The Recession Never Came. Is This Bull Market Just Getting Started?
Speakers
Ed Yardeni
— President, Yardeni Research
Summary
Ed Yardeni explains why the widely expected US recession has not arrived and why the bull market may still have room to run. He cites resilient baby boomer spending, solid corporate earnings, and AI-driven productivity as key supports. He also gives portfolio views on stocks, bonds, gold, and emerging markets.
- The US economy has repeatedly avoided the most widely anticipated recession and continues to perform well.
- Baby boomer spending is supporting healthcare, leisure, hospitality, travel, and airlines.
- He favors an earnings-led bull market over a valuation-led melt-up and sees stocks as attractive if earnings hold.
- The biggest AI opportunity may be companies using AI for productivity, including insurance, cybersecurity, financials, and healthcare.
- He suggests dividend-paying stocks for young long-term investors.
- Bonds and municipal bonds are attractive income sources, and gold may deserve a 5-10% allocation.
- Emerging markets funds offer exposure to growing middle classes and consumer growth.
- Key risks include a stock market decline that could hit consumer spending, but the Fed may cushion severe downturns.
Ideas
US bull market is earnings-driven.
The widely anticipated recession has not arrived and the US economy is performing well. The stock market is making new highs, the earnings picture is solid, and stocks are attractive if you believe the earnings; this is an earnings-led bull market rather than a valuation-led melt-up, with companies repeatedly beating expectations and profit margins holding up.
Bet on companies using AI productively.
The larger AI opportunity is betting on companies that use AI to improve productivity and profits, not just the AI infrastructure trade. Insurance companies are using AI to cut costs; software and especially cybersecurity should benefit because AI increases cyber threats; financials and fintech are spending heavily to improve productivity; and healthcare AI can improve recordkeeping and diagnosis.
Boomers spend on healthcare and travel.
Retiring baby boomers are continuing to spend rather than retrenching, particularly on healthcare, dining and travel. Healthcare is booming with strong employment gains, leisure and hospitality are strong, and airlines are doing extremely well as baby boomers adopt a YOLO spend-it-while-you-can attitude.
Bonds and munis offer attractive income.
On a shorter-term basis, bonds yielding around 4.5% are pretty good, and municipal bonds are very good for many investors, suggesting a role for fixed income in portfolios.
Gold merits small portfolio allocation.
He has never been a gold bug, but now believes gold may have a place as roughly 5-10% of a portfolio, implying a small strategic allocation.
Emerging markets gain from growing consumers.
Investors should consider an emerging markets fund because emerging markets are developing, with expanding middle classes and more consumers, offering exposure beyond the US.
