Yardeni Says Fed May Need to Raise Rates Three Times

Summary

Edward Yardeni tells Bloomberg Money that the U.S. economy remains resilient and the labor market is strong, so the stock market will continue to outperform despite inflation and potential Fed rate hikes. He sees today's 4-5% Treasury yields as a normal, healthy level, not a warning, and advises long-term investors to stick with equities.

• Yardeni believes the U.S. economy is resilient and the labor market is in good shape.
• He thinks the Federal Reserve may need to raise rates one to three times due to persistent inflation.
• The two-year Treasury yield is already pricing in further tightening.
• Despite rate hikes, the stock market will continue to defy bears and pessimists.
• Current 4-5% ten-year yields are normal and reflect a healthy economy; the zero-rate period was the aberration.
• Long-term retirement investors should maintain equity exposure rather than pivot on rate fears.
• Mortgage rates appear high only relative to the abnormal low-rate era, not versus a healthy economy.