partners.) The letter follows the Federal Circuit's July 31 oral argument, where judges reportedly pressed the government on the tariffs' legality. So it was filed post-oral argument to update the court on "pertinent and significant" developments since the government's briefs were submitted. Trump's lawyers seem to be anticipating that they will lose the case and are asking for a stay if so. That would allow them to ask the Supreme Court to rule on the matter. SCOTUS might pass on doing so if most of the 12 lower-court judges rule against the administration. The letter warns: "Suddenly revoking the President's tariff authority under IEEPA would have catastrophic consequences for our national security, foreign policy, and economy. The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed to pay, which would lead to financial ruin." That "could lead to a 1929-style result." The letter concludes: "In short, the economic consequences would be ruinous..." The conclusion may be exaggerated, but the result would be messy for sure. Foreign governments might not abide by their recent trade agreements with the US. Companies that have been paying the tariffs are likely to demand refunds from the Treasury. _This post is for paying subscribers only._ ### Bond Vigilantes May Be Lurking On Easying Path URL: https://www.yardeniquicktakes.com/bond-vigilantes-may-be-lurking-on-easying-path/ Last updated: 2025-08-13T01:38:22.000Z The S&P 500 and Nasdaq jumped to new record highs following the release of July's CPI report today. The headline inflation rate held steady at 2.7%, while the core rate warmed a bit to 3.1%. Stock investors concluded that the Fed is even more likely to ease in September. Indeed, the CME FedWatch tool now shows that the odds of that happening are 94.4%. The 10-year US Treasury bond yield, however, edged up to 4.30%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-61.png) Fed officials and stock investors should keep in mind what happened at the end of last year, when the Fed cut the federal funds rate three times by a total of 100 basis points from September 19 to December 19 (chart). The 10-year bond yield rose 100 basis points over the same period. _This post is for paying subscribers only._ ### DEEP DIVE: Tarrifying Semiconductors URL: https://www.yardeniquicktakes.com/deep-dive-tarrifying-semiconductors/ Last updated: 2025-08-11T17:43:57.000Z 💡 ***The following is an excerpt from our Morning Briefing dated August 7, 2025.** Semiconductors initially were exempt from the tariffs President Donald Trump announced on imports from Taiwan and elsewhere, but their rarified status may be about to end. President Trump said on Tuesday that semiconductor-specific tariffs would be announced in the next week or so. Then, last night after the financial markets closed, the President floated the idea of placing 100% tariffs on semiconductors, with exemptions for companies that are manufacturing in the US or have announced intentions to do so. Specifics weren't forthcoming, and dealmaking will undoubtedly bring that tariff percentage down. Nonetheless, 100% tariffs is certainly a higher starting point than we've seen on other tariffs imposed on countries' imports so far. The semiconductor industry initially received a reprieve from tariffs on April 11 under a Presidential Memorandum that excluded certain semiconductor products from reciprocal tariffs. But the industry knew the exemption would likely end because the Department of Commerce initiated on April 1 an investigation into the national security impact of imports of semiconductors and related products under Section 232 of the Trade and Expansion Act of 1962, a [***primer***](https://www.torrestradelaw.com/posts/Semiconductor-Tariff-Exclusions-New-Section-232-Investigations-/393?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=374821545&%5Fhsenc=p2ANqtz-9X8a1DbyDL3Bd9WE7CCV5ykxESSbqFVZZwtOb9d2VifP1%5FbMjIZUA%5FmneMrucDoqqCWPWkiix6Mx1zgkNRG3l12-%5Fgkg&%5Fhsmi=374821545#:~:text=On%20April%2011%2C%202025%2C%20President,as%20of%20April%205%2C%202025.) by Torres Trade Law explains. (Separate investigations under the same section are being conducted into critical minerals and pharmaceuticals and pharmaceutical ingredients.) A recommendation from that investigation is required by December 27; but given the President’s recent comments in Tuesday’s CNBC [***interview***](https://www.cnbc.com/2025/08/05/trump-tariffs-chips-semiconductors.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=374821545&%5Fhsenc=p2ANqtz-9X8a1DbyDL3Bd9WE7CCV5ykxESSbqFVZZwtOb9d2VifP1%5FbMjIZUA%5FmneMrucDoqqCWPWkiix6Mx1zgkNRG3l12-%5Fgkg&%5Fhsmi=374821545), the report may already be done. Tariffing semiconductors is tricky because the US imports relatively few semiconductors per se, roughly $45 billion worth. But it does import many products that include semiconductors (like smartphones). Sanford Berstein’s Stacy Rasgon speculated in a separate CNBC [***interview***](https://www.youtube.com/watch?v=chaGfI0TDrE&utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=374821545&%5Fhsenc=p2ANqtz-9X8a1DbyDL3Bd9WE7CCV5ykxESSbqFVZZwtOb9d2VifP1%5FbMjIZUA%5FmneMrucDoqqCWPWkiix6Mx1zgkNRG3l12-%5Fgkg&%5Fhsmi=374821545) that tariffs could be placed on semiconductors contained in imported devices. AMD, Apple, Nvidia and other semiconductor makers have their chips manufactured for them by Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan. President Trump didn’t reveal how high the semiconductor tariffs will be or whether they’ll be in addition to the existing 20% tariffs on Taiwan’s imports. His goal: to push chip manufacturing back to US shores. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 11 - 15 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-11-15/ Last updated: 2025-08-11T00:00:21.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/Screenshot-2025-08-10-164212.png) This is a week loaded with economic data releases that have the potential to shed light on the health of the US economy and change minds at the Federal Reserve—none more so, perhaps, than inflation. While the CPI and PPI are always of interest, the July releases come in the aftermath of jobs data that increased the prospect of interest rate cuts. In this context, retail sales data for July will also receive increased scrutiny as the financial markets seek clues about how tariffs are affecting consumers. In addition, corporate earnings from Cisco, Applied Materials, Deere, and other household names might offer hints of what’s coming next in 2025—especially in tech and industrials. If only things were that simple. Along with scouring data, market participants are likely to find themselves parsing President Donald Trump’s real-time, unfiltered social media reactions to the latest tabulation efforts by the Bureau of Labor Statistics (BLS) or trying to gauge how the figures from the Commerce Department’s Bureau of Economic Analysis jibe with Trump’s gut economic feelings. Trump, of course, has a busy week ahead with various tariff deal negotiations, settling on a new BLS head, and filling a Fed vacancy before jetting to Alaska for a high-stakes summit with Russian President Vladimir Putin. Along with Ukraine’s future, the two men could move oil markets with any agreements on sanctions against Moscow. Further East, China has a busy week of its own. Beijing’s latest credit numbers could answer questions about whether efforts to revive economic growth are gaining traction. July activity data on employment, fixed-asset investment, industrial production, and retail sales will shed light on the damage tariffs are doing to Asia’s biggest economy. Here’s a brief look at US data that could turn heads most—from Wall Street to the Oval Office: (1) *CPI*. The odds are low that we’ll see downside surprises in July CPI inflation data (Tue). There’s little doubt that tariff effects are boosting durable goods inflation, as they did in June. But the risk of a big upward surprise is tempered by signs that rents and used car prices are cooling. The Cleveland Fed’s Inflation Nowcasting model has the CPI rising 3.04% in July and 3.02% in August. Those would be considered too hot to justify Fed easing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-59.png) (2) *Retail sales*. July likely saw steady, if uninspiring, consumer spending (Fri) but perhaps not the sharp slowdown some might expect following the below-forecast July employment report. That's because our Earned Income Proxy for wages and salaries in personal income rose to a new high in July (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-1.jpg) (3) *Industrial production*. July's industrial production (Fri) could be weak given the modest decline in manufacturing aggregate weekly hours during the month (chart). That was no stellar performance certainly, but it was not soft enough to spur recession talk or have Fed officials plotting urgent rate cuts. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway.jpg) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Is The Sky The Limit? URL: https://www.yardeniquicktakes.com/market-call-is-the-sky-the-limit/ Last updated: 2025-08-10T21:14:46.000Z The S&P 500 nearly matched its July 28 record high on Friday. The Nasdaq did rise to a record high. Once again, the Magnificent-7 stocks collectively are leading the pack. That's because these remarkable companies continue to deliver magnificent earnings, which are increasingly being driven higher by the demand for cloud computing as AI increasingly powers the Digital Revolution. The sky seems to be the limit for the cloud providers. More and more of us are using AI's large language models, like GROK, ChatGPT, Claude, and Copilot, as tools to do research, to write software, to create content, and to work more productively. These AI tools are all processing and storing our interactions with them in the cloud and learning from these interactions to become more useful to us. As the tools become more useful, the cloud companies earn more, and they must spend more to expand their data center capacity. Our collective ability to process more data leads us all to create more data to process. And so on. So the sky really is the limit! Better-than-expected earnings reported by the Magnificent-7 contributed to the better-than-expected earnings results of the S&P 500 companies in aggregate during Q1 and Q2 (chart). Q1's earnings rose almost twice as fast as was expected just before the earnings reporting season. Q2's growth rate may be on track to be three times greater than expected. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-54.png) _This post is for paying subscribers only._ ### Musical Chairs & Policies At The Fed URL: https://www.yardeniquicktakes.com/musical-chairs-policies-at-the-fed/ Last updated: 2025-08-10T15:33:55.000Z President Donald Trump on Thursday nominated Council of Economic Advisers Chairman Stephen Miran to serve out the remaining term of Federal Reserve Governor Adriana Kugler. Trump said Miran will serve in the role until January 31, 2026, while he continues a search for a permanent replacement. The Senate will probably confirm his nomination quickly and before the September meeting of the FOMC. If so, then there could be at least three dissenters on the FOMC if the committee votes to pass on a cut in the federal funds rate (FFR) in September. They will argue that a weakening labor market justifies a rate cut. There might be a new group of dissenters if the Fed cuts the FFR. They might object that a rate cut risks heating inflation. The current big debate is whether the weakness in Friday's employment report reflects a labor market in which the demand for labor is weakening or whether there is a shortage of workers. It may be both at the same time. On the demand side, Trump's Tariff Turmoil (TTT) since April may have caused many employers to postpone their hiring plans until they were more certain of the impact of TTT on their businesses. If so, there should be less uncertainty about this now, and their hiring should resume. In this case, the Fed should hold off on cutting the FFR, and the dissenters will disagree. In our opinion, the problem is mainly on the supply side of the labor market (chart). The labor force has stopped growing so far this year as a result of the Trump administration's very effective closing of the border, as well as ongoing deportations. In this case, the Fed should also hold off on cutting the FFR since that would boost demand for workers, exacerbating the shortage of labor, which would put upward pressure on wage and price inflation rates. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-48.png) Of course, the case for easing Fed policy improved following the weak July payroll report that included significant downward revisions to the gains during May and June. In addition, the duration of unemployment has been steadily increasing this year. It has been getting harder for the unemployed to find jobs. Today's unemployment claims report showed that layoffs remain low, as evidenced by initial unemployment claims (chart). They remain in a low range consistent with a robust labor market. However, continuing claims have been rising this year, confirming that the unemployed are staying unemployed for longer. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-49.png) Keep in mind that unemployment benefits last only 26 weeks. The Bureau of Labor Statistics (BLS) compiles monthly data on the duration of unemployment. July's data showed that 1.83 million of the unemployed had been jobless for 27 weeks or more. Continuing claims rose to 1.97 million during the week of July 25 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-50.png) The monthly BLS data show that the number of unemployed workers has increased this year as the duration of unemployment has increased (chart). Layoffs have remained low, as evidenced by the steady number of those unemployed for less than five weeks. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-53.png) The average duration of unemployment has risen over the past three years to 24.1 weeks (chart). The FOMC would undoubtedly vote to ease in September to reduce the duration of unemployment. However, much will depend on the CPI inflation reports for July and August, which will be released before the September 16-17 FOMC meeting. We expect they will run hot as a result of tariffs. We also expect that August's payroll employment report, released in early September, will show that payroll employment continued to improve, as it did in July, because TTT has abated. If so, the FOMC likely will vote to hold off on cutting the FFR yet again. This time, there would be at least three dissenters, up from two at the last meeting. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-52.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Still Banking On A Resilient US Economy URL: https://www.yardeniquicktakes.com/still-banking-on-a-resilient-us-economy/ Last updated: 2025-08-06T20:53:38.000Z It's a light day for economic news. Stock prices are drifting higher today because the Q2 earnings reporting season is going well, with very few exceptions. Notwithstanding the weakness of the latest employment report and the two surveys of purchasing managers, in manufacturing and non-manufacturing industries, stock investors are still betting on the resilience of the economy since it is continuing to deliver solid earnings. We are betting the same way and recently explained why we didn't flinch following these three weak economic reports. Boosting our confidence in the resilience of the economy are the weekly data series that the Fed compiles on the commercial banking industry's balance sheet. Loans are at record highs. In addition, the strength of the S&P 500 Financials stock price index since the start of the current bull market has been comforting, mainly because we've been recommending overweighting the sector (chart). Financials can be a canary in the coal mine. They tend to chirp when the economy is doing well and croak when it isn't. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-44.png) _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Relax, Folks: Jobs Report Was OK URL: https://www.yardeniquicktakes.com/weekly-webcast-relax-folks-jobs-report-was-ok/ Last updated: 2025-08-06T12:00:51.000Z Yes, payroll employment rose less than expected in July, and, yes, revisions pegged it lower than initially thought during May and June. That doesn’t mean demand for labor has slacked off, as the extreme reactions of the financial markets suggested. The payroll weakness says more about the supply of labor than demand for it. Indeed, the two are in balance, which Fed Chief Powell even said last week. Other labor market barometers indicate strength: Hours worked are at a record high; so are wages—even adjusted for inflation. Companies aren’t firing more, though they are hesitating to hire so the duration of unemployment is up. The uncertainties related to Trump’s Tariff Turmoil might account for that. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### July's Purchasing Managers Surveys Are Mixed URL: https://www.yardeniquicktakes.com/julys-purchasing-managers-surveys-are-mixed/ Last updated: 2025-08-05T20:34:49.000Z The stock and bond markets didn't respond much to the national survey of non-manufacturing purchasing managers this morning, even though it was on the weak side (chart). The overall NM-PMI, which the Institute for Supply Management (ISM) compiles, edged down to 50.1, just above the expansion/contraction line at 50.0\. The production component was solid at 52.6\. But the employment component fell to 46.4\. On the other hand, the S&P Global flash US Services PMI Business Activity Index jumped from 52.9 in June to 55.2 in July. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-22.png) During July, the ISM and S&P Global surveys of manufacturing were both weak, with readings of 48.0 and 49.5, respectively (chart). On the other hand, the average of the general business indexes of the regional business surveys conducted by five of the 12 Fed district banks improved last month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-34.png) The weakness in manufacturing's payroll employment has been reflected in the employment component of the M-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-23.png) The same cannot be said for NM-PMI's employment index, which has been weak, while payroll employment in services industries has continued to grow (chart) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-24.png) In any event, the correlation between the M-PMI and the growth rate of real GDP goods has not been as high recently as it was in the past (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-32.png) On the other hand, the recent slowing in the growth rate of real GDP services has been reflected in the NM-PMI (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-33.png) Finally, the prices-paid indexes in both the M-PMI and NM-PMI have increased significantly over the past few months as a result of rising tariffs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-29.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### To 'V' Or Not To 'V'? That Is The Question! URL: https://www.yardeniquicktakes.com/to-v-or-not-to-v-that-is-the-question/ Last updated: 2025-08-05T03:08:49.000Z In our April 7 *Morning Briefing*, we anticipated the bottom in this year's S&P 500 correction and a V-shaped rebound. The bottom occurred the very next day. The V-shaped recovery started the following day on April 9, when President Donald Trump postponed his Wednesday, April 2, Liberation Day tariffs. We wrote: "Trump's Liberation Day last Wednesday triggered Annihilation Days on Thursday and Friday, with the Stock Market Vigilantes giving a costly thumbs-down to Trump's Reign of Tariffs. .... \[H\]e might get the message that hurting Main Street's stock portfolios can cause a recession and jeopardize the GOP majority in Congress. If so, he might postpone the reciprocal tariffs, giving trade negotiations time to work. Also, the courts might block Trump's tariffs. An early end to Trump's tariff nightmare would result in a V-shaped stock-market bottom. We’re counting on that; the alternative is just plain ugly.” The V-shaped rebound in stock prices that started on April 9 drove the S&P 500 to a record high of 6389.77 on July 28 (chart). It dropped sharply on Friday and bounced back up to 6329.94 today. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-14.png) _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: August 4-8 URL: https://www.yardeniquicktakes.com/economic-week-ahead-august-4-8/ Last updated: 2025-08-04T02:16:36.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/Screenshot-2025-08-03-204612.png) Compared to last week’s dramatic data surprises, this week’s offerings are decidedly of the slim-pickings variety. But boring, the days ahead will *not* be. While we’re still of the thinking that President Donald Trump won’t fire Jerome Powell, the Federal Reserve chair’s fate could be written between the lines of any data series that undershoots expectations. Following Friday’s weaker-than-expected July employment report, Trump wasted no time posting on social media that “Powell should be put out to pasture” for not easing already. That same day, Trump wrote that “IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!” Trump reveled in the news that Fed Governor Adriana Kugler is resigning early. He undoubtedly will replace her with a third loyalist on the Fed's Board of Governors very soon. All this will intensify attention on Fed officials’ speaking engagements this week, including that of Governor Lisa Cook (Wed). Overseas, financial markets widely expect the Bank of England to cut rates by 25bps for a fifth time (Thu). Over in Mumbai, the Reserve Bank of India is seen standing pat (Wed). China releases trade figures (Thu), providing an update on tariff pain in Asia’s biggest economy. Here’s a brief look at US releases this week: (1) *Jobless claims*. While Trump’s Tariffs Turmoil (TTT) might have depressed hiring in recent months, layoffs remain subdued. Weekly unemployment claims are expected to stay around 225,000 (Thu) after monthly Challenger, Gray & Christmas figures showed that layoffs remained low during July (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/4g7ONbU.png) (2) *PMI data*. July's NM-PMI may garner more attention than usual (Tue). Last week, we learned that the tariffs helped put factory activity back into contraction. The M-PMI dropped to 48.0 in July. In June, the NM-PMI stayed in the expansion zone at 50.8\. The series’ ability to avoid falling into contraction, as we expect, could be a real pick-me-up for the stock market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-11.png) (3) *Productivity & costs*. One happy implication of the significant downward revisions in May and June payrolls is that Q2’s productivity (Thu) should show a significant gain (chart). That’s especially true since real GDP rose solidly during the quarter by 3.0% (saar). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-12.png) (4) *Inflation expectations*. As the great inflation debate of 2025 rages on, the New York Fed expectations survey has been offering some comforting readings. In June, it showed that respondents expected inflation to be 3% over the next 12 months. That’s roughly the same level as in January, before TTT arrived. The July reading (Thu) might move a bit higher, signaling that tariffs are having some inflationary impact; they certainly are on imported goods (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-13.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Freaky Friday URL: https://www.yardeniquicktakes.com/market-call-freaky-friday/ Last updated: 2025-08-04T00:39:49.000Z On Friday, President Donald Trump slapped tariffs on all of America's trading partners. Friday's employment report was shockingly weak. So the President fired the commissioner of the Bureau of Labor Statistics (BLS) because, he said, she "RIGGED" the data. On Friday, Fed Governor Adriane Kugler resigned, allowing Trump to more quickly appoint someone who could replace Jerome Powell as Fed chair next May. On Friday, Trump said on his social media feed that he had "ordered two nuclear submarines" to be repositioned in response to online threats from Russia's former president, Dmitri Medvedev, a rare case of potential nuclear escalation between the superpowers. Gold soared. Stocks tanked. Yields fell. The odds of a recession rose from 12% to 17% according to Polymarket.com. The odds of a recession remain low because the odds of Fed rate cuts have increased. According to the CME FedWatch, the odds of a Fed rate cut in September are up to 80.3%. The stock market has been highly volatile this year compared to its average performance over the past 10 years (chart). It is heading into a seasonally choppy season, which typically lasts from August through October. It is likely to do so again following Freaky Friday. But then we can still look forward to a year-end rally up to our 6500-6600 target for the S&P 500\. We still are targeting the price of gold at $4,000 per ounce by the end of this year. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-7.png) What about that ugly employment report on Friday? It wasn't as bad as widely perceived. Payroll employment rose to a new record high of 160 million in July despite the weak 73,000 gain and the 258,000 downward revision in May and June. Aggregate hours worked, which is payroll employment times the average workweek, also rose solidly, by 0.4% m/m, to a new record high (chart). The downward payrolls revisions in May and June make sense given the uncertainty faced by employers during those months as a result of Trump's Tariff Turmoil. In any event, the courts may be about to rule that the President does not have the authority to impose tariffs in the first place. If so, lots of importers will be asking the Treasury for refunds of the duties they paid! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-8.png) Some of the weakness in payrolls reflects a shortage of workers, as evidenced by the lack of growth in the labor force so far this year (chart). That might be partly related to Trump's very effective immigration policies. We expect that faster productivity growth will more than offset the slowdown in the labor force. That should be the case during Q2, even more so after the downward payrolls revisions, given that real GDP rose 3.0% (saar) during the quarter! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-9.png) Meanwhile, S&P 500 forward earnings per share rose to yet another record high during the week of July 31 (chart). It is now at $301.44\. That's impressive considering that tariffs are a tax on businesses. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-6.png) The S&P 500 hit its latest new record high of 6389.77 on July 28\. Yet the two Bull/Bear ratios we monitor remained relatively subdued during the last week of July (chart). In other words, sentiment wasn't overly bullish; bullishness is bearish from a contrarian perspective. This is consistent with our view that, rather than yet another correction this year, we are more likely to see seasonal choppiness. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-4.png) What about the Fed? We are sticking with our none-and-done scenario for a 2025 cut in the federal funds rate. That's because we expect that the next batch of inflation indicators will show that tariffs are boosting consumer price inflation, especially of durable goods (chart). We also expect to see more signs of life in the labor market. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway-10.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Tomorrow is August 1 URL: https://www.yardeniquicktakes.com/tomorrow-is-august-1/ Last updated: 2025-08-01T02:39:32.000Z The April 2 Liberation Day reciprocal tariffs were postponed on April 9 to July 9 and again to August 1\. The S&P 500's latest correction bottomed on April 8\. The rebound to new record highs has been extraordinary. Today's selloff on mostly good news suggests that investors and traders might be starting to take profits before going on their August vacations. They might also be betting that September could be a weak month for stocks, as it often has been in the past. In addition, they may be coming around to our none-and-done forecast in 2025 for the federal funds rate, given the resilience of the economy and above-target inflation. Fed Chair Jerome Powell sounded more hawkish than widely expected during his presser yesterday. On the tariff front, Trump seems intent on using them as a revenue-raising and foreign policy tool. However, the courts might soon rule that he doesn't have the legal authority to impose them in the first place. Sure, reciprocal tariffs will be imposed on all America's trading partners tomorrow. But that doesn't mean that they won't be changed again. Today's economic indicators are consistent with our view of the economy: (1) *Initial unemployment claims*. Both initial and continuing jobless claims remained low in today's report (chart). The former remains consistent with an unemployment of around 4.0%, which is consistent with the notion that the economy is at full employment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/08/gateway.png) _This post is for paying subscribers only._ ### The US Economy Is In The Cloud URL: https://www.yardeniquicktakes.com/the-us-economy-is-in-the-cloud/ Last updated: 2025-08-04T05:13:39.000Z The Treasury's Quarterly Refunding Statement, released this morning, was a non-event. No unexpected policy shifts or drastic changes in issuance sizes were noted, so the announcement was largely as anticipated. The FOMC's decision in the afternoon to leave the federal funds rate (FFR) unchanged was widely expected, too. So was the fact that two Fed governors dissented from that decision for the first time since 1993\. Today's fireworks occurred after the stock market closed when Microsoft and Facebook beat earnings expectations. So did Qualcomm. Tomorrow, Apple and Amazon report after the close. Tomorrow should be a good day in the stock market. That's despite President Donald Trump's latest salvos in his trade war with the world. Trump signed executive actions today imposing a 50% tariff on Brazil and a 50% tariff on certain copper products as well as suspending a duty-free perk for all countries that export goods priced under $800 into the US. The President also said that India's exports to the US will face a 25% tariff in addition to a "penalty" for what he views as unfair trade policies and for India's purchase of military equipment and energy from Russia. In any event, it has been a good month for the dollar index (DXY). It found support at the bottom of its rising channel on July 2 at 96.8, as we had anticipated (chart). It was back up to 99.8 today. We've been among the few fans of the dollar lately. Gold was weak today and continues to consolidate its gains in recent weeks. We are still bullish on gold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/45m95cZ-2.png) The Fed is data-dependent, and today's Q2 real GDP report justified today's FOMC decision to leave the FFR as is. The FOMC's statement and Fed Chair Jerome Powell's press conference reiterated that, aside from the two dissenters, the other Fed officials are still in no rush to lower the FFR. We thought they might signal a possible rate cut in September, but they did not do so. We are sticking with our none-and-done stance for 2025. Real GDP beat expectations, rising 3.0% (saar) (chart). We've been using the word "resilient" to describe the economy for the past few years. We still are. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-105.png) Among the strongest components of real GDP were capital spending on information processing hardware (included in business equipment) and software (included in intellectual property) (chart). The epicenter of the Digital Revolution is datacenters, which are where the Cloud resides. AI is creating lots more data to store and process in the Cloud. The sky is the limit. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-109.png) Weighing on real GDP was a big drop in inventory investment during Q2 compared to Q1 (chart). Inventory investment should be a positive contributor to Q3's growth rate. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-110.png) The broadest measures of price inflation in the US are the headline and core GDP deflators. They were up only 2.5% and 2.7% y/y during Q2 (chart). The Fed has achieved its dual mandate. So there shouldn't be any rush to lower the FFR. If Trump got his rate cuts now, the result would likely be higher bond yields and mortgage rates and a stock market meltup that would set the stage for a meltdown. Message to the President: Beware of what you wish for. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-107.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Update On The Roaring 2020s URL: https://www.yardeniquicktakes.com/weekly-webcast-update-on-the-roaring-2020s/ Last updated: 2025-07-30T12:00:01.000Z ### With special guest Jim Lucier of Capital Alpha Partners Halfway through the decade, our Roaring 2020s investment theme remains on track. The US economy continues to prove remarkably resilient, supported by the robust spending of businesses and consumers, especially Baby Boomers. So far this year, it has been acing the stress tests of Trump’s trade policies. If the final years of the decade pan out as expected, Dr Ed reckons that the S&P 500 price index may be around 10,000 as the 2030s begin. And there’s no reason to expect the roaring to stop then. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Let The Games Begin! URL: https://www.yardeniquicktakes.com/let-the-games-begin/ Last updated: 2025-07-30T02:18:14.000Z Tomorrow will be action-packed. Wednesday morning, the US Treasury will issue its Quarterly Refunding Statement detailing how it intends to finance $1.0 trillion in marketable securities during Q3\. The question is whether Treasury Secretary Scott Bessent will rely more on doing so in the Treasury bill market, as recently suggested by President Donald Trump. Tomorrow afternoon, the FOMC will issue a press release at 2:00 p.m., most likely announcing that the voting members have decided to leave the federal funds rate unchanged. There is a good chance that Governors Michelle Bowman and Christopher Waller will dissent. They were both appointed by Trump. They have both stated that they want to cut the FFR now before the labor market weakens. If they don't dissent, then the stock and bond markets could rally significantly on expectations that the FOMC participants are leaning toward cutting the FFR in September, thus placating the two potential dissenters. These two events will be warm-up acts for the star of tomorrow's show, i.e., none other than Fed Chair Jerome Powell. He will hold a press conference at 2:30 p.m. to review the FOMC's decision. He might reiterate that the Fed is in no rush to lower rates, or he might pivot toward a more dovish stance, confirming that the odds of a rate cut are high in September. The co-star of the show is President Trump, who will probably berate the Fed in a social media post for not cutting rates now. Bessent should remind the President that when the Fed cut the FFR by 100bps during the final months of 2024, the 10-year Treasury bond yield rose 100bps (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-104.png) _This post is for paying subscribers only._ ### Wednesday Is Not Just Fed Day But Also Treasury’s Refunding Day URL: https://www.yardeniquicktakes.com/wednesday-is-not-just-fed-day-but-also-treasurys-refunding-day/ Last updated: 2025-07-29T02:21:12.000Z On Wednesday, the Federal Open Market Committee will announce its latest monetary policy decision. Odds are that it will be a non-event, i.e., the federal funds rate will remain unchanged (chart). The only drama will be whether the FOMC sticks to the current party line: "We are in no rush to lower interest rates." Or, will it signal a dovish pivot? If Governors Christopher Waller and Michelle Bowman dissent from the vote, then the rest of the FOMC's voting members have decided to stick with the relatively hawkish party line. If they don't dissent, then expect that the FOMC's participants, including Fed Chair Jerome Powell, will signal that they will be considering a rate cut at their September meeting. President Donald Trump selected Waller and Bowman to serve as Fed governors, and both are dovish. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-95.png) Another significant development for the financial markets may occur on Wednesday morning when the US Treasury outlines its plans for financing the federal government's borrowing needs through the issuance of Treasury securities. The Quarterly Refunding Statement (QRS) provides detailed plans for auctions of notes, bonds, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs) to refund maturing securities and raise new cash (chart). _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: July 28 - August 1 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-28-august-1/ Last updated: 2025-07-28T02:45:57.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/Screenshot-2025-07-27-173634.png) This is a big week on the monetary policy front, with the Federal Reserve, Bank of Japan, and Bank of Canada all holding policy meetings. Naturally, the main event will be the Federal Open Market Committee’s widely expected decision (Wed) to leave the federal funds rate unchanged. We are among those expecting no change. However, we do expect that Fed Chair Jerome Powell's press conference (Wed) will be relatively dovish, raising the odds of a September rate cut. Nevertheless, we remain in the none-and-done camp in 2025 for now. On Friday, the markets will receive a highly anticipated update on US employment. We expect the data to confirm, yet again, that the economy remains resilient. By the way, Friday is also August 1, the drop-dead day for many trade deals with the US. This week is full of reports that could influence the Fed’s thinking on whether slowing growth or accelerating price pressures is the bigger risk: (1) *Employment*. We expect to see July payrolls (Fri) rise by around 115,000, down from 147,000 in June. It will likely reach yet another record high, consistent with the record high in corporate earnings, since profitable companies tend to expand their payrolls (chart). We expect any slowdown in payroll gains to be related to a shortage of workers rather than a shortage of jobs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-17.jpg) (2) *GDP*. After dropping 0.5% y/y in Q1, real GDP growth (Wed) is likely to expand at a 2.4% y/y rate. That is in line with the latest Atlanta Fed GDPNow tracking model (chart). While much of the rebound will likely be driven by a narrowing trade deficit, domestic demand should provide some support. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-92.png) (3) *Job openings*. On Tuesday, the job openings data in June's JOLTS report should show that this series remains relatively high, as suggested by June's jobs plentiful series in the Consumer Confidence Index survey. That probably remained relatively high again in July (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-93.png) (4) *Personal income*. June's personal income and consumer spending (Thu) should rise based on the increase in payroll employment and retail sales during the month. (5) *Inflation*. June's headline and core PCED inflation rates (Thu) are projected to be up 2.5% and 2.7% y/y, according to the Cleveland Fed's Inflation Nowcasting tracking model (chart). Both could be a bit hotter. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-94.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### MARKET CALL: Path Of Least Resistance URL: https://www.yardeniquicktakes.com/market-call-path-of-least-resistance/ Last updated: 2025-07-28T01:16:45.000Z President Donald Trump is on a roll. He now has 33 trade deals—with the UK, China, Vietnam, Indonesia, the Philippines, Japan, and the 27 countries that are members of the European Union (EU). The EU deal was announced today. The deals show that Trump has raised his baseline tariff to 15% from 10%. He must figure that, in addition to his other tariffs, the US should collect at least $400 billion per year in import duties (chart). If so, these revenues will significantly help reduce the federal deficit. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-89.png) The countries Trump has dealt with aren't imposing a reciprocal baseline tariff. They are lowering or dropping their tariffs on selected goods imported from the US. In addition, many of them have agreed to spend more money on US exports and even on direct investments in the US. Trump stated that the EU agreed to purchase $750 billion worth of US energy and invest an additional $600 billion in the US. The White House maintains a [running list ](https://www.whitehouse.gov/articles/2025/06/trump-effect-a-running-list-of-new-u-s-investment-in-president-trumps-second-term/?ref=yardeniquicktakes.com)of commitments made by companies and countries to invest in the US, presumably as a result of Trump's deal-making efforts. These are mostly informal verbal declarations of intent without any specified time frame. _This post is for paying subscribers only._ ### DEEP DIVE: Foreign Investors Love US Stocks & Bonds URL: https://www.yardeniquicktakes.com/deep-dive-foreign-investors-love-us-stocks-bonds/ Last updated: 2025-07-26T03:09:40.000Z ***The following is an excerpt from our Morning Briefing dated July 21, 2025.** ### **Foreign Buyers I: Loading Up on US Treasuries & Equities.** The phrase "I have always depended on the kindness of strangers" is a famous line from Tennessee Williams' play, *A Streetcar Named Desire*. It's spoken by the character [*Blanche DuBois*](https://www.google.com/search?rlz=1C1VDKB%5FenUS1048US1048&cs=0&sca%5Fesv=a200e05b38ad46df&sxsrf=AE3TifNX300Q1G%5FZSiGIkZIegnafo-t2xQ%3A1752931364611&q=Blanche%20DuBois&sa=X&ved=2ahUKEwiIkY2agsmOAxUMv4kEHZQ5NFAQxccNegQIAxAB&mstk=AUtExfBI7m9HNYKVHKKS%5Fod0lo0QWl4Fe6wI7%5FNgAO%5FNZkH4XKh%5F4aQB%5FvGMBf23lVU7ZYlccGAnfNGwpqBZJqKVJvLZcqQLDA1uWqDdX2AUXDgguHSk9niiYdy7z-wz3dAfkQyWfMp7oM0SuxB1Bv9%5Fm2J5W7BSGGEQe7QnqKlJbnt5p4U&csui=3&utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=372841687&%5Fhsenc=p2ANqtz-9lPGnX6h4yqTbfj7k5UcaXIsYUarm-WTGFToR23ELXQLzkpzUpmJ2OEfRWYh-Qoob%5F91QR6DIpDyOR3oaqNkRx-s5T-g&%5Fhsmi=372841687) in the final scene as a doctor and a nurse are leading her away. The line is often interpreted in various ways, including as an expression of Blanche's naivety, her reliance on fantasy and illusion, and her desperate need for acceptance and validation. Similarly, Uncle Sam has increasingly relied on the kindness of strangers, i.e., foreign investors, to purchase US Treasuries, helping to finance the rapidly mounting debt of the US federal government. In recent years, Doomsayers, such as Ray Dalio, have warned that we can no longer count on them to do so. A debt crisis is increasingly likely, they warn. That would cause bond yields to soar in the US. The dollar would also plummet in this scenario. The dollar bears have recently warned that global equity investors are rebalancing their portfolios out of US equities and into other major equity markets worldwide, particularly those in Europe. This has depressed the foreign exchange value of the dollar, especially relative to the euro. The naysayers may be right eventually, but the May [*Treasury International Capital System (TICS)*](https://home.treasury.gov/news/press-releases/sb0196?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=372841687&%5Fhsenc=p2ANqtz-9lPGnX6h4yqTbfj7k5UcaXIsYUarm-WTGFToR23ELXQLzkpzUpmJ2OEfRWYh-Qoob%5F91QR6DIpDyOR3oaqNkRx-s5T-g&%5Fhsmi=372841687) data released last Thursday by the US Treasury show that foreigners remain very kindly disposed to buying US securities. In fact, they bought these securities at a record pace over the 12 months through May! This helps to explain why the 10-year US Treasury bond yield has remained relatively subdued all year, around our target range of 4.25% to 4.75% ([*Fig. 1 below*](https://yardeni.com/wp-content/uploads/tc%5F20250721%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=372841687&%5Fhsenc=p2ANqtz-9lPGnX6h4yqTbfj7k5UcaXIsYUarm-WTGFToR23ELXQLzkpzUpmJ2OEfRWYh-Qoob%5F91QR6DIpDyOR3oaqNkRx-s5T-g&%5Fhsmi=372841687)). That’s consistent with our view that the bond yield has normalized over the past couple of years by trading in a range like the one in the years before the Great Financial Crisis. ![Article content](https://media.licdn.com/dms/image/v2/D4E12AQEPTOMfFPxgNA/article-inline_image-shrink_1000_1488/B4EZhEp3s2GcAQ-/0/1753498484241?e=1758758400&v=beta&t=P95aVLk0mVBTG04_KtXDm_1SShkrVZ5k_Wll078NR2o) Figure 1 _This post is for paying subscribers only._ ### Investors May Be Gaining Confidence In the Resilience of the US Economy URL: https://www.yardeniquicktakes.com/investors-may-be-gaining-confidence-in-the-resilience-of-the-us-economy/ Last updated: 2025-07-25T02:52:35.000Z The four-week moving average of weekly initial unemployment claims provides a real-time indicator of the labor market (chart). It has been improving recently as the four-week average of jobless claims has been falling. Employers may be less concerned about the possible adverse impact of Trump's tariffs on the economy and on their companies. They should also be gaining confidence in the economy's resilience as validated by the record highs in the S&P 500 and the Nasdaq. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-87.png) We've been tracking the daily recession odds as reflected in Polymarket.com (chart). They've dropped significantly from around 60% in late April and early May to just 18% currently. There is an inverse correlation between the recession odds series and the S&P 500's forward price-to-earnings ratio. Investors are also gaining confidence in the economy's resilience and are willing to pay a relatively high valuation multiple for stocks. This is all consistent with our Roaring 2020s scenario, in which a recession remains a low-probability outcome for the rest of the decade. _This post is for paying subscribers only._ ### Slow-Motion Meltup Continues URL: https://www.yardeniquicktakes.com/slow-motion-meltup-continues/ Last updated: 2025-07-24T04:15:42.000Z The S&P 500 and Nasdaq edged up to record high closes today, lifted by Nvidia and GE Vernova. Trump's Tariff Turmoil appears to be subsiding, just as we expected it would during the summer. Investors are welcoming President Donald Trump's recent tariff deals and expect more before the August 1 deadline set by the President. The European Union and the US appear headed toward a trade deal similar to an agreement President Donald Trump struck with Japan. The White House's deal with the EU would include a broad tariff of 15% on EU goods imported into the US. The rate, which could also extend to cars, would mirror the framework agreement the US has struck with Japan. Leading the S&P 500 higher since mid-2023 have been momentum stocks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-84.png) _This post is for paying subscribers only._ ### Trump's Tariffs Go To Court URL: https://www.yardeniquicktakes.com/trumps-tariffs-go-to-court/ Last updated: 2025-07-23T23:42:36.000Z The following is a note on imminent court decisions regarding President Donald Trump's tariffs, written by Jim Lucier, one of the best Washington watchers we know and a good friend of Yardeni Research. Jim is one of the founders of [Capital Alpha Partners](https://www.capalphadc.com/?ref=yardeniquicktakes.com), LLC, a leading, independent provider of strategic policy research and political forecasting. **For more details about the Capital Alpha team, please email* [**inquiries@capalphadc.com*](mailto:inquiries@capalphadc.com "mailto:inquiries@capalphadc.com") 💡 ****Jim will join Dr. Ed’s webinar on Monday, July 28, at 11 a.m. Eastern.** The link will be sent to QuickTakes Premium members at 10 a.m. that day. - Two federal appeals courts are sending clear signals they wish to resolve the uncertainty over President Trump’s IEEPA tariffs as quickly as possible, we think. - The Federal Circuit Court of Appeals will likely hear oral arguments in one case en banc, which is a sign that they want a speedy ruling, with minimum chances of a successful appeal to the Supreme Court. - The District of Columbia Circuit has named a three-judge panel consisting entirely of Trump appointments to hear another case. The odds against such a panel being appointed by a purely random selection are 99.4%. Trump can’t blame a defeat on “activist judges.” If Trump can’t win with this panel, we believe, his odds of prevailing at the Supreme Court are slim. Two federal courts have ruled that President Trump’s IEEPA tariffs are unlawful and unconstitutional. Trump has appealed these rulings, but what are his chances of getting them reversed? Trump has a chance of prevailing in the end, we believe, but he starts in the hole, at 0-2, and one of the rulings that went against him was a 3-0 decision on May 28 by the Court of International Trade (CIT), which is the federal judiciary’s specialist court on trade matters. For more details, please see our July 18 note, “What if the Courts Strike Down Trump’s IEEPA Tariffs?”, and the July 16 “Capital Alpha Trade Primer 3.1.” (available by request via [inquiries@capalphadc.com](mailto:inquiries@capalphadc.com)). The panel which handed down a unanimous decision against Trump was an eclectic one, with judges appointed by Presidents Ronald Reagan, Barack Obama, and Trump himself. The panel vacated the IEEPA tariffs that Trump had ordered to date, and issued a permanent injunction against such tariffs in the future. **Will Tariffs Stay or Will They Go?** The Federal Circuit Court of Appeals stayed the CIT ruling while it hears an appeal. *V.O.S. Selections, Inc. v. Trump, Docket No. 25-01812 (Fed. Cir. May 28, 2025).* Trump has since announced more than two dozen trade agreements based on the IEEPA tariffs. Trump has also told foreign governments that the stay is a sign that the court will rule in his favor, so that they should treat them as permanent. But the Federal Circuit may be telling us something else. Oral arguments on the appeal are scheduled for July 31\. But in an unusual move, we expect the court to hear oral arguments en banc, which means that all 11 active judges in the court will participate. En banc hearings are normally reserved for an appeal from a three-judge panel. By hearing the case for the first time en banc, the court is sending a message that it wishes to make a decisive ruling which reflects the views of the entire court as quickly as possible. Eight of the judges on the Federal Circuit were appointed by Democratic presidents, three were appointed by Republicans, and none were appointed by Trump. The president has his work cut out for him here. A strong majority ruling from the Federal Circuit would have two implications. One would be that barring some other court decision that would result in a circuit split, the odds of a successful appeal to the Supreme Court would be low. Another implication would be that if the Federal Circuit upholds the CIT decision enjoining the tariffs, the odds of Trump getting another stay to keep the tariffs in place would also be low – perhaps as low as they could possibly be. In order to grant the stay, the Supreme Court would have to assess reasonably high chances that it would reverse the Federal Circuit, which would be unlikely if the Federal Circuit rules with a strong en banc majority. Given the urgency of the case – IEEPA tariffs will be accumulating at about $25 billion per month starting August 1 – and the pressure that the Trump administration is likely to put on the Supreme Court for a favorable ruling, there is another way to look at this situation. That is, the Federal Circuit is doing what it can do to ensure that the Supreme Court need not take up the case; in other words, they are clearing a way for the Supreme Court to take a pass. **The Odds are 99.4% Against** Something even more unusual is happening at the D.C. Circuit Court of Appeals. The court has selected a three judge panel consisting entirely of Trump appointments to hear Trump’s appeal of a May 29 decision from the District of Columbia District Court. *Learning Res., Inc. v. Trump, No. 25-5202, 2025 BL 198491 (D.C. Cir. June 05, 2025).* This ruling, like the CIT decision, found the IEEPA tariffs to be unlawful and unconstitutional. It also denied a Trump administration motion to transfer the case to the CIT, where Trump had hitherto hoped for a more favorable ruling. There are 11 active judges on the D.C. Circuit Court of Appeals. Only three of them were appointed by Trump. We can apply the basic rules of probability to calculate the odds of the court randomly assigning a panel of all three Trump appointees. The odds would be 3/11, times 2/10, times 1/9, equaling 1/165, or 0.6%, which is a vanishingly small probability. We could also state the converse, and say the odds are 99.4% that such a panel would never be appointed. As a general rule, the panels in federal courts are assigned randomly, but this is not always the case. There was, for instance, the notorious case of the same panel in the Fourth Circuit Court of Appeals hearing challenges to the Mountain Valley Pipeline six times in a row. The courts do not explain how panels were selected. But from the panel selected to hear Trump’s appeal in the D.C. Circuit, we can make one of two inferences, in our opinion. Either the panel selection was a truly random event, despite the overwhelming odds against it, or the D.C. Circuit is subtly signaling to Trump that if he cannot win with a panel of three judges he appointed, then he might as well abandon all further appeals. Trump cannot blame activist judges appointed by prior Democratic presidents for the decision. Oral arguments in the D.C. Circuit are set for September 30\. The D.C. Circuit could rule in Trump’s favor at the end of the day. But oral arguments in the D.C. Circuit, like those in the Federal Circuit, will be a high-stakes affair. 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### WEEKLY WEBCAST: Foreigners LOVE American Securities URL: https://www.yardeniquicktakes.com/weekly-webcast-foreigners-love-american-securities/ Last updated: 2025-07-23T12:00:22.000Z Like Blanche DuBois, the US Treasury has been dependent on the kindness of strangers, particularly foreign investors. Doomsters warn that foreign investors are losing their confidence in US Treasuries and in the US dollar. Yet, the Treasury’s latest TICS data show that they remain strong buyers of US debt. In addition, they’ve bought a record amount of US equities over the past 12 months. Dr Ed reviews the latest data and discusses the implications.[](https://us02web.zoom.us/rec/share/JoBC8zQ4aDsWRMUWctnf3D2cDBTtXEKeCVsQbQPanH2wFS5xIKXDSUfBwxZbkeYF.cqeWHyB9GozCTyYG?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Washington Creates Buzz 24x7 URL: https://www.yardeniquicktakes.com/washington-creates-buzz-24x7/ Last updated: 2025-07-23T03:35:42.000Z Can't we get a day without news coming out of the White House? Yesterday, US Treasury Secretary Scott Bessent called for an "exhaustive internal review" of the Fed's "non-monetary policy operations." He accused the central bank of "significant mission creep." He did so on CNBC in the morning. In a lengthy post on X, Bessent sought to clarify his remarks later that day. This morning, Bessent appeared on Fox Business and reiterated his stance on the Fed. Nevertheless, he said it is okay if Fed Chair Jerome Powell stays until the end of his term. Stocks have not moved significantly so far this week in response to this news. However, the DXY dollar index edged lower, and the gold price rose closer to its June 13 record high of $ 3,452.80 (chart). The latter jumped more than $50 yesterday in response to Bessent's attack on the Fed. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-75.png) This evening, the price of gold is down slightly on news that the US has reached a trade deal with Japan. The US will impose a 15% tariff on Japan's exports to the US, with auto duties reportedly being lowered to the same level. Japan’s markets jumped after the deal announcement, with major auto stocks soaring, some over 10%, while the broader Nikkei 225 gained more than 2% (chart). _This post is for paying subscribers only._ ### Fed Day (7/30) To Be Followed By Liberation Day II (8/1) URL: https://www.yardeniquicktakes.com/fed-day-7-30-to-be-followed-by-liberation-day-ii-8-1/ Last updated: 2025-07-22T02:28:16.000Z The next couple of weeks will certainly be interesting. The FOMC will decide on whether to lower the federal funds rate (FFR) or not on July 30\. On August 1, the US will impose reciprocal tariffs on goods imported from America's trading partners. Furthermore, administration officials will undoubtedly continue to beat up on the Fed, especially if the FOMC decides not to lower the FFR next week. This morning, US Treasury Secretary Scott Bessent called for a comprehensive review of the Federal Reserve, questioning its effectiveness and suggesting it has not succeeded in its mission. In a CNBC interview on "Squawk Box," he criticized the Fed for "fear-mongering" over President Trump's tariffs, noting that inflation has remained low despite these policies. Bessent remarked, "They were fear-mongering over tariffs, and thus far we have seen very little, if any, inflation." He also expressed frustration with the Fed's staff, stating, "All these PhDs over there, I don’t know what they do." This latest attack by the administration on the Fed weighed on the DXY dollar index and boosted the price of gold (chart). The S&P 500 remained at a record high, though a rally in the morning fizzled by the afternoon. It's as though investors are anticipating that the FOMC won't cut the FFR next week, but will signal that a September cut is likely. Fed Chair Jerome Powell may have to turn more dovish to avoid having two Fed governors (Christopher Waller and Michelle Bowman, both appointed by Trump) dissent next week. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-73.png) _This post is for paying subscribers only._ ### MARKET CALL: What If the Fed Hints At A September Rate Cut Next Week? URL: https://www.yardeniquicktakes.com/market-call-43/ Last updated: 2025-07-21T02:38:22.000Z The odds of a Federal Reserve rate cut at the July 29-30 FOMC meeting are down to 4.7% based on futures pricing from the [CME FedWatch Tool](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?ref=yardeniquicktakes.com). A strong June jobs report, which added 147,000 nonfarm payrolls and showed the unemployment rate drop to 4.1%, has significantly reduced expectations for a July cut. Fed Chair Jerome Powell and other Fed policymakers have emphasized a cautious, data-dependent approach, citing persistent inflation above the 2% target and uncertainties from tariffs. Most market participants and analysts now expect the Fed to hold rates steady at 4.25%-4.50%, with a September cut being more likely, at 60.7% probability. The latest batch of weaker-than-expected inflation reports, including the drop in July's expected inflation series, might persuade Fed Chair Jerome Powell and his colleagues to signal they are leaning toward lowering the federal funds rate at the September 16-17 meeting, as markets expect (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-57.png) We expect a more dovish tone from next week's FOMC statement and Powell's press conference. If so, that would continue to fuel the bull market in stocks, especially since the Q2 earnings reporting season should continue to beat expectations. The blended (actual/estimated) S&P 500 earnings per share growth rate edged up to 4.3% y/y last week (chart). It should be closer to 8.0% when all the results are in. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: July 21-25 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-21-25/ Last updated: 2025-07-21T02:18:48.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/Screenshot-2025-07-20-210238.png) This might be a good week to take a summer vacation. The economic data calendar is light. On Monday, Fed Chair Powell [will speak](https://www.federalreserve.gov/newsevents/calendar.htm) in Washington, perhaps offering an update on his views on employment, inflation, and interest rates. He won't comment on calls for his resignation. Vice Chair Michelle W. Bowman could make some news at the same conference the following day. The European Central Bank is not widely expected to lower interest rates at its meeting on July 23-24, 2025\. Analysts and market expectations, based on recent web sources, suggest the ECB will likely maintain current rates, with the deposit rate at 3.75%. Here is a brief rundown of the US economic week ahead: (1) *Composite economic indicators*. The week should begin on a reassuring note, as the Index of Coincident Economic Indicators (Mon) is expected to hit another record high in June, confirming that the economy remains resilient (chart). The Index of Leading Economic Indicators (LEI) has been a very misleading indicator of the economy and should be ignored. The S&P 500 is one of the 10 components of the LEI. It has returned to a record high. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-62.png) (2) *Existing home sales*. This week’s batch of housing indicators should show that the sector remains challenged by high mortgage rates and rising inventories of unsold homes. Existing-home sales (Wed) edged up 0.8% m/m in May and probably remained relatively depressed in June (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-63.png) (3) *New home sales*. After tanking 13.7% m/m in May, new home sales (Thu) might uptick in June in response to the recent decline in mortgage rates and new home prices. The months' supply of new homes on the market rose to 9.8 months in May (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-64.png) The ample supply of unsold new homes is weighing on new home prices (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-65.png) (4) *Jobless claims and business surveys*. This week’s initial unemployment claims report (Thu) is likely to confirm that the labor market remains robust. This week's regional business surveys from the Richmond Fed (Tuesday), the Chicago Fed (Thursday), and the Kansas City Fed (Thursday) should confirm the rebound in the New York Fed and Philadelphia Fed surveys (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-66.png) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) ### Trump Dealing ... Consumers Consuming ... Employers Employing URL: https://www.yardeniquicktakes.com/trump-dealing-consumers-consuming-employers-employing/ Last updated: 2025-07-18T02:16:40.000Z Liberation Day II is coming on August 1\. President Donald Trump has stated that it won't be postponed, unlike Liberation Day I, which was initially scheduled for April 2 but was postponed to July 9 and then to August 1\. According to a July 10 Reuters report, Trump is considering raising his 10% base tariff to 15% or 20% on most trading partners by that deadline. That would be consistent with our view that he would like to get this issue behind him so that he can focus on campaigning for Republicans running in next year's congressional elections. Meanwhile, Trump may be dialing down his almost daily rants about Fed Chair Jerome Powell, calling on him to either lower interest rates or resign. He has threatened to fire Powell. Yesterday, he moderated his stance, saying, "I don't rule out anything, but I think it's highly unlikely unless he has to leave for fraud." There has been no evidence of fraud, and the Fed has pushed back on criticism of its handling of the renovation of its headquarters building. Today's economic indicators confirm the resilience of the US economy: _This post is for paying subscribers only._ ### PPI Report Comes With A Warning Label! URL: https://www.yardeniquicktakes.com/ppi-report-comes-with-a-warning-label/ Last updated: 2025-07-17T02:29:20.000Z On Tuesday, June's CPI report was warmer than expected. Today's June PPI report was cooler than expected. Yesterday, we argued that while Trump's tariffs may not be boosting inflation, they may have halted its fall to the Fed's 2.0% inflation target. Measures of consumer price inflation may be stuck closer to 3.0% for a while as a result. This reduces the likelihood of a Fed rate cut in the near future. However, didn't today's PPI report, showing that it remained unchanged, vindicate President Donald Trump's repeated claim that there's "no inflation," so the Fed should cut interest rates? The PPI report comes with a clear warning label: "The scope of the CPI includes imports. The PPI excludes imports." The PCED measure of consumer prices also includes imports. June's PCED will be reported on July 31\. We expect to see it warming up too, from 2.3% to 2.5% y/y, as predicted by the Cleveland Fed's [Inflation Nowcasting](https://www.clevelandfed.org/en/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) model (chart). July is also tracking at 2.5%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-49.png) Furthermore, the Cleveland Fed's model shows the core PCED tracking at 2.7% y/y in both June and July, unchanged from May's inflation rate (chart). _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Trump’s Reign Of Tariffs Ain’t Over URL: https://www.yardeniquicktakes.com/weekly-webcast-trumps-reign-of-tariffs-aint-over/ Last updated: 2025-07-16T12:00:16.000Z We had expected that Trump’s Tariff Turmoil would have subsided by now, and investors probably assumed the same since the financial markets have been so okay with it all in recent weeks. But the resilience of the economy, the moderation of inflation, and the calmness of the markets seem to have emboldened the President: He has not relented on his tariff war with the world as expected by now but seems to be escalating it again. That’s even though high tariffs are bound to hurt US corporate profit margins, the US economy, and the GOP’s slim majority in Congress after the midterm elections. What now? Dr Ed shares his thoughts and maintains his yearend price target for the S&P 500. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Is Inflation Stuck At 3.0% Because Of Trump's Tariffs? URL: https://www.yardeniquicktakes.com/is-inflation-stuck-at-3-0-because-of-trumps-tariffs/ Last updated: 2025-07-16T02:53:52.000Z Today's CPI report for June suggests that consumer price inflation is no longer declining toward the Fed's 2.0% target. Instead, it might continue to hover around 3.0% for a while as it has recently (chart). Trump's tariffs may be a contributing factor, though their impact remains debated. The core CPI inflation rate upticked to 2.9% last month, hinting that the core PCED inflation rate (at 2.7% in May) might have followed a similar trend. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-43.png) President Donald Trump is pushing for the Federal Reserve to cut the federal funds rate (FFR) from 4.33% to 1.00%. This reduction would lower net interest payments on the federal debt, helping to reduce the US budget deficit. A lower FFR could also weaken the dollar, boosting exports and reducing imports. However, Fed Chair Jerome Powell and most Federal Open Market Committee (FOMC) participants are reluctant to cut rates, especially to 1.00%, due to concerns that Trump's tariffs could hinder progress toward the Fed's 2.0% inflation target. The June CPI report reinforces the FOMC's cautious stance. Although Trump's tariffs may not yet be significantly driving inflation, they appear to be contributing to inflation stalling at around 3.0%, supporting the FOMC's hesitation to lower the FFR. Let's have a closer look at today's CPI data: _This post is for paying subscribers only._ ### Russian Roulette, the Dollar, and Gold URL: https://www.yardeniquicktakes.com/russian-roulette-the-dollar-gold/ Last updated: 2025-07-16T03:52:22.000Z The US stock market held up very well today in the face of Trump's escalation of his trade war with the world over the weekend. Maybe that's because he threatened that his latest tariff salvo won't be fired until August 1 (i.e., Liberation Day II). So there is still time to negotiate trade deals. Today, he also threatened to impose 100% "secondary" tariffs on any country doing business with Russia if a Ukraine ceasefire isn't secured within 50 days. Secondary tariffs are duties imposed on third countries that do business with a sanctioned nation and are designed to isolate that nation economically by targeting its trade partners. So, Trump’s latest threat amounts to another round of tariffs on countries that import Russian oil, such as India and China. The European Union also purchases oil and gas from Russia, totaling $24 billion last year. We don't like to draw too many conclusions from one day's trading, but we noticed that the price of gold edged down and the value of the dollar edged up on Trump's latest “tarrifying” news. Everyone is bearish on the dollar, except us (it seems). From a contrarian perspective, today's *Wall Street Journal* included an [article](https://www.wsj.com/finance/currencies/us-dollar-value-spending-power-travel-aeae581a?mod=hp%5Flead%5Fpos10&ref=yardeniquicktakes.com) titled "Plunging Dollar Leaves American Travelers With Less Buying Power This Summer." Such headlines often occur at turns in the dollar. That would be consistent with the DXY dollar index’s rebounding off the bottom of its upward channel (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/45m95cZ-1.png) We remain bullish on gold, although the current consolidation may persist through the summer. The price has remained contained within its ascending channel (chart). _This post is for paying subscribers only._ ### MARKET CALL: Trump's Reign Of Tariffs Ain't Over URL: https://www.yardeniquicktakes.com/market-call-trumps-reign-of-tariffs-aint-over/ Last updated: 2025-07-14T01:38:46.000Z 💡 ***The following is an advance excerpt from our Morning Briefing dated July 14, 2025\. We are providing it in place of our usual Market Call QuickTakes.** ### **Trump’s Tariffs I: More Tariff Turmoil.** It’s July. Back in March, we expected that Trump’s Tariff Turmoil (TTT) would become less tumultuous by the end of the summer. We figured that President Donald Trump would start to declare victory in his trade war with the world. We figured he would start to move on to other issues to reduce the risk that his trade war would cause a recession in the US. The political calendar shows that the congressional mid-term election campaigns will be starting in the not-too-distant future. Trump needs a good economy to increase the odds that the Republicans will hold onto their thin majorities in the House and the Senate come November 2026. In fact, the economy is in very good shape right now. The labor market is at full employment given that the unemployment rate is 4.1%, and CPI inflation, excluding the slow-motion decline in rent inflation, is below 2.0% y/y ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20250714%5F1.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=371088793&%5Fhsenc=p2ANqtz--eI2o3pfAUxIu-P-kGIbDwf5OGIMgPUR8-uTeRNKUyc-W33G6-GZVBWYV8-mrXtXUywCeSchNx-oyKPnQaVcHoWYYxVA&%5Fhsmi=371088793) below and [*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20250714%5F2.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=371088793&%5Fhsenc=p2ANqtz--eI2o3pfAUxIu-P-kGIbDwf5OGIMgPUR8-uTeRNKUyc-W33G6-GZVBWYV8-mrXtXUywCeSchNx-oyKPnQaVcHoWYYxVA&%5Fhsmi=371088793) below). The Misery Index, which is the sum of the unemployment rate and the headline CPI inflation rate, is at 6.6%, well below its average over time of 9.0% ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20250714%5F3.png?utm%5Fcampaign=Morning%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=371088793&%5Fhsenc=p2ANqtz--eI2o3pfAUxIu-P-kGIbDwf5OGIMgPUR8-uTeRNKUyc-W33G6-GZVBWYV8-mrXtXUywCeSchNx-oyKPnQaVcHoWYYxVA&%5Fhsmi=371088793) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/1.png) Figure 1 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/tc_20250714_2.png) Figure 2 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/tc_20250714_3.png) Figure 3 Why should Trump mess with success? Why not spend the time remaining until the elections in November of next year campaigning for Republican congressional candidates on the considerable economic and geopolitical successes of the White House so far? _This post is for paying subscribers only._ ### Week Ahead: July 14 - 18 URL: https://www.yardeniquicktakes.com/week-ahead-july-14-18/ Last updated: 2025-07-13T22:25:33.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/Screenshot-2025-07-13-103603.png) This will be a jampacked week for economic indicators and big banks' Q2 earnings reports. We are relatively optimistic about the latter, which should be bullish for the stock market. The inflation news may show some signs of tariff-related warming. Consumer-related data are likely to be be mixed. The White House will probably keep tariffs and the Fed in the news on a daily basis. On balance, we expect the stock market to be choppy over the remainder of the summer into early fall before a yearend rally. The stock market's V-shaped pattern during H1 should look more like a square-root sign in coming months. Consider the following: (1) *S&P 500 earnings*. Q2's earnings reporting season should start out this week with a bang as lots of big banks report strong earnings. Industry analysts have been lowering their earnings estimates for S&P 500 companies over the past several weeks, bringing their earnings growth expectations down to 3.5% y/y as of the July 10 week (chart). That should be easy to beat. We expect to see actual earnings rise by twice that much. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-35.png) (2) *CPI and PPI.* So far, the impact of Trump's tariffs has been difficult to spot in hard inflation data. That may be about to change, albeit modestly with June's CPI report (Tue). The Cleveland Fed's Inflation Nowcasting is showing a 3.0% y/y increase in this inflation rate, up from 2.8% in May (chart). June's PPI report (Wed) might confirm that the downward trend in inflation has been interrupted at least on a transitory basis by Trump's tariffs. That may be enough to keep the Fed on hold. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-36.png) (3) *Retail sales*. The sizable 0.9% drop in retail sales in May, the first back-to-back monthly decline since the end of 2023, was offset by the month's "core group," which was up 0.4% (chart). June's retail sales report (Thu) could also be a mixed bag, with auto sales weak again and a small increase in the control group. Our Earned Income Proxy for private industry wages and salaries in personal income was flat last month. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-11.jpg) Anticipation of Amazon's Prime Day, the annual deal event on July 8-11, might have reduced online shopping last month. However, there's no sign of that happening in the weekly Redbook retail sales series, which remains robust (chart). That's consistent with the low readings for weekly initial unemployment claims (Thu). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-37.png) (4) *Industrial production*. June's industrial production (Wed) probably edged down given that manufacturing aggregate weekly hours fell slightly last month (chart). The New York Fed's July Empire State Manufacturing Index (Tue) could show signs of stabilizing following a surprisingly weak -16.0 reading in June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-12.jpg) (5) *Fed fight*. A number of Fed officials will have their chance at publicly parsing this week's economic indicators. Among top Fed policymakers [giving speeches](https://www.federalreserve.gov/newsevents/calendar.htm) are: Governors Michelle Bowman (Tue), Michael Barr (Tue and Wed), Adriana Kugler (Thu), and Christopher Waller (Thu). It will be interesting to see whether any of them takes sides in the Great Fed Fight between Trump and Fed Chair Jerome Powell. The President has been attacking Powell almost daily of late for not lowering interest rates. Trump still wants Powell gone before his term as Fed chair expires in May 2026\. Though the Supreme Court [complicated](https://www.politico.com/news/2025/05/22/supreme-court-fed-powell-trump-00366526?ref=yardeniquicktakes.com) his hopes to fire Powell, Trump World is getting quite creative about grounds for termination. Case in point: arguing that Powell [mismanaged renovations](https://www.wsj.com/economy/central-banking/jerome-powell-fed-renovations-trump-fb9793df?ref=yardeniquicktakes.com) at Fed headquarters and lied to Congress about the project. Let the games begin! [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### DEEP DIVE: Trump & Bessent Versus Powell & The Bond Vigilantes URL: https://www.yardeniquicktakes.com/deep-dive-trump-bessent-versus-powell-the-bond-vigilantes/ Last updated: 2025-07-13T17:57:47.000Z 💡 ***This is an excerpt from the July 7, 2025 Morning Briefing of Yardeni Research, Inc.** ### **US Debt I: Trump vs Powell.** President Donald Trump wants lower interest rates. He blames Fed Chair Jerome Powell for keeping them too high. He has been saying so since his first term in office as President. He said so again on June 27: “I think we should be paying 1% right now, and we’re paying more because we have a guy who suffers from, I think, Trump Derangement Syndrome.” That’s after he reiterated that “I’d love him to resign if he wanted to; he’s done a lousy job." Trump has also been frustrated by the Bond Vigilantes. On April 9, he was forced to postpone imposing his April 2 “Liberation Day” reciprocal tariffs on America’s trading partners for 90 days after bond yields spiked on the resulting turmoil in the capital markets ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20250707%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=370618917&%5Fhsenc=p2ANqtz-%5F-ydH9gqDmg80qZcYx8CGYYDNSdq38ktaVDzAU02H5eKjiITDTNB8dxdNFu0-V6uWsP28HCoB1d54B1ARlLwuYOYVFcw&%5Fhsmi=370618917) below). He acknowledged as much that same day (April 9) when he said, “I was watching the bond market. The bond market is very tricky; I was watching it. But if you look at it now, it’s beautiful. The bond market right now is beautiful. ... I saw last night where people were getting a little queasy.” ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/tc_20250707_1.png) Figure 1 If the Fed were to lower interest rates, Trump’s expectation is that the entire yield curve would decline, saving the US federal government “hundreds of billions of dollars.” Last week, on his Truth Social site, Trump shared a handwritten note he wrote to Powell. “You are, as usual, Too Late,” he wrote. “You have cost the USA a fortune and continue to do so. You should lower the interest rate by a lot! Hundreds of billions of dollars being lost! No inflation.” However, Trump also realizes that bond yields wouldn’t necessarily follow short-term interest rates downward: After what happened in early April, he knows that the Bond Vigilantes could spoil his victory by pushing bond yields higher. That’s what happened last year from September through December when the Fed cut the federal funds rate four times by 100bps in total ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20250707%5F2.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=370618917&%5Fhsenc=p2ANqtz-%5F-ydH9gqDmg80qZcYx8CGYYDNSdq38ktaVDzAU02H5eKjiITDTNB8dxdNFu0-V6uWsP28HCoB1d54B1ARlLwuYOYVFcw&%5Fhsmi=370618917) below). The 10-year bond yield (and mortgage rates) rose by 100bps ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20250707%5F3.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=370618917&%5Fhsenc=p2ANqtz-%5F-ydH9gqDmg80qZcYx8CGYYDNSdq38ktaVDzAU02H5eKjiITDTNB8dxdNFu0-V6uWsP28HCoB1d54B1ARlLwuYOYVFcw&%5Fhsmi=370618917) below). The Bond Vigilantes recognized that the economy wasn’t as weak as Fed officials thought at the time. We did too, and we predicted that the bond yield would rise in response to the Fed’s unwarranted easing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/tc_20250707_2.png) Figure 2 ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/tc_20250707_3.png) Figure 3 ### **US Debt II: Trump’s Gambit.** Trump has a plan for dealing with Powell and the Bond Vigilantes. Last week on Sunday, June 29, in a pre-taped interview with Maria Bartiromo on her Fox News show *Sunday Morning Futures*, he said, “I don’t want to have to pay for 10-year debt at a higher rate,” when talking about financing the US government debt. When Maria asked the President how he was going to deal with the $9 trillion in debt that is due this year, Trump said he was going to refinance it as short-term debt because “we have a stupid person” at the Federal Reserve. He added, “Then we’re gonna get somebody into the Fed who’s going to be able to lower \[the rates\].” He noted the rates should be at 1% or 2%: “You know, if you look at Switzerland, they’re the lowest right now. They’re at much less than one point, and frankly we should be there, too. …” So according to this plan, the Treasury will issue more Treasury bills and fewer notes and bonds over the rest of the year through next year until Trump appoints the next Fed chair, who then will lower interest rates so that the maturing Treasury bills can be refinanced with longer-maturity debt at the then-lower interest rates. Brilliant! Not so fast: It would be brilliant except for a couple of loose ends: (1) Fed Chair Jerome Powell’s term as Fed chair expires on May 15, 2026\. However, he could stay on as a Fed governor until his term in that position expires on January 31, 2028\. Fed Governor Adriana D. Kugler’s term expires on January 31, 2026\. Trump could fill her open position with someone outside the current Fed roster, such as Treasury Secretary Scott Bessent or another Trump loyalist, including current Fed Governor Christopher Waller. But Trump loyalist or not, the next Fed chair will still need to work with the other 11 voting members of the Federal Open Market Committee to make monetary policy decisions. In the past, Fed chairs have succeeded in persuading the majority of their voting colleagues on the Federal Open Market Committee to vote for their policy stances. There rarely have been any dissenters, and when there were dissenters, they were few in number (one or two). A Trump loyalist as Fed chair might have more dissenters or even more than enough of them to vote for a policy stance contrary to the one supported by Trump’s Fed chair. That would seriously weaken the power of the Fed chair and raise concerns about the internal conflict with the Fed. (2) In addition, if Trump’s loyal Fed chair replacement manages to deliver rate cuts when they are not justified by the incoming data, the Bond Vigilantes might do what they did in late 2023, i.e., push bond yields higher. The Treasury might be forced to continue issuing more Treasury bills in the hopes that a reduced supply of Treasury bonds would bring their yields down. But the Bond Vigilantes might push back, recognizing that lower bond yields would cause the Treasury to rapidly increase the supply of bonds. Deep Dives (for paid members of QuickTakes) are occasional excerpts from our flagship research service which is available on a complimentary trial basis [here](https://share.hsforms.com/1QzLPSpDiSheMzwcRNaVQ7g5dbnp?ref=yardeniquicktakes.com). ### The Roaring 2020s: Six Years of Resilience, So Far URL: https://www.yardeniquicktakes.com/the-roaring-2020s-six-years-of-resilience-so-far/ Last updated: 2025-07-11T01:12:14.000Z The economy won't let us down. Despite numerous crises, real GDP has remained recession-resistant since the Covid lockdown during the first half of 2020\. That's almost six recession-free years notwithstanding the pandemic, the Russian invasion of Ukraine, the tightening of monetary policy, the war in the Middle East, and Trump's Tariff Turmoil. Despite the five crises, it really has been the Roaring 2020s so far. Real GDP is at a record high and so is the stock market. There doesn't seem to be much roaring (a.k.a., exuberance) in measures of consumer and business confidence. But there is plenty of it visible in the quarterly Buffett Ratio, which is equal to the total value of US corporate equities at market value divided by nominal GDP (chart). A useful weekly proxy for the Buffett Ratio is the S&P 500 stock price index divided by the S&P 500 forward revenues per share. It rose to 3.03 during the July 9 week matching the record high just before the latest correction started on February 19\. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-31.png) _This post is for paying subscribers only._ ### Uncertainty & Breadth URL: https://www.yardeniquicktakes.com/uncertainty-breadth/ Last updated: 2025-07-10T01:48:30.000Z At the end of last year, the words "uncertain" and "uncertainty" appeared 12 times in the minutes of the December 17-18 meeting of the Federal Open Market Committee. Those words appeared more often during this year's meetings. The June 17-18 meeting minutes released today included those words 28 times. During his presser, Fed Chair Jerome Powell mentioned the two words 19 times. Most of the uncertainty faced by Fed officials has to do with Trump's Tariff Turmoil (TTT). Collectively, they are leaning toward lowering the federal funds rate. But they are in no hurry to do so since they are worried that TTT might still boost inflation. Uncertainty about Trump's tariffs was the major cause of the correction in the S&P 500 from February 19 through April 8\. There was also uncertainty about the impact of DeepSeek on AI infrastructure spending. But the bulls stampeded again once Trump postponed his April 2 Liberation Day reciprocal tariffs on April 9 and the major AI and cloud computing companies in the US said that they remain committed to their capital spending plans during their April conference calls with investors. Now that the S&P 500 is back in record-high territory, investors once again are worrying (as they have at such points since the beginning of the current bull market in October 2022) that the post-correction rebound since April 8 has bad breadth. We've been pushing back against this notion (since the start of the bull market) by observing that the stellar outperformance of the Magnificent-7 has distracted from the very solid performance of the rest of the stock market. Consider the following: (1) It has been a broad V-shaped recovery among S&P 500 sectors (charts). The only serious laggard has been the Health Care sector. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-6.jpg) (2) Five of the Magnificent-7 stocks have fully recovered (chart). The laggards are Apple and Tesla. _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Trump & Bessent Versus Powell & The Bond Vigilantes URL: https://www.yardeniquicktakes.com/weekly-webcast-trump-bessent-versus-powell-the-bond-vigilantes/ Last updated: 2025-07-09T12:00:47.000Z President Trump is determined to lower the interest paid on government debt one way or the other. One way is replacing Fed Chair Powell with a Trump loyalist who tries to convince the rest of the FOMC that the federal funds rate must fall, the data be damned. Another involves replacing maturing long-term Treasury bonds with short-term Treasury bills until long-term bond yields fall enough to refinance advantageously. Such “Yield Curve Control” requires the cooperation of US Treasury Secretary Bessent (which Trump has) and the Bond Vigilantes (which he doesn’t). Is it a clever way to lower the federal government’s net interest outlays or is it a catalyst to capital markets turmoil?[](https://us02web.zoom.us/rec/share/lDKTZEwIg9ztXsV%5Fk1Ab12Y7jSiVMzZp0kxRkZnh4OXLWMU3ZY8BlVvET3%5Fth71A.FfQqS2KIGLxWxBVo?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Seinfeld Kind Of Summer Day URL: https://www.yardeniquicktakes.com/seinfeld-kind-of-summer-day/ Last updated: 2025-07-09T02:22:22.000Z Nothing happened today in the financial markets. The prices of stocks, bonds, the dollar, and oil all were relatively flat. On the other hand, there was more Trump Tariff Turmoil (TTT). But the markets watched it all with as much interest as watching reruns on TV. President Donald Trump huffed and puffed again. The financial markets' reaction was ho-hum. Trump today announced plans to impose a 50% tariff on copper imports and a 20% duty on pharmaceuticals. He also warned there would be "no extensions" to his new date for when tariffs would take effect, August 1, having pushed the effective date out from July 9 on Monday. Ho-hum. For now, stock investors are tuning out the latest episode of TTT. They may be doing so because they expect the upcoming Q2 earnings reports to be full of upside surprises, just as Q1 earnings reports were notwithstanding TTT. Q1's S&P 500 earnings rose 11.5% y/y, almost twice as fast as the consensus of industry analysts' estimates just before companies reported their results—creating an upswing, or “earnings hook,” in the data series line (chart). The consensus growth rate for Q2 earnings was cut from 8.5% y/y at the start of the year to 3.7% currently. That should be easy to beat. We expect another earnings hook, with actual earnings up 7.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-26.png) _This post is for paying subscribers only._ ### Liberation Day II URL: https://www.yardeniquicktakes.com/liberation-day-ii/ Last updated: 2025-07-08T02:20:13.000Z Liberation Day I occurred on Wednesday, April 2 after the stock market closed, when President Donald Trump imposed reciprocal tariffs on America's trading partners. The immediate reaction was what we called "Annihilation Days" in the stock and bond markets until April 9, when Liberation Day I was postponed until July 9 (chart). Today, Trump announced reciprocal tariffs again on 14 countries. Their governments have until August 1 to respond before the tariffs are imposed. This time, the initial reactions of the stock and bond markets to Liberation Day II have been relatively muted, so far. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-5.jpg) In an April 11 NBC interview, Peter Navarro, a White House trade adviser, claimed that "90 deals in 90 days" was possible. So far, there have been only two trade deals announced, with the United Kingdom and Vietnam. There is also a framework agreement with China. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: July 7-11 URL: https://www.yardeniquicktakes.com/economic-week-ahead-july-7-11/ Last updated: 2025-07-07T01:33:20.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/Screenshot-2025-07-06-143045.png) There's not much on this week's economic calendar. The only big event was supposed to occur on Wednesday, July 9\. That would have been 90 days after President Donald Trump postponed his April 2 reciprocal tariffs on America's trading partners on April 9 for 90 days. Today, that deadline was postponed again, to August 1. This morning, Treasury Secretary Scott Bessent said in an interview on CNN's "State of the Union" that a country’s tariffs will go back to April 2 levels on August 1 if there is no progress on signing a deal with the US. Bessent also said, "I would expect to see several big announcements over the next couple of days." In recent weeks, many investors bought stocks as they stopped panicking over Trump's trade war. That's because corporate earnings and the economy continued to confound the pessimists. The S&P 500 surged 26% since the correction low on April 8\. The economy is still showing signs of resilience, most recently with the 147,000 increase in June payrolls and unemployment dropping to 4.1%. Here's a look at data reports coming out this week, which collectively are likely to reassure Federal Reserve officials that their wait-and-see approach to rate cuts is the right one: (1) *NFIB business optimism*. The results of the National Federation of Independent Business June survey of small business owners (Tue) are likely to show some improvement. The Optimism Index should rise from 98.7 in May closer to 100.0, reflecting a steadier-than-expected economy as confirmed by record stock prices. The Uncertainty Index should edge down for the same reason despite lingering uncertainties about Trump's tariff policies (chart). We will be focusing on the survey's timely labor market indicators for confirmation that the jobs market remains resilient. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-17.png) (2) *Inflation expectations*. The New York Fed's June inflation expectations survey (Tue) should confirm that May's drop was no fluke (chart). That would confirm the Cleveland Fed's inflation [Nowcasting model](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) showing m/m CPI increases of only 0.25% in June and 0.07% in July! ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-18.png) (3) *Unemployment claims*. We expect initial unemployment claims (Thu) to remain within the recent low range, continuing to prove wrong recent worries about layoffs (chart). It's possible that continuing claims will continue to suggest that the duration of unemployment is increasing, though that was not confirmed by June's decline in the unemployment rate to 4.1% from 4.2% in May. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-19.png) (4) *Federal budget*. US federal deficit figures for June (Fri) take on even greater weight considering the passage of Trump’s Big Beautiful Bill. Now that he signed it into law on July 4, let's see how the bond market reacts to it. The 10-year bond yield rose to 4.35% on Thursday following the better-than-expected June employment report. We are still forecasting that the yield will range between 4.25% and 4.75% through the end of this year. [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: Slow-Mo Meltup Fueled By Less Uncertainty URL: https://www.yardeniquicktakes.com/market-call-slow-mo-meltup-fueled-by-less-uncertainty/ Last updated: 2025-07-06T15:37:08.000Z _This post is for paying subscribers only._ ### Bond Yield Rises, Ignoring Weak ADP Payrolls Report URL: https://www.yardeniquicktakes.com/bond-yield-rises-ignoring-weak-adp-payrolls-report/ Last updated: 2025-07-06T15:40:57.000Z The 10-year Treasury bond yield rose yesterday and today on mostly upbeat employment indicators. Yesterday, the JOLTS report came in stronger than expected. In addition, initial unemployment claims edged down, according to yesterday's report. Today, the Challenger report showed a drop in layoffs. The bond market chose to tune out the uptick in continuing unemployment claims in yesterday's report, and it also ignored today's weaker-than-expected ADP payroll report. We are inclined to agree with the bond market's current assessment: The labor market remains relative strong. The bond market clearly won't ignore tomorrow's employment report, especially if it is surprisingly weak. If it is weak, though, we doubt that it would change our minds because we view the current slowdown in economic activity as just a first-half-2025 soft patch. We still expect that the tariff issue and geopolitical worries will weigh much less on the economy during the second half of this year. The record highs in stock prices confirm our outlook and also increase its probability of panning out, by providing a very positive wealth effect on consumer spending. Low gasoline prices provide another tailwind for consumer spending. Our guess is that June's payroll employment rose between 100,000 to 125,000. Let's review the latest employment indicators: (1) *ADP*. The ADP measure of private industry payrolls has been a misleading indicator of the comparable data compiled by the Bureau of Labor Statistics (BLS) in recent months (chart). We aren't sure why that's happened. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-9.png) Private industry payrolls fell 33,000 during June according to ADP (chart). It was the first decline since March 2023, after a downwardly revised increase of 29,000 in May. The ADP payroll series has been weaker than the BLS series during Q2\. It was stronger in previous months, which explains why the average monthly increases over the last 12 months have been almost the same (124,200 vs. 122,000). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-10.png) (2) *Challenger layoffs*. A separate report from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by US-based employers totaled 47,999 in June, a drop of 49% from the prior month (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/4g7ONbU.png) (3) *JOLTS*. Hiring remained relatively robust in May, according to the JOLTS report (chart). It showed hires at 5.503 million in May, a slight decline of 112,000\. Job openings increased so that there were 1.07 job openings for every unemployed person in May, up from 1.03 in April. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-1.jpg) (4) *Unemployment claims*. The low readings for initial unemployment claims in recent weeks confirm the drop in Challenger's layoffs series. However, the rise in continuing claims indicates that it is taking longer to get a job. This suggests that the unemployment rate might have edged up slightly in June to 4.3% from 4.2%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway-11.png) [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### WEEKLY WEBCAST: ‘It’s Always Something’ URL: https://www.yardeniquicktakes.com/weekly-webcast-its-always-something/ Last updated: 2025-07-02T12:00:16.000Z Though the stock market is back on record-high ground after a couple of big worries have dissipated, investors remain wary, sentiment readings show. Slowing economic activity has ascended to the top of their worry list. Today, Dr Ed examines how worrisome it is. True, some key recent economic indicators have come in weaker than expected. But that suggests a soft patch, nothing worse. The recent outperformance of four cyclical sectors associated with our bullish themes supports our long-term optimism on the economy. In any event, as long as inflation doesn’t rise problematically in coming months, the Fed Put is on standby. ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Correction: On Fed Governors' Terms URL: https://www.yardeniquicktakes.com/correction-on-fed-governors-terms/ Last updated: 2025-07-01T21:45:41.000Z In previous QuickTakes, we wrote that Fed Chair Jerome Powell's term as Fed chair expires on May 15, 2026 but that he could stay on as a Fed governor until his term in that position expires on January 31, 2028\. However, we were incorrect that President Donald Trump would be limited to the other current Fed governors when appointing the next Fed chair. That's because Fed Governor Adriana D. Kugler's term expires on January 31, 2026\. Trump could fill that open position with someone outside the current Fed roster, such as Treasury Secretary Scott Bessent or another Trump loyalist. But Trump loyalist or not, the next Fed chair will still need to work with the other 11 voting members of the Federal Open Market Committee to make monetary policy decisions. [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### Pounding Powell = Pounding The Dollar URL: https://www.yardeniquicktakes.com/pounding-powell-pounding-the-dollar/ Last updated: 2025-07-01T17:56:57.000Z There is method to President Donald Trump's madness regarding Fed Chair Jerome Powell. Trump has been hammering Powell almost daily recently because doing so is very effectively hammering the foreign-exchange value of the dollar (chart). Trump wants a weaker dollar to boost US exports and depress US imports. He has said that he favored a weaker dollar many times in the past, but now he has found a way to achieve that: by beating up on Powell. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/45m95cZ.png) Trump wants Powell to resign so that he can replace him with one of his loyalists, who will cut interest rates more quickly than Powell. The Fed chair frequently has said that he is in no rush to lower the federal funds rate. Powell's term as Fed chair ends on May 15, 2026\. He might then decide to serve out his term as Fed governor through January 31, 2028\. If so, then Trump would have to chose one of the current Fed governors as the new Fed chair. In this case, he would most likely pick Fed Governor Christopher Waller, who Trump appointed and who has been publicly lobbying for the job by advocating lowering interest rates sooner rather than later. US Treasury Secretary Scott Bessent has also been lobbying for the job for a while. He told *Barron's* last October, "You could do the earliest Fed nomination and create a shadow Fed chair . . . and based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say any more." The story also quoted me: "Ed Yardeni, a longtime Fed watcher and the president of Yardeni Research, called it a 'terrible' idea, explaining that a shadow Fed chair would 'create a lot of noise in the market.'" Again, Powell would have to resign as Fed governor to open up a position that Bessent could fill, permitting him to be appointed as Fed chair by the President. He would still have to be approved by the Senate, which shouldn't be an issue. A much bigger issue is that whoever replaces Powell as Fed chair will still have to convince the other 11 voting members on the Federal Open Market Committee to go along with his/her policy stance. In any event, Powell today said that he wouldn't rule out a rate cut at the July 29-30 meeting of the FOMC. As always, the decision will depend on the data. This morning, the price of an ounce of gold is up by more than $50 to $3,363 in response to the weakening dollar (chart). We are still targeting $4,000 by the end of this year. _This post is for paying subscribers only._ ### 'Summertime, And The Livin' Is Easy' URL: https://www.yardeniquicktakes.com/summertime-and-the-livin-is-easy/ Last updated: 2025-07-01T02:23:17.000Z The stock market seems to be carefree. Investors likely figure that any signs of slower economic growth increase the odds that the Fed will ease. Plus, inflation remains remarkably subdued through May notwithstanding Trump's tariffs. June's CPI inflation rate is tracking around only 2.6% y/y according to the Cleveland Fed's Inflation Nowcasting model. The dollar's weakness is viewed as boosting corporate earnings. And stock investors probably figure that if the bond market doesn't seem to care much about the deficit-bloating potential of Trump's Big, Beautiful Budget Bill, why should they? "Summertime, and the livin' is easy," as the song goes from *Porgy and Bess*. The regional business surveys conducted by five of the 12 Fed district banks suggest that the national manufacturing purchasing managers index (M-PMI) will be below 50.0 again during June when it is reported tomorrow morning (chart). It's been mostly below 50.0 since November 2022, yet real GDP has continued to grow over this period. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/07/gateway.png) The five regional business surveys show that their average prices-received and prices-paid indexes stopped rising during June, after rising sharply early this year (chart). But inflation measures based on the CPI, PPI, and PCED have remained subdued. We reckon that's because while Trump's tariffs might have increased the prices of some imported goods, inflation remained subdued for most nondurable goods and services made in America. In an interview today with CNBC's Jim Cramer, Amazon CEO Andy Jassy said the retail and tech giant hasn't seen significant price increases, and he explained why as follows: "We did a lot of forward buying several months ago, and then a lot of our sellers, our third-party selling partners, forward deployed a lot of inventory to avoid some of the issues with the uncertainty around where tariffs are going to settle," he said. "And we have, so far, not seen prices appreciably go up." _This post is for paying subscribers only._ ### MARKET CALL: New Highs Suggest Stock Market May Be Back In Meltup Mode URL: https://www.yardeniquicktakes.com/market-call-42/ Last updated: 2025-06-30T02:12:01.000Z The S&P 500 rose to a new record high on Friday, slightly exceeding its previous peak on February 19 by 0.5%. The bull market that started on October 12, 2022 is alive and well following the 18.9% correction from February 19 through April 8\. During that period, the stock market sold off on Trump's Tariff Turmoil (TTT) as well as concerns that China's DeepSeek was bad news for US technology companies, especially the ones spending the most to build AI infrastructure. Both those concerns abated after April 8, and the bull market resumed. Trump started to moderate his stance on tariffs on April 9, and AI companies reiterated their commitment to spend tens of billions of dollars on AI capital investments during April's Q1 earnings season. Also boosting the S&P 500 is the record high in S&P 500 forward earnings (chart). It had peaked on April 4, two days after President Donald Trump announced his proposed reciprocal tariffs on America's trading partners. It briefly dipped through April 25 and has rebounded since then. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-107.png) Almost all of the correction was attributable to a drop in the S&P 500's forward P/E (chart). It peaked at 22.2 at the start of the correction and bottomed at 18.1 at the end of the correction. Now it is back to 21.9! It has been a P/E-led, V-shaped correction lasting 48 days. That's a relatively normal correction. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: June 30-July 4 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-30-july-4/ Last updated: 2025-06-29T21:02:03.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/Screenshot-2025-06-29-132803.png) It may be July 4th week in the US, but we don't expect many fireworks on the economic data front. Of course, surprises could come from events in the Middle East, as Israel, Iran, and the Trump administration figure out whether the ceasefire will hold or missiles will start flying again. Surprises could also come from Trump's trade negotiations. A bunch of deals are expected in coming days. On Capitol Hill, the Senate today passed a revised version of President Donald Trump's 940-page Big, Beautiful Bill, getting it closer to Trump's July 4 deadline. The question now is whether the House will embrace Senate alterations to the original House version of the legislation. The markets will also pay close attention to a speech (Mon) by Federal Reserve Chair Jerome Powell. Speaking in Sintra, Portugal, Powell may drop a hint or two about whether last week's mixed data on trade, housing, and consumption might have altered his view that rate cuts aren't under serious consideration at Fed headquarters. Fireworks or not, here's a brief look at this week's economic data highlights: (1) *Employment report.* The release with the greatest chance of influencing the Fed's wait-and-see approach is the June jobs report (Thu). We're expecting hiring activity to remain reasonably brisk now that the fog of war is lifting in the Middle East and in US trade relationships. The jobless rate might tick up to 4.3% or even 4.4% given the modest upturn in initial unemployment claims (chart). We expect that a solid gain of 125,000-150,000 in payrolls should allay recession fears. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-101.png) (2) *Unemployment claims*. We expect initial claims for unemployment insurance (Thu) to confirm that layoffs still remain low as reported by Challenger (Wed) (chart). Continuing claims may suggest the duration of unemployment is increasing for some. Yet overall, we look for fresh confirmation that industries from healthcare to leisure and hospitality are benefiting from the Baby Boomers’ splurging on restaurants, cruises, and other entertainment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/4g7ONbU-1.png) (3) *JOLTS*. The May Job Openings and Labor Turnover Survey (Tue) takes on greater importance as economists search for signs that the labor market is cracking. The healthy April reading surprised many, as the available jobs component increased by 191,000 from the previous month. We see little evidence to suggest that May’s reading won’t likewise point to solid employment conditions (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-102.png) (4) *Regional Fed surveys*. The hard data/soft data disconnect continues to confound many. Given the strength of the former and tentativeness of the latter, regional Fed series could offer useful signals. May's Chicago Business Barometer (Mon), which is a regional purchasing managers' index, saw its 18th consecutive month of contraction (chart). The Dallas Fed's May business survey (Mon) also showed the trade war taking its toll. Going forward, both gauges bear watching for signs of stabilization after Trump delayed his "reciprocal tariffs" on April 9. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-104.png) (5) *International trade*. The surge in the US international trade deficit (Thu) during the first three months of this year was a key driver of Q1's economic contraction. The question is whether the big drop in imports during April and May (in the advance report on trade) portends strong GDP growth during Q2 (chart). Any clear sign that economic activity is rebounding or steadying likely would validate Powell & Co.'s steady-as-she-goes stance on rates. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-103.png) [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### DEEP DIVE: What's The Matter With China's Consumers? URL: https://www.yardeniquicktakes.com/deep-dive-whats-the-matter-with-chinas-consumers/ Last updated: 2025-06-28T02:48:43.000Z ### **China’s Consumer Bust I: Blame Xi, Not Trump.** As US President Donald Trump does his worst to hobble China’s economy, China’s President Xi Jinping may be beating him to the punch. There’s no doubt that Trump’s tariffs are destabilizing Asia’s biggest economy. Though the current 30% US tariff on Chinese imports is a fraction of Trump’s earlier 145% China tax, it’s still prohibitively high—[*Smoot-Hawley Act high*](https://www.washingtonpost.com/history/2025/04/08/smoot-hawley-tariffs-trump-trade/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456). It’s complicating President Xi’s ability to stimulate China’s hamstrung economy sufficiently to make this year’s 5% real GDP growth target. Ironically, among the biggest wounds limiting China’s growth potential is a Xi-inflicted one: The troubling chronic weakness of consumer spending, which shows no signs of picking up sustainably. Chinese consumers prioritize saving, to the detriment of spending, owing to the absence of a social security safety net. Xi has struggled to reverse this trend but could be doing more to incentivize spending. There are, of course, months when Chinese state media will jump on a particular economic statistic as a harbinger of a consumption boom to come. Case in point: the [*6.4% y/y rise*](https://tradingeconomics.com/china/retail-sales-annual?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456) in retail sales in May, the biggest since December 2023 ([*Fig. 1*](https://yardeni.com/wp-content/uploads/tc%5F20250624%5F1.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456)). Yet China has produced such short-term blips many times before. The latest can be attributed to a mix of central bank easing, government trade-in programs and subsidies targeting home appliances and tech goods, and optimism over Trump’s tariff downshift. However, such policies treat the symptoms of China’s troubles, not the underlying conditions, which are flaring up anew: (1) *Weak consumer confidence is fueling deflation*. Consumer prices fell for a fourth straight month in May despite Beijing’s stimulus moves. In the latest month, China’s consumer price index [*fell 0.1% y/y*](https://www.cnbc.com/2025/06/09/china-cpi-ppi-may-deflation.html?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456) ([*Fig. 2*](https://yardeni.com/wp-content/uploads/tc%5F20250624%5F2.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/tc_20250624_2.png) Figure 2 [*Price wars*](https://www.afr.com/world/asia/inside-china-s-brutal-ev-price-war-that-s-raising-quality-fears-20250611-p5m6gh?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456) in the auto sector may be exacerbating the nation’s deflation trend going forward. Under the surface, meanwhile, this falling-price dynamic is thriving. Producer prices [*fell 3.3% y/y in May*](https://www.reuters.com/markets/asia/chinas-consumer-prices-extend-decline-fourth-month-may-2025-06-09/?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456), the largest drop since July 2023. The main drivers of weak household confidence—the property crisis, which is eroding consumers’ wealth, and disappointing wage growth, hurting their incomes—show no signs of improvement ([*Fig. 3*](https://yardeni.com/wp-content/uploads/tc%5F20250624%5F3.png?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=368574456&%5Fhsenc=p2ANqtz-9mJgA3nVtw5aN8jLeOYCxs3h1e2uuD1q8QJF3SVxSWrvdeBeOK9nQld1dNiyC18LvF2Slg3HAOMJvhkLai-lREJH4Dbg&%5Fhsmi=368574456) below). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/tc_20250624_3.png) Figure 3 “Things are not getting much worse, but they will probably not get better without more government support,” warns Larry Hu at Macquarie Group. _This post is for paying subscribers only._ ### July 9 Trade Deals Deadline 'Is Not Critical' URL: https://www.yardeniquicktakes.com/july-9-trade-deals-deadline-is-not-critical/ Last updated: 2025-06-26T23:47:01.000Z Stock prices got a boost around mid-day today when White House Press Secretary Karoline Leavitt told reporters during a briefing: “The President can simply provide these countries with a \[trade\] deal if they refuse to make us one by the deadline, and that means the President can pick a reciprocal tariff rate that he believes is advantageous for the United States and for the American worker.” We've been observing and agreeing with the notion that the stock market rally since April 9 suggests that investors believe that the tariff issue will be mostly behind us by the end of the summer. On April 9, President Donald Trump postponed his April 2 Liberation Day reciprocal tariffs for 90 days. Today, that deadline has been rescinded. Trump's Tariff Turmoil from April 2 through today (June 26) has had remarkably little impact on the forward profit margin of the S&P 500 so far (chart). It has been essentially flat since the start of this year but at roughly a record high of 13.7%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-91.png) That's remarkable since a tariff is first and foremost a tax on a company that imports goods. So the importer must send a check to the US Treasury to pay the duty on the imported goods. A 10% across-the-board tariff on all goods imports could potentially raise $400 billion over a 12-month period. For comparison, federal corporate tax receipts totaled $516.7 billion over the past 12 months (chart). _This post is for paying subscribers only._ ### Semiconductors Leading The Stock Market Higher URL: https://www.yardeniquicktakes.com/semiconductors-leading-the-stock-market-higher/ Last updated: 2025-06-26T02:54:05.000Z Since the start of the current bull market during October 2022, we recommended overweighting the S&P 500 Information Technology sector and have been especially positive on the S&P 500 Semiconductor industry. We stuck with that recommendation during the correction in the S&P 500 from February 19 through April 8\. In recent days, the industry's stock price index rose to new record highs (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-85.png) Nvidia's stock price rose more than 4% today. It closed at a record high for the first time since January. Nvidia's current market capitalization is $3.77 trillion. This valuation has made Nvidia the world's most valuable company, surpassing Microsoft ($3.66 trillion) and Apple ($3.01 trillion) (chart). That's an impressive achievement considering that Nvidia CEO Jensen Huang last month said, "The $50 billion China market is effectively closed to US industry." At the company's annual shareholder meeting today, Huang said that AI and robotics are the firm's biggest growth opportunities. _This post is for paying subscribers only._ ### A New Day In The Middle East? URL: https://www.yardeniquicktakes.com/a-new-day-in-the-middle-east/ Last updated: 2025-06-25T02:58:25.000Z Any day with a ceasefire in the Middle East is a good day for stocks. On Monday, President Donald Trump declared that the "12-Day War" between Israel and Iran is over. The S&P 500 rose 2.1% yesterday and today on that news to 6092.18 (chart). That's only 0.9% below the February 19 record high of 6144.15\. The market rose even though both Israel and Iran today accused each other of violating the ceasefire brokered by Trump, who angrily responded by dropping an F-bomb on both countries: "We basically have two countries that have been fighting so long and so hard that they don’t know what the f\*\*\* they’re doing." ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-81.png) The White House also went ballistic over news reports that US missile strikes did not completely destroy Iran's key nuclear sites, based on an initial assessment by the US Defense Intelligence Agency. White House Press Secretary Karoline Leavitt told NBC News in a statement that the "alleged assessment is flat-out wrong ...” and "a clear attempt to demean President Trump, and discredit the brave fighter pilots who conducted a perfectly executed mission to obliterate Iran’s nuclear program." _This post is for paying subscribers only._ ### Ceasefire URL: https://www.yardeniquicktakes.com/ceasefire/ Last updated: 2025-06-24T02:07:52.000Z This morning, Iran launched a missile attack on the US military's Al Udeid Air Base in Qatar in retaliation for US airstrikes on Iranian nuclear facilities the previous day. The attack involved short- and medium-range ballistic missiles, with Qatar reporting that its air defenses intercepted most of them, and no casualties were reported. Earlier in the day, President Donald Trump thanked Iran for giving the United States advance notice of the coming missile strike! The notice, he wrote on [social media](https://truthsocial.com/@realDonaldTrump/posts/114734424268466099?ref=yardeniquicktakes.com), "made it possible for no lives to be lost, and nobody to be injured." Stock prices rallied on the news because it greatly reduced the likelihood that Iran would retaliate by blocking the Strait of Hormuz. Polymarket.com showed that the odds of this outcome plunged from 60% on Sunday to 16% today (chart). The odds of a US recession in 2025 edged down to 27% today from 66% on May 1\. Instead of a blockade, we had reckoned that Iran would sue for peace. This evening, Trump declared on social media that the "12 day war" between Israel and Iran was set to end in a ceasefire. (There was no immediate word from either country on the ceasefire, and the terms of the announced deal were unclear.) ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-80.png) The price of a barrel of Brent crude oil plunged 11.1% to $68.49 this evening, reflecting widespread relief that Iran staged a phony retaliation event in Qatar rather a real one in the Strait of Hormuz. The ceasefire is also bearish for oil.The US might lift sanctions imposed on Iranian oil exports if Iran behaves better. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-79.png) Meanwhile, the 10-year US Treasury bond yield remained around 4.35% today as a second Fed official turned more dovish. Now there are two Fed governors who support cutting the federal funds rate at the July meeting of the Federal Open Market Committee (FOMC). Governor Christopher Waller told CNBC on Friday that he thinks the Fed should do so. Today, Federal Reserve Governor Michelle Bowman seconded Waller's motion. Both of them have become less concerned about the inflationary impact of Trump's tariffs and more willing to bolster the labor market by easing credit conditions. "I think it is likely that the impact of tariffs on inflation may take longer, be more delayed, and have a smaller effect than initially expected, especially because many firms frontloaded their stocks of inventories," Bowman said. The average of June's prices-received and prices-paid indexes for the New York and Philly Fed districts rose sharply earlier this year, but might have peaked in May, as both indexes dipped in June. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-15.jpg) [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### ECONOMIC WEEK AHEAD: June 23 - 27 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-23-27/ Last updated: 2025-06-23T12:00:16.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/bb.png) Layered on top of a still-developing trade war, President Donald Trump's attack on Iran puts markets in decidedly uncharted territory. Much will depend on how Iran responds to the attack. Trump said in Saturday's White House address, if Iran doesn’t "make peace" then "future attacks will be far greater and a lot easier." In addition, Trump's "Big Beautiful Bill" could make fresh headlines this week as Senate Republicans gear up for a potential vote on their tax-cut tweaks to the House version. Also, Fed Chair Jerome Powell delivers his two-day semiannual monetary policy report to Congress on Tuesday and Wednesday. Yet, despite the fog of wars (over US tariffs, Iranian nukes, and the US federal budget), the US economy continues to hum along. This week's data are likely to remind markets that, for all the uncertainties, the underlying economy is holding its own. Here's a look at the upcoming US data releases with the greatest chance of influencing markets as well as the Fed's wait-and-see approach: (1) *Inflation*. May's PCED inflation rate (Fri) might show a bit of acceleration. The Cleveland Fed's inflation [Nowcasting](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) tracking model is showing a 2.3% y/y increase for headline PCED up from 2.1% y/y in April (chart). If so, this inflation report will validate the Fed's reluctance to ease, especially since most Fed officials expect the fog of wars to put upward pressure on inflation, at least in the short run. June's Summary of Economic Projections (SEP), released by the FOMC last week, shows a median estimated 2025 PCED inflation rate of 3.0%, up from the March SEP median estimate of 2.7%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-74.png) (2) *Consumer confidence*. We expect the labor market indicators in the Consumer Confidence Index (CCI) survey (Tue) to reflect solid underlying conditions. Recent readings on jobless claims confirm our view that the extreme economic uncertainty dominating news feeds matters less than perceptions about job security and future wage gains. As such, the CCI survey indicates how plentiful or hard to get jobs are in June and will be of great interest to Fed watchers (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-75.png) (3) *Personal income*. Following recent reported increases in payroll employment and average hourly earnings in May, personal income (Fri) probably rose solidly last month. It helps that hourly wages have been rising to record highs in real terms (chart). For low-wage workers, in fact, real average hourly earnings have been rising faster than their long-term uptrend for two years now. _This post is for paying subscribers only._ ### MARKET CALL: Trump Says Iran's Nuke Program Is 'Obliterated' . . . What's Next? URL: https://www.yardeniquicktakes.com/market-call-trump-says-irans-nuke-program-is-obliterated-whats-next/ Last updated: 2025-06-22T14:45:19.000Z On Saturday night, the US attacked Iran's three nuclear sites in Fordow, Natanz, and Isfahan. President Donald Trump announced this in a social media post at 7:50 p.m. EST. In a short speech at 10:00 p.m., he said that Iran’s key nuclear sites were "completely and fully obliterated" by the strikes. He noted that there are many more sites in Iran that could easily be destroyed if the Iranians retaliate. The next move is up to the Iranians. Our bet is that they will sue for peace. We are assuming that while the Mullahs and their generals (those who haven't been killed by the Israelis yet) may be fanatics, they aren't crazy. If that's the case, then the price of oil should fall and stock markets around the world should climb higher. The price of gold is likely to fall in this scenario. But that should provide a good buying opportunity since many central banks around the world are diversifying their reserves into gold. Interestingly, the Israel MSCI stock price index (in local currency) is up 2.6% to a new record high since Friday, June 13, when Israel launched a preemptive attack on Iran (chart). The index is up 79.9***%*** since October 27, 2023, which was 20 days after Hamas attacked Israel, killing approximately 1,200 Israelis and taking about 250 hostages. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-70.png) Predicting geopolitical developments in the Middle East is a treacherous exercise. However, the Israeli stock market suggests that we may be witnessing a radical transformation of the Middle East now that Iran has been de-nuked. Iran has been the biggest state sponsor of terrorism in the Middle East, often using its lethal proxies in Gaza, Lebanon, Syria, and Yemen to do its dirty work. Under the country's Mullahs, who seized power in 1979, Iran has been the sworn enemy of Israel, with a vocal commitment to destroy it, and has viewed the US as "the devil." Now, President Donald Trump may succeed in expanding his 2020 Abraham Accords, in which several Arab nations recognized Israel, to include Saudi Arabia and other Arab nations. It currently includes the United Arab Emirates, Bahrain, Morocco, and Sudan. In an ideal outcome, the Mullahs' regime would be overthrown in Iran, replaced by a new government that focuses on promoting domestic and regional prosperity rather than terrorism. Iran could still be a spoiler if the Mullahs manage to stay in power or are replaced by a military dictatorship, either way resulting in a government that remains bitterly hostile to Israel and the United States. Such a government could prolong the war and create lots of havoc by attempting to close the Strait of Hormuz and by continuing to attack Israel and starting to target American interests in the Middle East. That would cause oil prices to continue spiking higher, raising the odds of a global recession (chart). Iran would still lose the war, in our opinion. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-71.png) The bottom line for us as investment strategists is that the bull market in the S&P 500 that started in October 2022 remains intact. We are still targeting 6500 by the end of this year and 10,000 by the end of the decade. We think that the latest developments in the Middle East will end well for our "Roaring 2020s" scenario in the US sooner rather than later. Geopolitically, we think that Trump has just reestablished America's military deterrence capabilities, thus increasing the credibility of his "peace through strength" mantra. We note that the consensus of industry analysts is turning more optimistic on the outlook for S&P 500 forward earnings per share, which rose to a record high for the third week in a row through the June 19 week (chart). There had been a slight dip in forward earnings during the spring on concerns about Trump's tariffs. But now, industry analysts seem to be thinking that tariffs won't weigh much on profits (and profit margins), if at all. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-73.png) [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### IN 11 CHARTS: Fed Remains On Hold, But Still Leans Towards Easing URL: https://www.yardeniquicktakes.com/in-11-charts-fed-remains-on-hold-but-still-leans-towards-easing/ Last updated: 2025-06-20T03:08:33.000Z President Donald Trump has been calling on Fed Chair Jerome Powell to lower interest rates. The Fed chair has been the object of intensifying schoolyard jabs from the President. "We have a stupid person, frankly, at the Fed," Trump told reporters following the Fed's stand-pat decision on Wednesday. "Am I allowed to appoint myself at the Fed? I'd do a much better job than these people." Clearly, the Powell-led Fed made the smart decision to leave rates alone on Wednesday—and to signal that the Federal Open Market Committee (FOMC) is in no hurry to ease. As Powell observed in his post-decision presser, labor "conditions have remained solid" and inflation, while still "somewhat elevated" has "eased significantly." He added that "we're beginning to see some effects" from Trump's tariffs on inflation. Powell also reiterated, "we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance." However, as Powell made clear, the FOMC’s bias is toward lowering rates versus raising them. Now, let's have a close look at the FOMC's quarterly Summary of Economic Projections (SEP), released after its Wednesday meeting and reflecting the forecasts of meeting participants, as the outlook is clouded by wildcards like Trump's tariffs and Israel's clash with Iran: (1) *Real GDP*. The FOMC's forecast for current-year growth of 1.4% y/y seems awfully low to us given the persistent strength of the labor market (chart). It's not much better next year, at 1.6% y/y, or over the longer run at 1.8%. The economy has been growing closer to 2.5%-3.0% y/y over the past three years, and the historical average is 3.1%. Sure, Trump's tariffs and the Middle East war are major concerns. But the economy has been more resilient than the Fed's current assessment of it. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-10.jpg) (2) *Unemployment rate*. The SEP reckons that today's 4.2% unemployment rate is headed to 4.5% by year-end and will remain there in 2026 (chart). That's possible, but would still leave the labor market very close to full employment. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-11.jpg) (3) *Inflation*. The SEP projects that the core PCED inflation rate will be 3.1% in the current year and come down to 2.4% next year (chart). We agree with that relatively subdued outlook for inflation under the circumstances. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-12.jpg) (4) *Dot plot of federal funds rate (FFR)*. Interestingly, seven of the 19 FOMC participants indicated they wanted no FFR cuts this year (chart). That's up from four in March. This so-called dot plot suggests that Trump can't expect the Fed to respond to his calls for lower rates any time. Even if a Trump loyalist ran the Fed today, he or she might not be able to deliver for Trump if the majority of the FOMC’s voting members vote to do nothing. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/4dfIfFA.jpg) (5) *Median FFR projection*. Nevertheless, those 19 participants collectively see the Fed's benchmark lending rate dropping to 3.90% by year-end, implying a range of 3.75%-4.00% and suggesting two easing moves later this year (chart). Then perhaps one more in 2026 would get the FFR down to 3.60%. We are still in the none-and-done camp for 2025. _This post is for paying subscribers only._ ### "UNCONDITONAL SURRENDER" URL: https://www.yardeniquicktakes.com/unconditonal-surrender/ Last updated: 2025-06-17T20:07:09.000Z The stock market held up remarkably well today considering that President Donald Trump abruptly left the Group of Seven meeting in the Canadian Rockies this morning. On his way home, he warned Tehran's residents to get out of town immediately. He also warned Iranian leader Ayatollah Ali Khamenei that he is an "easy target" and "our patience is wearing thin." In a subsequent post, he then demanded "UNCONDITIONAL SURRENDER" by Iran. His comments today suggest that the US might enter the war against Iran by dropping bunker-busting bombs on the country's nuclear facilities. The S&P 500 Aerospace & Defense stock price index is soaring in record-high territory (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-62.png) Under the circumstances, the participants of the Federal Open Market Committee (FOMC) have lots to discuss during their two-day policy meeting that ends tomorrow. What's not on the table is a rate cut anytime soon, in our opinion. That leaves Fed watchers focused on how Fed Chair Jerome Powell spins the range of views following the FOMC meeting at his presser tomorrow afternoon. Fed watchers also will be focusing on the committee's latest Summary of Economic Projections (SEP). Odds are that its median economic forecasts will show slow economic growth with a slight increase in the unemployment rate and a modest short-term uptick in inflation--all mostly consequences of President Donald Trump's tariffs and now the war between Israel and Iran. The SEP is likely to signal a couple of small cuts in the federal funds rate in coming months. But Powell will certainly reiterate that the FOMC is in no hurry to do so. Let’s review the highlights of today's economic releases: _This post is for paying subscribers only._ ### Stocks Up As Mullahs Ready To Talk, Again URL: https://www.yardeniquicktakes.com/stocks-up-as-mullahs-ready-to-talk-again/ Last updated: 2025-06-16T20:19:40.000Z Stock prices rose this morning as oil prices fell a bit on news reports that the Mullahs want Israel to stop pounding them and are willing to resume nuclear talks with the US as long as the US doesn't start pounding them too. Israel has established air superiority over Iran by knocking out most of the country's air defense systems. Israel is now focusing on knocking out Iran's ballistic missile launching sites to stop Iran's attacks on Israel. Israel is also bombing some of Iran's oil and gas facilities. Israel has yet to land the knockout punch on Iran's nuclear weapons capabilities. That could happen soon, since Israel is warning Iranians residing or working next to nuclear facilities to scram. Stock investors have concluded that this war won't last much longer. Furthermore, Iran won't have nuclear weapons or missile delivery systems. And Iran won't shut the Strait of Hormuz. Moreover, there's plenty of excess oil capacity around the world to replace any reduction in Iran's oil production and exports (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-59.png) We agree with all the above. If we are right, then stock investors should be back to trying to sort out the same issues as before Israel attacked Iran on Friday, including President Donald Trump's tariffs, his Big Big Beautiful Budget Bill, economic growth, inflation, Fed policy, and artificial intelligence. _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: June 16–20 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-16-20/ Last updated: 2025-06-15T21:07:03.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/Screenshot-2025-06-15-at-2.47.18---PM.png) The moment Fed watchers have waited for is finally here—albeit with less drama than many believed a few weeks back. As we've long said, the two-day June Federal Open Market Committee meeting (Tue-Wed) should come and go with the federal funds rate still in the 4.25%-4.50% range that it's been in since December. Even as headline inflation measures appear to moderate, the robust labor market, evidenced by May's 4.2% unemployment rate, leaves Fed Chair Jerome Powell with little urgency to ease. _This post is for paying subscribers only._ ### MARKET CALL: In The Middle Of The Middle East URL: https://www.yardeniquicktakes.com/market-call-in-the-middle-of-the-middle-east/ Last updated: 2025-06-15T18:44:38.000Z Israel is in the middle of the Middle East. Iran's Mullahs have been threatening Israel's existence since they overthrew the Shah of Iran in February 1979\. There has been a covert war between the two since then. It turned more overt last year and escalated on Friday when Israel launched a preemptive strike targeting nuclear facilities (Natanz, Khondab, Fordow), military installations, and residences of senior officials in Iran. The strikes killed key Iranian military figures, including IRGC commander Hossein Salami and Armed Forces Chief of Staff Mohammad Bagheri, along with nuclear scientists and civilians (reports vary from 78 to 90 deaths). Iran reported damage to oil fields and gas production facilities. The S&P 500 is now in the middle of the Middle East. The S&P 500 fell on Friday on the unsettling news out of the region but by only 1.13% to 5,976.97, which remains not far below the February 19 record high (chart). We anticipated this development in last Thursday's QuickTakes and recommended using any selloff in the stock market as a buying opportunity. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-47.png) We also reiterated our view that the 10-year US Treasury bond yield should remain around 4.50% through year-end. Following last week's lower-than-expected CPI and PPI inflation reports on Wednesday and Thursday, bond yields fell a bit on expectations that the Fed might respond to the good news by lowering the federal funds rate sooner rather than later (chart). Yields rose a bit on Friday on news of Israel's attack on Iran, which caused the price of oil to soar. The Fed now has to worry about the inflationary consequences of President Donald Trump's latest round of threatened tariffs as well as the price of oil. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-48.png) The latest war in the Middle East means that investors are facing a host of known unkowns. How long will the war last? Not long if Israel continues to knock out Iran's military assets. Crippling strikes against Iran's nuclear facilities haven't occurred yet. But Iranians living near these sites have been warned by the Israelis to run for the hills to avoid radiation released when the sites are bombed. _This post is for paying subscribers only._ ### Inflation Is Chilling Down While Middle East Is Heating Up URL: https://www.yardeniquicktakes.com/inflation-is-chilling-down-while-middle-east-is-heating-up/ Last updated: 2025-06-12T21:40:15.000Z May's PPI inflation report, released today, was lower than expected as was May's CPI inflation report yesterday. The PPI final demand for personal consumption edged down to 2.6% y/y in May, while the CPI rose only 2.4% during the month (chart). Both suggest that May's PCED inflation rate might have dropped to 2.0%, which would finally be down to the Fed's target for this inflation rate. The Cleveland Fed's Inflation Nowcasting for PCED inflation is a bit higher at 2.3% for both May and June. Either way, the relevant data suggest that President Donald Trump's tariff hikes have yet to boost consumer price inflation as widely expected. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-40.png) Furthermore, initial and continuing unemployment claims remain subdued suggesting that the labor market and the economy may be more resilient to Trump's Tariff Turmoil (TTT) than has been widely expected. In other words, the stagflation scenario remains a no-show. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-41.png) In the bond market, yields continued to decline today in response to May's lower-than-expected inflation data (chart). Thankfully, the widely feared debt crisis in the US government bond market (most recently predicted by Jamie Dimon, Ray Dalio, and Elon Musk) is also a no-show. Recent Treasury auctions have been well received. Yields are down again today despite yesterday's Bloomberg report that "Hong Kong's pension fund managers have formed a preliminary plan to sell down their Treasury holdings within as soon as three months if the US loses its last recognized top credit rating, according to people familiar with the matter." That's either alarming or alarmist. We pick the second choice. _This post is for paying subscribers only._ ### Stagflation’s Absence, Trump’s Deal-Making, Government’s Higher Debt URL: https://www.yardeniquicktakes.com/stagflations-absence-trumps-deal-making-governments-higher-debt/ Last updated: 2025-06-11T20:54:03.000Z The stock market didn't do much today. Neither did the bond market. But the price of a barrel of crude oil rose, and so did the price of an ounce of gold. President Donald Trump announced another deal with China. The US will allow Chinese students to continue attending American colleges, and China will continue to provide rare earth minerals to American manufacturers. Tariffs imposed on each country by the other one remain the same. That didn't excite stock or bond investors, and neither did May's lower-than-expected CPI. Perhaps, they were unsettled that Trump also said he is less confident that Iran will agree to stop uranium enrichment in a nuclear deal with Washington, according to an interview released today. In addition, May's federal deficit data, also released today, reminded investors that fiscal policy remains on an unsustainable course. Last Friday's employment report confirmed that the labor market and the economy are in good shape. Today's Consumer Price Index report suggested that Trump's tariffs might not be as inflationary as feared. In other words, the widely anticipated stagflation scenario remains a no-show. Those are a lot of moving parts. Let's review a few of the more important ones: _This post is for paying subscribers only._ ### WEEKLY WEBCAST: Americans Are Still Working For A Living URL: https://www.yardeniquicktakes.com/weekly-webcast-americans-are-still-working-for-a-living/ Last updated: 2025-06-11T12:00:49.000Z Over the past three and a half years, the US economy has defied the recession expectations of many, remaining uncommonly resilient in the face of stress tests including Fed tightening, an oil price spike, and most recently Trump’s Tariff Turmoil. The economy’s strength despite these formidable challenges supports our base-case Roaring 2020s scenario (to which we assign 75% odds) and our still bullish S&P 500 targets. … A big reason for the economy’s impressive resilience is that the labor market has remained impressively resilient. Americans are working, secure in their prospects to keep working, so their spending hasn’t been slowed by tariff-related uncertainties.[](https://us02web.zoom.us/rec/share/zui5Udgo819%5FvIFKHWeckhxokEdrKjNrFpujYLGGr1PGVH-YLi9HLdrMBqqxWF1R.M5hzfpYUJsMknWgl?ref=yardeniquicktakes.com) ❇️ ****Exclusive Early Access for Paid Members:** Below, you'll find Dr. Ed's latest webcast. Paid members can enjoy immediate access to the video. This content will become available to the public at a later date—don't miss out on early insights, consider upgrading today! _This post is for paying subscribers only._ ### Betting On Bullish Hard Data, Not Bearish Soft Data URL: https://www.yardeniquicktakes.com/betting-on-bullish-hard-data-not-bearish-soft-data/ Last updated: 2025-06-11T07:48:39.000Z The “soft” economic data releases have been weak, while the “hard” data have been strong in recent months. The former includes surveys of consumers, small business owners, and purchasing managers. We've been betting on the resilience of the economy, as confirmed by the hard data. Stock investors seem to agree with our view. The purchasing managers indexes for both manufacturing (M-PMI) and non-manufacturing (NM-PMI) remained weak through May. However, the M-PMI doesn't track the growth in real goods GDP as it did prior to the pandemic. The same can be said for NM-PMI and the growth in real services GDP. The growth of real GDP on a y/y basis remains solid (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-6-2.png) Measures of consumer confidence have also been depressed so far this year, especially the Consumer Sentiment Index (CSI). It remained so in May, while the Consumer Confidence Index rebounded smartly during the month. Meanwhile, consumer spending, which was depressed by colder than usual winter weather in January and February, bounced back solidly in March and April because the labor market remained robust. _This post is for paying subscribers only._ ### Inflationary Expectations Decline In US As China Deflates URL: https://www.yardeniquicktakes.com/inflationary-expectations-decline-in-us-as-china-deflates/ Last updated: 2025-06-10T01:56:59.000Z In the hilarious comedy movie "What About Bob," Bill Murray, who plays Bob, tells his shrink "that there are two types of people in this world. Those who like Neil Diamond and those who don't." There also seem to be two types of respondents to surveys of inflationary expectations: like those included in the Consumer Sentiment Index (CSI) survey and those included in the New York Fed's [Survey of Consumer Expectations.](https://www.newyorkfed.org/microeconomics/sce?ref=yardeniquicktakes.com#/) In recent years, they've generally agreed on the outlook for inflation over the year ahead (chart). But since the start of this year, they've diverged significantly. In May the CSI folks anticipated a one-year inflation rate of 6.6%, while the NY Fed's survey respondents predicted a 3.2% increase, which was a decline from April's 3.6%. We fit with the latter group. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-29.png) The NY Fed's survey also found that the three-years ahead and five-years ahead expected inflation rates fell to 3.0% and 2.6% in May (chart). That makes sense since consumers must have expected less inflation resulting from President Donald Trump's tariffs after he postponed most of them on April 2 and lowered the ones on China on May 12. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-30.png) Trump's trade war is exacerbating China's deflation. The country's CPI fell 0.1% y/y during May (chart). The PPI dropped by 3.3% that month. Deflating prices in China may offset the impacts of Trump's tariffs on US importers and consumers a bit. More importantly, deflation is putting pressure on the Chinese government to negotiate a trade deal with Trump that benefits both countries. Such discussions resumed today in London with trade representatives from China and the US. Stock prices meandered today in the US as investors awaited news on whether the two sides are making progress in resolving their various trade issues. _This post is for paying subscribers only._ ### DEEP DIVE: Essential Rare Earth Minerals URL: https://www.yardeniquicktakes.com/deep-dive-essential-rare-earth-minerals/ Last updated: 2025-06-09T03:20:49.000Z **This is an excerpt from the June 5, 2025 Morning Briefing of Yardeni Research, Inc.* “People who live in glass houses should not throw stones.” That’s a saying that President Trump should have taken to heart before slapping aggressive tariffs on Chinese imports, because China has one thing that the US lacks and needs: rare earth minerals. These minerals are necessary components of high-tech equipment like automobiles, robots, and military equipment. China mines about 70% of the world’s rare earth minerals, and it processes about 90% of them. In the wake of Trump’s tariffs, China began to require exporters of rare earths to get licenses to sell their goods internationally—and those licenses have been slow to come when they’ve come at all. So the exports of these minerals from China has slowed to a crawl. There’s a growing concern that global auto manufacturers will have to pause production if they can’t get their hands on enough magnets made from rare earth minerals. The US is left to depend on a small company, MP Materials, to boost the production and processing of rare earth minerals domestically. President Trump understandably is upset about the situation, and Secretary of State Marco Rubio countered China’s moves by announcing plans to cancel the visas of Chinese students inside the US. China response: Calling Harvard a “party school” and touting its own universities. Chinese AI company DeepSeek expressed pride that its founders were educated in China. Such ridiculous tit-for-tat among world powers could easily have been avoided. The US government has long known that America’s dependence on China for rare earth minerals was a problem, but it never acted on the recommendations of the studies it had commissioned. Most recently, the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, established in 2023, warned in a December 12, 2023 [*report*](https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/reset-prevent-build-scc-report.pdf?utm%5Fcampaign=Weekly%20Briefing&utm%5Fsource=hs%5Femail&utm%5Fmedium=email&utm%5Fcontent=365141915&%5Fhsenc=p2ANqtz-8OpYSixHGidIIu2nwOI0FSaZhHV42Psd9M6fbnBaRHDMccfA6xJx%5FdNLUEbF4RJ06J1-xHSWw4XGJLxR4v8az2aN9klg&%5Fhsmi=365141915) that the US was too dependent on China for rare earth minerals. Here are some of its suggestions that the US should have heeded: _This post is for paying subscribers only._ ### ECONOMIC WEEK AHEAD: June 9 - 13 URL: https://www.yardeniquicktakes.com/economic-week-ahead-june-9-13/ Last updated: 2025-06-09T01:20:33.000Z ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/Screenshot-2025-06-07-134849.png) Many of the questions the Fed has about how Trump's trade war is impacting the inflation outlook will get timely answers this week. Well, updates at least, since only President Donald Trump knows how long Trump's Tariff Turmoil (TTT) will continue disrupting the world's biggest economy. On Friday, we learned that half of Fed's dual mandate is doing just fine. The full-employment part of the mandate is confounding the hard-landers, as evidenced by the 139,000 increase in payroll employment and 4.2% jobless rate in May. So, there's no urgent need for the Fed to hit the monetary accelerator—certainly not at next week's June 17-18 Federal Open Market Committee meeting. The resilience of the economy should be confirmed anew by this week's economic data releases. And the extent to which Fed officials might have an inflation problem (at least in the short run) could come into clearer view. Highlights include: (1) *Inflation: expectations.* The New York Fed's closely watched survey of consumer expectations (Mon) will get the week started. The May survey showed inflation expectations over the year ahead edged up to 3.6%, while three- and five-years-ahead expectations both remained near 3.0% (chart). Fed officials would probably like to see all three below 3.0%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-28.png) (2) *Inflation: CPI*. May's Consumer Price Index (Wed) could shed light on whether Trump's tariffs are starting to boost inflation. Since April's 2.3% y/y increase, the Cleveland Fed’s Inflation [Nowcasting model](https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting?ref=yardeniquicktakes.com) has been signaling slight pickups in May (2.4%) and June (2.7%). However, gasoline prices were flat in May, and the Manheim Used Vehicle Value Index eased during the month. The big surprise could be how little Trump's tariffs are boosting inflation despite upward pressures on prices-paid and prices-received indexes in the Fed's regional business surveys (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/2.jpg) (3) *Inflation: PPI.* The US Producer Price Index (Thu) for goods has been highly correlated with China's [PPI, which fell 2.7%](https://www.reuters.com/world/china/chinas-consumer-prices-fall-third-straight-month-april-2025-05-10/?ref=yardeniquicktakes.com) y/y in April. The fact that Asia's biggest economy is grappling with deflation could offset tariff-related price pressures. Since the April drop in China's PPI was the steepest in six months, there's reason to expect its deflation isn't going away anytime soon. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/3.png) (4) *Small business owners survey.* When the National Federation of Independent Business releases its latest survey of small business owners (Tue), the real insights will come from the labor market indicators. We expect the May survey to confirm the resilience of employment conditions despite the tariffs. It should help, too, that the May data period coincided with Trump’s either postponing or lowering tariffs. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/4.png) (5) *Federal budget*. It's anyone's guess what Trump's "Big Beautiful Bill" will look like after the Senate works it over this week, especially given how ugly the process has gotten as the Trump-Musk big beautiful bromance implodes in real time. Already, the current version is seen adding between $2-$5 trillion to the federal debt—on top of the $20 trillion increase the Congressional Budget Office currently projects over the next 10 years (chart). Expect the Bond Vigilantes to have lots to weigh in about this trajectory. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/5.jpg) (6) *Unemployment claims*. The weekly jobless claims (Thu) release is garnering increasingly breathless attention because of the will-they-or-won't-they-ease debate among Fed watchers. For unemployment claims to stay within the recent range of roughly 205,000-243,000 will be key. The four-week moving average for claims is currently around 235,000, suggesting that the resilience we've seen in labor markets remains intact. [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". ### MARKET CALL: Meltup Again? (Do We Have Nothing To Fear But Nothing To Fear?) URL: https://www.yardeniquicktakes.com/market-call-meltup-again-do-we-have-nothing-to-fear-but-nothing-to-fear/ Last updated: 2025-06-08T19:41:52.000Z The stock market has become tariff-scare-proof now that the S&P 500 is only 2.3% below its February 19 record high despite Trump's Tariff Turmoil (TTT) since then. After Friday's better-than-expected employment report, the stock market has also become recession-scare-proof. According to Polymarkets, the odds of a recession were back down to 27% on Friday from a recent peak of 66% on May 1 (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-5.jpg) The stock market might become inflation-scare-proof on Wednesday, if May's CPI inflation rate turns out to be as subdued as estimated by the Cleveland Fed's Inflation Nowcasting, i.e., 2.4% y/y. On May 19 we wrote, "So the odds of our Roaring 2020s scenario is back up to 75%. In this scenario, the S&P 500 rises to 6500 by the end of this year. It could keep going to 7000 in a meltup." So, do we have nothing to fear but nothing to fear? That would represent much to fear, as fearless investors create meltups, which then become meltdowns. But in fact, the stock market's sentiment gauges are showing plenty of fear, which is bullish from a contrarian perspective (chart). _This post is for paying subscribers only._ ### He Said, Xi Said URL: https://www.yardeniquicktakes.com/he-said-xi-said/ Last updated: 2025-06-08T18:21:44.000Z President Donald Trump said today that he had a "very good talk" with China's President Xi Jinping for an hour and a half mostly about trade. They also agreed to visit one another. The financial markets yawned. Stock, bond, currency, and commodity traders have become jaded about Trump's tumultuous trade dealmaking. Even rising concerns about a shortage of Chinese rare earth minerals (needed by lots of US manufacturers) haven't fazed the stock market so far. Investors seem to be more focused on whether the US economy is slowing or not. On Tuesday, April's JOLTS report suggested that the labor market is just fine. On Wednesday, May's ADP employment report was very weak. Today's Challenger layoffs report showed a decline in May from the previous month, while initial unemployment claims edged up, but remained low. Tomorrow's payroll employment report for May isn't likely to resolve the debate about the labor market, though we anticipate that it will be better than expected, exceeding 100,000\. Stock and bond prices would likely stay firm if so. If the report is weaker than expected, both would probably rally on expectations of sooner-rather-than-later Fed rate cuts. Either good or bad news tomorrow should bolster stock prices, in our opinion. Let's review today's data: (1) *Layoffs*. US-based employers announced 93,816 job cuts in May, down 12% from 105,441 cuts in April, and up 47% from 63,816 announced in the same month last year, according to Challenger, Gray & Christmas (chart). In March, this series peaked at over 275,000\. So far, there has been no similar spike in initial unemployment claims. In the past, they both tended to spike together. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/4g7ONbU.png) In recent months, layoffs have been concentrated in retailing and technology companies (chart). Both their layoffs have been declining over the past couple of months. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-15.png) (2) *Unemployment claims*. Weekly initial unemployment claims rose to 247,000 during the May 30 week (chart), they remain in their low range since 2022. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-14.png) The four-week moving average of initial unemployment claims closely tracks the unemployment rate, which probably remained around 4.2% in May given the 235,000 average reading on initial jobless claims over the last four weeks (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-16.png) (3) *Purchasing managers surveys*. The employment index in the M-PMI remains weak, suggesting that manufacturing payroll employment isn't expanding (chart). That's been true for the past three years and hasn't weighed much if at all on GDP growth. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-17.png) In recent months, the employment index of the NM-PMI has been volatile and a misleading indicator of employment in the services sector, which we believe remains strong (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-18.png) (4) *Auto sales*. US light vehicle sales dropped sharply in May, the biggest monthly decline in five years (chart). The pullback followed a surge in March and April as buyers rushed to beat expected tariff-driven price hikes. That mostly explains why the Atlanta Fed's GDPNow tracking model is showing Q2's real GDP up 3.8% (saar), a downward revision from 4.7% on Wednesday. Real consumer spending was revised down from 4.0% to 2.6%. ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-20.png) (5) *Stock market sentiment*. For the stock market, fundamentals matter a great deal over the long run. In the short run, sentiment is also important. The latest bull/bear ratios show that bullishness remains relatively low, which is bullish from a contrarian perspective (chart). ![](https://storage.ghost.io/c/16/ef/16efc0dd-240f-4f5e-9e01-d619d6fd4fd1/content/images/2025/06/gateway-19.png) [View All QuickTakes](https://www.yardeniquicktakes.com/) [View Our Live Charts](https://www.yardeniquicktakes.com/live-charts/) 💡 Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members' contributions may be featured in our segment, "Ed Answers Your Questions". _Includes the latest 500 public posts. 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