Ed Yardeni, President at Yardeni Research, brings his bullish economic insights, discussing how inflation could impact Fed rate policies and looming tariffs from Trump. Jay Hatfield, CEO at Infrastructure Capital Management, dives into the nuances of retail sales and the ongoing gradual disinflation trend. Lindsey Piegza, Chief Economist at Stifel, provides expert commentary on the Federal Reserve's monetary approach, analyzing the tensions between inflation concerns and economic growth. Together, they tackle critical issues affecting today's market landscape.
Despite concerns of recession, the economy's resilience is evident through a strong job market and stable GDP growth around 3%.
The ongoing tariff discussions signal a shift towards negotiation rather than hostility, potentially fostering a more stable economic environment.
Deep dives
Economic Resilience Observed
The economy has demonstrated considerable resilience over the past three years, challenging predictions of an impending recession. Even with widespread anticipation of economic downturns, actual outcomes have been more stable than expected. The speaker highlights that the job market has remained robust, marked by an unemployment rate around 4% and real GDP growth hovering at approximately 3%. Such indicators suggest that the economy deserves greater respect and confidence from investors and analysts.
Fed's Interest Rate Policy Insights
The current monetary policy landscape indicates that there is little justification for the Federal Reserve to continue lowering interest rates, given that key economic indicators such as inflation and GDP growth have reached a balance. Recent CPI data, although hotter than anticipated, does not seem to threaten the underlying economy's strength, particularly due to positive productivity trends. With real GDP increasing and inflation rates stabilizing around 2.5% to 3%, maintaining current interest rates appears to be a prudent course. This perspective is bolstered by observations that the bond market continues to reflect confidence in this strategy.
Earnings Projections and Stock Market Outlook
Despite a significant rise in stock market valuations since late 2022, there remains a belief in the potential for further growth driven primarily by earnings rather than merely speculative valuations. The speaker forecasts earnings for the S&P 500 to reach $285 per share for the current year and potentially $400 by 2029, suggesting that a tech-led productivity boom could drive significant market gains. This optimistic outlook also highlights the risks associated with a market that becomes excessively reliant on valuation increases, as it raises the potential for a sharp correction. As such, focusing on earnings will be crucial for sustained growth in the equity market.
Potential Impacts of Tariffs on Market Dynamics
The discussion around tariffs emphasizes a more nuanced approach, with the term 'reciprocal' being preferred over 'retaliatory', as it carries implications of negotiation rather than unilateral action. Historical contexts suggest that aggressive tariff implementation without regard for international repercussions could evoke negative outcomes, as seen during the Great Depression. However, there is optimism that current tariff discussions may lead to lower tariffs rather than heightening market tensions. Such diplomacy in trade could foster a more stable economic environment and reduce risks for investors.
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyFebruary 14th, 2025 Featuring:
Ed Yardeni, President at Yardeni Research, on Fed rate cuts as inflation heats up and Trump's tariffs loom
Jay Hatfield, CEO at Infrastructure Capital Management, brings us into retail sales and discusses why he believes gradual disinflation is still in play
Lindsey Piegza, Chief Economist at Stifel, joins for an extended discussion on the Fed and why it could hike rates