Tags: Trump Administration | Ed Yardeni | Bonds | Economy | Inflation | Trump

Ed Yardeni: Bonds Doubt Strong Economy, High Inflation Under Trump

(AP/Paul Sancya)

By    |   Wednesday, 05 April 2017 12:17 PM

Yardeni Research president Ed Yardeni advises savvy investors that bond yields have slipped in a possible economic omen.

"It seems that the bond market just hasn't really bought into the idea that inflation is coming back, or that economic growth is going to be surprisingly strong," Yardeni recently told CNBC.

 "The stock market seems to be more attuned to that kind of growth," the Newsmax Finance Insider said.

Although the Federal Reserve remains firmly in hiking mode, raising its federal funds rate target already and indicating it will likely do so twice more this year, the 10-year U.S. Treasury yield is falling, CNBC.com explained.

Some experts interpret this as a sign of volatile investor sentiment surrounding fading "Trump trades" and a renewed set of expectations around economic growth.

On Tuesday, the 10-year yield fell to 2.31 percent, its lowest level since the last week of February.

"After the election, a lot of people started to revise their GDP numbers up, figuring fiscal policy was coming, in terms of infrastructure spending and tax cuts. And I think now we're getting a little dose of reality, and realizing it's going to take a while to see all that unfold. Meanwhile, the economy hasn't changed radically since the election," so "we're not seeing it in the hard data."

Meanwhile, one of the most respected economic minds of modern times has recently cautioned about soaring inflation.

Former Federal Reserve Chairman Alan Greenspan reportedly warns that Trump's economic policies risk plunging America into a period of 1970s-style stagflation with low growth and "out of control" inflation.

Greenspan also expressed "grave concerns" about the future of the eurozone, where countries in northern Europe such as Germany have "in effect been funding the deficits of the South," the UK Telegraph reported.

"That cannot continue indefinitely," Greenspan wrote in the latest issue of Gold Investor, the Telegraph reported. "The eurozone is not working," said Greenspan, who led the US central bank between 1987 and 2006.

Under Trump, Greenspan warns that America could enter a "destabilizing period" where inflation rises sharply as workers begin to demand higher pay.

This could return America to "what happened in the 1970s, when we last experienced stagflation and there were real concerns about inflation spiraling out of control,” he predicted.

The Federal Reserve was forced to raise rates to 20 percent to keep a lid on inflation, but the move also threw the economy into recession and pushed up unemployment.

"I hope that we don't have to repeat that exercise to stabilize the system. But it remains an open question," said Greenspan.

(Newsmax wires services contributed to this report).

Dr. Ed Yardeni is the President of Yardeni Research, Inc., a provider of independent global investment strategy research.

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Yardeni Research president Ed Yardeni advises savvy investors that bond yields have slipped in a possible economic omen.
Ed Yardeni, Bonds, Economy, Inflation, Trump
Wednesday, 05 April 2017 12:17 PM
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