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Ed Yardeni: Stocks to Rise 10 Percent in Next 12 Months

Ed Yardeni: Stocks to Rise 10 Percent in Next 12 Months
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By    |   Thursday, 26 May 2016 06:00 AM

Ed Yardeni, noted economist and Newsmax Insider, predicts the S&P 500 stock index will rise 10 percent in a year as commercial activity continues to expand.

“One of the questions is: ‘Is there a recession around the corner?’ And I don’t see it,” he told CNBC. He sees historically low interest rates, a stronger dollar, improving commodities prices and growing earnings as supportive to market gains.

The S&P 500 has risen 2.3 percent since the beginning of the year, reaching within 2 percent of its record high from May 2015. The stock benchmark has had two declines of more than 10 percent in the past year, with the most recent correction following the Federal Reserve’s December rate hike, the first one since 2006.

Stocks have rebounded by 14 percent from the February low, which Yardeni considered a significant level.

“We made an important low in February,” he told the network. “At the time, I said the market could be up 10 percent. I didn’t think it would happen by now.”

He is optimistic about the next 10 percent gain as Wall Street analysts revising upward their estimates of corporate earnings after being “way too pessimistic at the beginning of the year.”

Most importantly, he sees a supportive Fed as a key component of stock performance as companies continue to take advantage of low interest rates to finance stock repurchases and mergers and acquisitions.

“The key players have been central bankers in cahoots with corporate finance managers,” he said. “With bond yields likely to stay low, I think we’ll continue to see buybacks and M&A, and that’s what’s really driving the market.”

Meanwhile, Jeffrey Gundlach, CEO of DoubleLine Capital, said this week’s more than 2 percent gain in stocks feels like a short squeeze and characterized U.S. stocks as "dead money" in an interview with Reuters. A short squeeze happens when traders buy stock to cover short sales, driving the market higher.

"The market is not incredibly healthy," he told the newswire, pointing to lackluster corporate profits.

Gundlach places even odds on a rate hike at the Fed’s monetary policy meeting in June. While central bank speakers have said they want to raise interest rates, the decision rests finally with Fed Chair Janet Yellen.

"All that matters is Yellen. She is still there,” he told Reuters. “I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good."

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Ed Yardeni, noted economist and Newsmax Insider, predicts the S P 500 stock index will rise 10 percent in a year as commercial activity continues to expand.
Yardeni, economy, stocks, market
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2016-00-26
Thursday, 26 May 2016 06:00 AM
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