Deep Dive

DEEP DIVE: Inflation: The 1970s Again?

Sep 18, 2023 6 min read paid

US Economy I: Raising Odds of a Recession a Tad On July 31, Debbie and I lowered our odds of a recession. We wrote: “Our script has played out as expected so far. The soft-landing scenario looks increasingly like a no-landing one. As a result, we are raising the odds of a no-landing scenario from 75% to 85% and lowering the odds of a hard-landing scenario from 25% to 15%

Ed Yardeni

DEEP DIVE: S&P 500 Forward Earnings Remains On Recovery Road

Aug 31, 2023 4 min read paid

The stock market rallied from Friday through Wednesday despite Fed Chair Jerome Powell’s hawkish speech at Jackson Hole on Friday. The rally received a bullish jolt from July’s JOLTS report on Tuesday morning showing both fewer job openings and fewer quits than expected during the month. These are bullish developments, as we discuss further below, because they suggest that the labor market is “rebalancing,” with demand for labor

Ed Yardeni

DEEP DIVE: Misleading Economic Indicators?

Aug 24, 2023 3 min read paid

While we await Fed Chair Jerome Powell’s Jackson Hole speech on Friday, which is bound to impact the financial markets, let’s review the latest composite economic indexes. The Conference Board compiles the Index of Leading Economic Indicators (LEI), the Index of Coincident Economic Indicators (CEI), and the Index of Lagging Economic Indicators (LAGEI). July’s indexes were released last week on Thursday. Collectively, they are a mixed bag.

Ed Yardeni

DEEP DIVE: Here Are Five Bearish Arguments That Haven't Worked So Far

Aug 9, 2023 4 min read paid

Let’s revisit our upbeat response to the most frequently cited reasons to be worried about a recession: (1) Falling leading indicators and M-PMI. The Index of Leading Economic Indicators (LEI) peaked at a record high during December 2021 (Fig. 7). It is down 9.4% since then through May. The LEI correctly anticipated the previous eight recessions with an average lead time of 12 months. We’ve previously shown

Ed Yardeni

DEEP DIVES: Inflation, Symmetry & Shockwaves

Aug 7, 2023 2 min read paid

Inflation tends to be a symmetrical phenomenon. It tends to come down as quickly or as slowly as it went up when measured on a y/y basis. We can see this consistent pattern in the CPI inflation rate for the US since 1921 (Fig. 1). The inflation symmetry has been particularly pronounced in the goods-producing sector (Fig. 2). That’s because goods prices tend to respond quickly to changes

Ed Yardeni

DEEP DIVE: Quantum Leaps

Jul 24, 2023 2 min read paid

Artificial Intelligence is just one of several technological innovations that are likely to drive the economy during the Roaring 2020s. The promise of quantum computing—and what humans can accomplish with such vast amounts of computing power—makes scientists giddy. Google, Amazon, Microsoft, and IBM are leading the race to develop these computers and offer access to them in the cloud. Here are some recent developments in the area: (1)

Ed Yardeni
Jackie Doherty

DEEP DIVE: The Worry List

Jul 8, 2023 4 min read paid

Economists who are still forecasting a recession typically offer four reasons. First is the inversion of the yield curve. Second is the drop in M2. Third is the significant tightening of monetary policy resulting from the increase in the federal funds rate combined with quantitative tightening (QT). Fourth is that consumers’ excess saving accumulated during the pandemic could run out as soon as September. A more immediate risk to the

Ed Yardeni

DEEP DIVE: Baby Boomers Retiring With $75 Trillion In Net Worth

Jun 28, 2023 4 min read paid

When the Fed started to raise interest rates aggressively last year, there was lots of speculation that it would cause a recession. Housing certainly fell into a recession as housing starts plunged 25.7% from a peak of 1.80 million units (saar) during April 2022 to a trough of 1.34 million units during January and April 2023 (Fig. 1). Consumer spending adjusted for inflation has been on a

Ed Yardeni

DEEP DIVE: All About S&P 500 Earnings

Jun 17, 2023 4 min read paid

Earnings I: The Past The Q1 earnings season is over, and the final numbers are in. They were better-than-expected results, which isn’t surprising when the economy is growing. Worse-than-expected results tend to occur when the economy is falling into a recession. That the economy would fall into a recession has been a widespread concern—but not our outlook, as you know. So far, so good. Today, let’s review

Ed Yardeni

DEEP DIVE: Stocks Discounting Earnings Recovery

May 25, 2023 3 min read paid

The stock market discounts earnings over the next 52 weeks. How do we know this? Most industry analysts provide earnings estimates for the current year and the coming year. They might provide earnings estimates or earnings growth forecasts beyond that period, but investors aren’t likely to have as much confidence in earnings forecasts beyond the next 52 weeks. Of course, industry analysts don’t forecast earnings on a 52-week-ahead

Ed Yardeni

DEEP DIVE: Bad & Good Breadth

May 18, 2023 2 min read paid

Joe and I have recently observed that the S&P 500 has a breadth problem. This is a widely recognized problem by most technicians who track the stock market. The good news is that a more fundamental measure of earnings breadth is performing well. Consider the following: (1) If we are in a bull market that started on October 12, 2022 as we still believe, our thesis isn’t

Ed Yardeni

DEEP DIVE: Fiscal Policy - A Trillion Here, a Trillion There

May 1, 2023 3 min read paid

We have been on Wall Street as economists and strategists for more than 40 years. Over that entire period, doomsters have been scribbling away, producing lots of articles and books about the US federal deficits and debt. The only pause in their doom and gloom was during the late 1990s and early 2000s, when the federal government ran a surplus for a brief time. Nevertheless, while the annual federal deficits

Ed Yardeni

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