Taps Coogan – October 29th, 2021

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Dr. Ed Yardeni, long time bull, creator of the highly informative website Yardeni Research, and author of ‘In Praise of Profits,’ recently spoke with Fox Business to reiterate his sanguine outlook for markets and the economy, noting that he “didn’t see any signs of a recession” amid another quarter of strong earnings. However, he did warn that high energy prices could eventually cause a recession.

 

Some excerpts from Ed Yardeni:

“We’ve got another fairly good earnings season going on. The best one was… the second quarter. We saw earnings for the S&P 500 up 90% on a year-over-year basis and now the question is whether it’s going to be up 25% or 35% for the third quarter… I think we are slowing down to something more normal. Next year I think earnings will grow at 6% to 8% which is the trend growth of profits…”

“What causes bear markets in the past has been credit crunches that caused recessions or energy crises that caused recessions. I think we’ve got more risk of an energy related recession than we do of a credit crunch, but right now I don’t see signs of a recession any time soon… As long as (earnings) are growing, it’s a bull market.” 

“I’m a big believer that profits drive the economy. Most economists are demand side or supply side economists. They have various theories of the business cycle, but over the years, I’ve noticed something remarkably simple and that is that it is profitable companies that hire workers, create jobs, and expand their capacity. This notion that the presidents are constantly telling us that they created all these jobs, it’s nonsense. It’s businesses that created all these jobs. So, we really don’t want to get in the way of that job creation machine… We have to have more respect for profits…”

Indeed, we do.