Stocks are unlikely to retest bear market lows and there’s too much pessimism about the US economy, market veteran Ed Yardeni says

• There’s too much pessimism about the US economy, says Ed Yardeni at Yardeni Research.

• He told CNBC that investors may have missed out if they ditched stocks after Jamie Dimon sounded alarms about an economic “hurricane”.

• The S&P 500 has risen about 19% since hitting a bear-market low in October.

Investors may miss out on potential stock market gains if they grow too wary about the US economy, which is likely to avoid an outright recession, said Wall Street veteran Ed Yardeni as the S&P 500 inched closer to entering a bull market.

“I’ve been among the bulls, especially in late October … I thought there was way too much pessimism…in some of these surveys of confidence about the market, about as much pessimism as we saw back in March of 2009. And certainly, surely things aren’t anywhere near as bad as that,” the Yardeni Research chief investment strategist said in a CNBC interview late Monday.

“We’ve been in a recession since last year, but it’s a rolling recession and it keeps rolling in different industries and all in all, it isn’t adding up to an economy-wide recession,” he said. A better-than-expected performance by the economy should help prevent stocks from revisiting bear-market lows.  

Yardeni said a highlight of pessimism about the economy came from JPMorgan Chase CEO Jamie Dimon last June when he warned of an oncoming economic “hurricane.”

He noted the S&P 500 made a new low in June after Dimon’s declaration, then in October, it moved 2% below that trough. The market “has been doing fine” since then, Yardeni said.

“I just quibble with the fact that somebody who’s as influential is Jamie Dimon has been promoting pessimism when what he really should do is just focus on his bank results, and they were spectacular at the end of last last week, just totally at odds with his pessimism,” he said.

Last week, Dimon warned investors of “storm clouds” ahead for the world’s largest economy. That warning accompanied strong financial results from the investment bank, which turned in record revenue of $38.3 billion that beat expectations on the back of higher interest income.

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“The October low wasn’t really much lower than the June low. So I think if anybody listened to Dimon and got out, they’ve missed a pretty good recovery in the market.`’

The S&P 500 has climbed 19% from its low of 3,491.58 notched on October 13. It dropped to that level after the September 2022 inflation report showed core inflation rising to a four-decade high, bolstering expectations of a hawkish response by the Federal Reserve. But the index swiftly rebounded and ended October up by 8%.

So far, the first-quarter earnings season shows that banks have been able to raise their deposit rates and deliver an increase in net interest margins, which is “quite an achievement,” Yardeni said. Meanwhile, a feared credit crunch has yet to develop with loans at all-time highs.

“I think instead of maybe earnings being down 5% to 7%, they might be down more like 4% to 5% in the first quarter,” he said

Read the original article on Business Insider