00:00Ed Yardeni of Yardeni Research, cutting his year-end target on the S&P to 7,900 from a street
00:06-fi 8,400,
00:08writing, the risk of a downturn have increased. We've raised the odds of a bearish outcome from 20% to
00:1330%.
00:14Ed joins us now for more. Ed, welcome to the program, sir. You've dialed things back just a bit, slightly
00:18less bullish.
00:19What's weighing on you heading into year-end?
00:21Yeah, well, the key point in terms of what I've changed is I'm thinking it's going to take a little
00:27longer
00:28to get to 8,400. I don't think it's likely to happen by the end of the year now. I
00:33think it's more likely
00:34to happen by the middle of next year. 7,900 is still obviously above where we are now, so it
00:39would still
00:40give us an awfully good year of returns. But the issue for me is geopolitical developments have
00:46deteriorated. The war in the Middle East has escalated, and we're looking at higher for longer
00:53oil prices and higher for longer oil prices increase the odds that some of that inflationary
00:59pressures from energy will spill over into core prices, as Bill Dudley, your interview with Bill
01:06Dudley, excellent interview, indicated. And then in turn, we have not a one-and-done situation here
01:15with the Fed. We've got a situation where we're likely to have another one or two increases this
01:21year. And then the bond market is concerning. My friends, the bond vigilantes, have kind of gone
01:28wild all around the world. And I'm particularly concerned about the unwinding of the carry trade
01:34in Japan. The U.S. officials keep putting pressure on the Japanese to increase their interest rates
01:42at a faster rate, which makes sense from a macroeconomic standpoint. But unfortunately,
01:49we may find out that this leads to more unwinding of the carry trade, which means hedge funds that
01:55borrowed in Japan at very low interest rates when the yen was getting weaker now will flip around and
02:04say, you know, that financing is just too expensive now, too risky.
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