Taps Coogan – August 25th, 2023

Dr. Ed Yardeni, creator of Yardeni Research and author of ‘In Praise of Profits,’ recently spoke with CNBC about his fairly sanguine view that the rise in 10-year treasury yields is simply a return to normal pre-Financial Crisis interest rates and not necessarily a major stumbling block for equity markets. Despite concerns about “profligate spending,” he does not see the 10-year rising much further as he sees inflation continuing to moderate.

 

Some excerpts from Dr. Ed Yardeni:

“Look at the 10-year bond yield prior to the Financial Crisis back in 2008 right through to the Great Virus crisis. During that period interest rates were at record lows, near zero, but now we are going back to a period prior to the Great Financial Crisis in which the 10-year bond yield was something like 4.5% on average… I think we are kind of returning to a normal bond yield and maybe that’s why the stock market isn’t all that upset about it. Normal isn’t nessearily bad.”

“I have my concerns, as everybody does, about profligate fiscal policy. Clearly the deficit is widening again… In the past, supply and demand (in a fiscal sense) never really mattered to the bond market, it was always inflation and what the Fed would do about it, but in recent weeks we’ve seen that the bond market really cares about the supply issues… There really is a remarkably different profligate process going on… but I think the bond market still is driven to a large extent by inflation and I believe the inflation… will continue to show moderation through the end of the year…”

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