Taps Coogan – June 15th, 2022

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Creator of Yardeni Research and author of ‘In Praise of Profits,’ Ed Yardeni, has been, to his credit, one of the most consistently bullish prognosticators on US markets since the fallout of the Global Financial Crisis.

Over the past few months, that bullishness has sounded increasingly strained and now Dr. Yardeni is conceding that we are in a bear market, that we have been in one since the start of the year, that the market is likely headed lower, and that the chance of a recession is rising.

Notably, Dr. Yardeni now sees a triple-rate hike Wednesday, another in July, and yet another in September.

 

Some excerpts from Dr. Yardeni:

“I don’t think (the Fed) would have planted that story (about a triple rate hike) in the Wall Street Journal unless they intended to do it. And I think that… Powell will indicate that there will be another one (triple hike) coming in the July meeting and another one at the September meeting… I think it will be another three consecutive increases of 75 basis points.”

“We are increasing the odds of a recession… I think that we are currently in a bear market… We have been in a bear market, with the benefit of hindsight, since January 3rd… and I think the outlook is increasing for the risk of a recession, but I’m not at 100%, I’m at 45%… Seriously, I think that somehow these recession concerns are being overstated, but I can’t ignore the fact that we may very well talk ourselves into recession…”

“It’s kind of like trying to catch a falling knife here clearly, but I think it probably has lower to go. I kind of like to see where we were right before the pandemic. We were around 3,300-3,400 back then. I guess it’s conceivable that we go that far back, but that would be mostly a valuation issue. As I’ve said before, we’ve got a problem with the earnings valuations. The P/E has been too high and now it’s probably got to go too low for a time here.”

As for the call for three consecutive 75 basis point rate hikes, let’s hope he is wrong. The Fed belatedly rushing to hike rates on the cusp of a recession is the leading cause of financial crashes since 1913. 

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