We have a very special edition today. We have one of our favorite Wall Street strategists, Ed Yardeni, who has a research firm that we follow very, very closely. We’re going to talk about Ed’s viewpoint on the economy and the markets. Ed is one of the few optimists on Wall Street, there are not many of them. We are so happy to have him on the show.
Rolling Recession and Resilient Markets
Ed believes we’ve been in a rolling recession since the beginning of last year.
- The single-family housing sector has been in a recession
- Retailers got stuck with a lot of inventory at the end of last year and had to discount because consumers pivoted away from buying goods to buying services
- There may be a recession in the commercial real estate market
But all in all, it just hasn’t added up to an economy-wide recession. That’s important because it’s relevant to earnings, and earnings are relevant to the stock market.
- We’ve seen that the market always seems to be able to find something to invest in
- We’ve had a price rebound in the mega-cap 8 and other areas of the market as well
- International markets have rebounded
”I got a chuckle the other day.. people accuse you of being a perma bull and you took that as the highest form of flattery.Bob Payne
The Market Goes Up
If you look at a chart of the S&P 500 or the Dow and go all the way back to the beginning of the 1920s, the reality is the market goes up most of the time. But investors get fixated on the historical negatives like the Great Depression and not too long ago the financial crisis. The market took a dive back then but it did recover.
The problem with trying to time the market
The problem with trying to get out at the top is you have to make sure you get in at the bottom. You’re probably going to get back in at the same place you were many years later and miss the compounding of dividends.
”..if you look at a chart of the S&P 500 or the Dow and go all the way back .. the reality is the market goes up.Ed Yardeni
Technology and innovation could help solve the labor shortages
- When the economy turns down businesses work twice as hard
- Technology can solve problems and increase standards of living
- If there’s a shortage of something we use technology to replace it with something better and cheaper
- Baby boomers created a flood of workers in the 70s and 80s and now they’re retiring
- Robotics and automation are already a big part of solving a need for labor
”People say, technology will replace people to where we're not going have jobs. But, we have an unemployment rate that's as low as the 60s.. technology has certainly advanced since the 1960s, clearly it doesn't displace workers.. it enhances productivity.Ryan Payne
Hidden Facts of Finance
After 6.3 trillion spent on renewable energy and another 3.3 trillion spent on electricity networks since 2005, global energy use is still 80% reliant on fossil fuels. From a low of 70% in Europe to 86% in emerging markets, the global measure has declined by just 5% since 2005, even with all that investment.
Assets continue to flow into institutional government money funds about 200 billion over the course the last couple of weeks the asset class at an all time record high at over 5.5 trillion.