Tags: ed yardeni | record | stock | rally

Ed Yardeni: Record Rally May Turn Into 'Too Much of a Good Thing'

(Dollar Photo Club)

By    |   Monday, 04 November 2019 02:58 PM

Newsmax Finance Insider and investment guru Ed Yardeni warns that the seemingly endless record-setting bull-market run on Wall Street may actually turn into something bad by making stocks much too expensive.

The Yardeni Research president told CNBC that if the S&P 500 forward-earnings multiple ticks to 19 or 20, it could spark a “nasty correction.” The index recently was at about 17 while the historic norm is 15 to 16, CNBC.com explained.

“I just don’t want too much of a good thing here. I’d like this bull market to continue at a leisurely pace not in a melt-up fashion,” he told CNBC. “That’s actually the risk,” he said.

The S&P late Monday was at 3,080, closing in on Yardeni’s 3,100 year-end target. His 2020 target is 3,500.

“If the market gets ahead of itself and gets to 3,500 a lot sooner... I may have to consider taking some profits,” Yardeni said. “I’d much rather stay fully invested in this bull market and not be forced to jump out just because it is ridiculously overvalued,” he said.

However, Yardeni has an optimistic long-term outlook.

“I’m sticking with this bull market. I think it’s going to continue to see higher levels,” said Yardeni.

Even though he says President Donald Trump will most likely win a second term, Yardeni doesn’t see permanent damage to the markets or economy if a Democrat wins.

“I’m not convinced that if [President] Trump loses and a Democrat wins that it necessarily implies a bear market and a recession,” Yardeni said. “But I think initially the market would not react well to a change.”

However, not all respected Wall Street voices are as optimistic.

A weak environment for economic growth and inflation, paired with low bond yields, portend anemic returns from a typical stock-bond portfolio over the next decade, according to Morgan Stanley.

A traditional fund -- split 60% in equities and 40% in fixed income -- will see an annual gain of just 2.8% over that time, about half the average over the last two decades, the firm’s strategists estimate, Bloomberg reported. That’s based on the S&P 500 Index returning 4.9% per annum and 10-year Treasuries handing investors 2.1% a year for a dollar-denominated investor.

Not only will the returns be below what investors are used to but lower sovereign-bond yields will dampen the ability of fixed-income securities to offset large declines in equities, they said.

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Newsmax Finance Insider and investment guru Ed Yardeni warns that the seemingly endless record-setting bull-market run on Wall Street may actually turn into something bad by making stocks much too expensive.
ed yardeni, record, stock, rally
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2019-58-04
Monday, 04 November 2019 02:58 PM
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