Ed Yardeni Boosts S&P Target Amid ‘Unprecedented’ Earnings Expectations

追加: 2026-05-12

[00:00:00]Let's just talk about the earnings outside of recoveries.

[00:00:02]GFC, the pandemic strip that out outside of recoveries.

[00:00:06]When was the last time earnings season and projections for earnings were this good? I don't really recall anything like this is extraordinary. Uh, the first quarter earnings, uh, expectations really weren't, uh, all that bad coming into the first quarter earnings season. Actually, they were holding up pretty well. And, uh, instead they turned out to be much better. And on top of that, they're the analysts are raising their second, third and fourth quarter numbers.

[00:00:34]Uh, so now it looks as though we're going to have something like an 18% year over year increase in the first quarter and for the year as a whole, other, uh, expecting 24%. And that's definitely unprecedented.

[00:00:45]That's the kind of double digit gains you see coming out of a recession.

[00:00:48]Uh, you don't see the the economy that's been growing for a while.

[00:00:52]And looking across industry groups, the semis right now make up about 18% of the S&P 500. How much heavy lifting the chip is doing? Well, I think that's part of the story.

[00:01:04]But, uh, we're also seeing that the, uh, uh, earnings expectations for the year.

[00:01:09]Small caps and the mid caps have been going up to record highs.

[00:01:13]Uh, those two areas of the market were actually sort of in a coma, uh, flatlining uh, since 2022, in terms of earnings expectations.

[00:01:23]And then over the past six months or so, we've suddenly seen them picking up and going to to new record highs. So I think earnings breadth is actually improving. And if that's the case, that should lead to an improvement in the breadth of the market.

[00:01:36]How sustainable is this ad given the fact that we're hearing about consumers increasingly pushing back on price increases, increasingly being choosy as a result of, uh, some of the inflation that they're seeing across the market?

[00:01:49]Well, you mentioned it before. There's, uh, a widespread belief that this is the economy where a lot of people are facing an affordability crisis, and only a few people are doing well.

[00:02:00]Um, I think that's, uh, I'm not dismissing that, but I think a lot of that this is the impact of demography. I'm a baby boomer.

[00:02:07]I'm still working for a living. Uh, but I'm seeing a lot of my friends retiring, and, uh, the baby boomers collectively have a record $89 trillion of net worth, and they're starting to spend it.

[00:02:18]So all this anxiety about disposable income going flat.

[00:02:22]Well, that's natural. I mean, the baby boomers are at the peak of their careers and they're retiring, so that's gone flat.

[00:02:29]Meanwhile, they're spending their, uh, retirement, uh, uh, assets.

[00:02:33]And so they're continuing to spend and I think a lot of baby boomers, uh, are helping their, uh, young adult children, uh, maybe with mortgage payments, helping out with the grandchildren's, uh, after school activities, some of the fees there. Uh, I know I see this from personal experience as well as from my friends. And, uh, so I think that's what's missing here. And that explains why the consumer has been so remarkably resilient. And I think that continues.

[00:02:59]So I don't really buy the idea that the economy is just being propped up by the capital spending on technology. We have a few companies.

[00:03:07]I think that consumers are definitely there.

[00:03:10]And the weakness of the consumer in the fourth quarter and the first quarter was weather related. So we're about to test that.

[00:03:16]We'll see what retail sales looks like up ahead here.

[00:03:18]Um, and um, put it all together. And I think the economy remains resilient, as it has been since the beginning of the well, I call it the roaring 2020s, and so far so good. If that's the case said, then isn't it true that we would see a more sustainable inflation rate moving higher as a result of the increased consumer spending power, the increased amount of money and frankly, supply shock after supply shock that's hit the economy.

[00:03:44]Yeah, that's that's a good point. And I think it's uh, we have a recent example of, uh, what can happen. And that was in 2022 when we saw, uh, a spike in energy prices. But that was on top of supply side disruptions and, uh, you know, supply chain disruptions.

[00:04:02]And you could argue that the same thing is happening now.

[00:04:05]But the big difference is wage inflation is really moderating.

[00:04:09]And, uh, we're we have a labor market that's in equilibrium.

[00:04:13]Supply equals demand. So we're not seeing a lot of upward pressure on wages, whereas we saw a tremendous amount of, uh, wage pressure in 21, 22. And there was a lot more demand and supply of labor. And that led to a wage price spiral.

[00:04:27]So I think what's missing on the inflation side this time is a wage price spiral. We certainly have an energy spike.

[00:04:33]And that'll certainly lead to higher inflation for the next few months.

[00:04:38]But I think both the barn and the stock market have basically looked through it.

[00:04:42]By the way, I kind of you've finals of 4.25% to 4.75% as normal.

[00:04:48]I'm not getting freaked out by it. Um, but, you know, suddenly we're we're going to see the bond vigilantes act up, though, you know, I'm watching them right now. The band vigilantes are acting up in Tokyo and. And in London.

[00:05:00]Um, I don't see them, uh, here just yet. So.

[00:05:04]And with that in mind, just build on that.

[00:05:05]When does it become a threat, this move in fixed income?

[00:05:08]Well, it's interesting, you know, a couple of years ago, uh, I think it was in 2024, we saw the bond yield, uh, going up from 4% to 5% in three months.

[00:05:19]Uh, that was, uh, August, September, October.

[00:05:23]Uh, and, uh, it got up to 5%, uh, on November 1st.

[00:05:27]And Janet Yellen, who was Treasury secretary back then, said, okay, okay, we're the Treasury is not going to increase the supply of, uh, bonds.

[00:05:34]We're going to do our increased financing in the bull market.

[00:05:38]And so the bond vigilantes are not the only players here.

[00:05:40]And by the way, the vinyl came tumbling down.

[00:05:43]And so the Treasury and the fed could still, uh, intervene in the market to keep it from going above 5%. And on top of all that, I think we still have the carry trade going on where I think a lot of hedge funds are, in fact, uh, sitting there in the Cayman Islands, or at least their books are sitting in the Cayman Islands, uh, borrowing in Japan at, uh, 0.75% and buying bonds and getting a nice spread on it. Uh, do you think Kevin Walsh just got appetite to use the balance sheet? The Federal Reserve to intervene in the Treasury market? Uh, well, I think, uh, absent, uh, Treasury secretary absent, uh, as the appetite to do what he was against doing when, when Janet Yellen did it. And that is issue more more bills and fewer bonds if, if that's necessary. I don't think they're going to just kind of sit there and let the bond yield go from 5 to 6%.

[00:06:33]Uh, and I don't think it's going to go there.

[00:06:34]I think there's a lot of the bond is the U.S.

[00:06:37]bond is still viewed as a safe haven, and there's plenty of reasons to worry about things these days.