Thursday, 18 April 2024

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‘Expect some turbulence for the stock market’: Big earnings misses and rising oil prices are threatening investors’ banner year, Ed Yardeni says

‘Expect some turbulence for the stock market’: Big earnings misses and rising oil prices are threatening investors’ banner year, Ed Yardeni says

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Ed Yardeni, founder of Yardeni Research, has been one of Wall Street’s biggest bulls over the past few years. While many experts warned of recessions and debt crises, Yardeni has repeatedly argued that we’re in the middle of the “Roaring 2020s”—an era when inflation will fade and new technologies like AI and robotics will help spark a productivity boom. Last December, the veteran market watcher even predicted the S&P 500 would surge 30% to 6,000 by the end of 2025, a price target that seems far less sensational after the blue-chip index’s more than 10% rise year to date.

But this week, Yardeni reminded investors that even if the stock market hits his lofty price target, it won’t surge in a straight line. “There has been no turbulence in the stock market’s smooth ascent to new record highs,” he wrote in a Tuesday note to clients. “Nevertheless, we should expect some turbulence for the stock market ahead.”

Yardeni highlighted a few key reasons for his “turbulence” call, including rising geopolitical tensions that are putting pressure on oil prices; a few big earnings misses from U.S. corporations; and a still-robust labor market that could keep the Federal Reserve from cutting interest rates soon. Just like Fed Chairman Jerome Powell has said time and again ever since he began raising interest rates in March 2022, the path to lower inflation is likely to be “bumpy” for the economy and markets.

Don’t expect market-juicing interest rate cuts anytime soon

At the end of 2023, most investment banks were expecting the Fed to cut interest rates by 100 basis points this year, with some anticipating the first cut as soon as March. The outlook for sinking borrowing costs helped push stocks higher since their October 2023 low. Now, though, with the economy proving its resilience to higher rates, and two hotter-than-expected inflation reports in January and February leaving Fed officials less confident that inflation has truly been tamed, Wall Street has a different outlook for interest rates. 

The current consensus outlook is for three 25 basis point rate cuts this year, with some having even more pessimistic views. Atlanta Fed president Raphael Bostic, who is a voting member of the Federal Open Market Committee (FOMC) that sets interest rates, said this week that he expects only one rate cut this year, and not until November or December.

The latest Job Openings and Labor Turnover Survey (JOLTS) could be a key…

Click Here to Read the Full Original Article at Fortune | FORTUNE…


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