FX168 Financial News Agency (North America) - Market veteran Ed Yardeni stated that the stock market frenzy sparked by Donald Trump's election victory will continue.
Yardeni reiterated his prediction on Monday that the S&P 500 index would reach 10,000 points by the end of this century, an increase of 66% from the current level. He also raised his year-end 2024 forecast to 6,100 points, implying a 1.8% increase.
The long-term forecaster pointed out that Trump's victory (and the possibility of a Republican sweep of Congress) has driven the stock market higher. Following the stock market's best week of the year, the possibility of a 'Roaring Twenties' scenario has increased.
He stated that as the president-elect announces more business-friendly policies, the sentiment that led to last week's significant rally may continue to boost investor confidence.
"We believe these forecasts are consistent with our 'Roaring Twenties' scenario, which is being driven by the animal spirits that Trump 2.0 economic policies are expected to generate," Yardeni wrote.
Trump's victory earlier on Wednesday pushed the S&P 500 index, the Nasdaq index, and the Dow Jones Industrial Average all to record highs, benefiting from the 'Trump trade,' where everything from Bitcoin to the US dollar to Tesla soared.
Investors widely expect Trump's second presidential term to bring more business-friendly policies, including reducing regulations and lowering taxes, which will help boost corporate profits.
Therefore, Yardeni stated that he expects industry analysts to raise profit expectations for the S&P 500 index and to raise his own profit expectations for 2025 from $275 to $285 and for 2026 from $300 to $320. He stated that these expectations assume Trump will quickly reduce the corporate tax rate from 21% to 15%.
He added that if the conflict between Russia and Ukraine and the Middle East crisis are resolved faster than initially expected, market optimism may further intensify.
However, Yardeni also warned that if stock prices rise too quickly, Wall Street's frenzy and overvaluation of some super large cap stocks could lay the groundwork for a difficult decline.
"Viewing emotions may be related to irrational prosperity, leading to a stock market crash, thereby laying the groundwork for a crash," he said.
Yardeni stated that although he does not see huge risks of a bear market emerging under the current optimistic sentiment, he expects a correction to occur before 2020.
