Investment guru Ed Yardeni predicts the current bull stock market has much more room to keep charging ahead.
The S&P 500 experienced a peak-to-trough decline of almost 20% in late 2018, Barron’s explained.
However, the president of Yardeni Research and Newsmax Finance Insider explained to Barron's that the late-year tumble was an exception to the rule.
The stock market slide, he argues, was brought on by Federal Reserve Chairman Jerome Powell’s statement in October that interest rates were “a long way from neutral.”
But with the Fed now having pressed pause on any rate hikes, Yardeni says the market has resumed its previous upward trajectory. He sees the S&P 500 hitting 3100 at the end of this year, and continuing to climb to 3500 about a year later.
“Typically bull markets are killed by recessions—not by old age—and recessions have historically resulted from credit crunches,” he says. “That’s when the system seizes up and not only dodgy borrowers lose access to credit, but even good borrowers find it very hard to refinance or to get funding.”
To be sure, U.S. stocks climbed back to near record highs on Friday after the largest U.S. bank, JPMorgan Chase, soothed worries that the first-quarter earnings season would pour cold water on Wall Street’s big rally back from last year’s slump.
Analyst now expect S&P 500 companies to show a 2.3% year-on-year decline in earnings, slightly improved from their most recent reading of a 2.5% drop, per Refinitiv data. But first-quarter profit is still seen logging its first annual contraction since 2016, Reuters reported.
However, of the 29 companies in the S&P 500 that have reported thus far, 79.3% have come in above analyst expectations.
The Nasdaq and the Dow were both about 1.6% below their previous record highs.
For the week, both the S&P 500 and the Nasdaq were on course to show their third consecutive gains, while the Dow looked set to post a nominal weekly loss.
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