Taps Coogan – July 28th, 2022

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Dr. Ed Yardeni, creator of the highly informative website Yardeni Research and author of ‘In Praise of Profits,’ recently spoke with Bloomberg to call a bottom for the S&P 500. While Dr. Yardeni has been late to the game on recognizing this bear market, he did famously call the bottoms in 1982 and 2009. His call came a few days before yesterday FOMC meeting.

 

Dr. Yardeni on the ‘terminal’ Fed funds rate:

“I guess I’m in the 3% to 3.25% (camp)… The reason for that… quantitative tightening, which means the reduction of the Fed’s balance sheet has some tightening effect… and then there is the strong dollar, a 10% increase in the dollar since the beginning of the year… So there is a tremendous amount of tightening already going on through these developments, so I am not convinced that we’re going to have to see 4% or higher…”

On Inflation: 

“If inflation just remains protracted, then obviously the people that are saying that the Fed is going to basically have to do a ‘Volcker 2.0’ are correct. I think there are already some signs, and I am obviously reaching for whatever I can find, but I am looking at the regional business surveys of both New York and Philadelphia for July… that are showing prices paid and prices received surveys are starting to moderate as are indexes for supply chain disruptions…”

On GDP:

“Clearly we are going to have a negative real GDP number in the second quarter… I think it’s a mild recession at best. I think it’s a mid-cycle slowdown kind of like what we had in the mid 1980s, the mid 1990s, and the mid 2010s… I don’t see a hard landing…”

On markets:

“It’s never easy to pick a bottom in stocks markets but I’m going to give it a try. I think that June 16th, when we fell down to 3,666 on a closing basis (for the S&P 500), which by the way was 3,000 points higher than the intraday low that we had in 2009, I think that was the bottom. Coincident to that, is we have seen commodity prices come down. We have seen a slowing of the economy which I think will help moderate inflation. The real question is going to be the earning season and it really hasn’t trashed the market…”

There is more to the interview, so enjoy it above.