Long-time market bull Ed Yardeni is delivering a dose of optimism into year-end.
Yardeni, who’s known for running investment strategy for Prudential and Deutsche Bank, expects the holidays to boost stocks deeper into record territory.
“This is going to be one of the best Christmas seasons ever,” the president of Yardeni Research told CNBC’s “Trading Nation” on Friday. “People are coming out of this pandemic still mentally, and they need to spend. And, I think they realize they have to spend now because if you get too close to Christmas, a lot of the merchandise may be out of stock.”
He expects a willingness to spend despite the inflation spike.
“Consumer confidence has been weak, and inflation has been eating into the wage gains,” said Yardeni. “But the reality is some of the lowest income workers in America are seeing some of the best wage increases they’ve had maybe ever.”
He speculates higher income workers with robust savings are adding to consumers’ capacity to offset inflation pressures.
Yardeni’s base case is stocks will continue to rise, and price pressures will ease once supply chain troubles get worked out
“Companies are doing a great job of hammering away and getting at costs and keeping profit margins at all-time record highs,” he said. “It’s very, very impressive.”
The Dow, S&P 500 and tech-heavy Nasdaq closed the week at record highs. The S&P 500 is at 4,697.53, up 25% so far this year. It’s also 2% away from Yardeni’s year-end target.
“I have a 4,800 for the S&P 500 by the end of this year or the end of next week. I’m working on the timing. The market is moving pretty quick here, and then 5,200 by the end of next year,” said Yardeni, who’s also author of the new book “In Praise of Profits!.”
Yardeni’s latest positivity comes 17 months after his “ray of sunshine” market call on “Trading Nation.” In the midst of Covid-19 lockdowns in Spring 2020, he predicted a “pretty broad bull market” was ahead.
Now, he suggests the biggest hardships associated with the pandemic are behind the United States.
“Enough people have been vaccinated that the economy is performing just fine. It’s really not seeing that the pandemic is getting in the way of economic growth,” said Yardeni. “It’s probably another reason why we’re having yet another move to record highs in the market.”
Yardeni continues to recommend overweighting stocks. Over the next 12 months, he likes the value mid and small cap stocks offer to investors. He also lists technology, financials and energy as his top picks within the S&P 500.
“We’re looking at a continuation of the bull market,” Yardeni said.