Ed Yardeni Says Stocks Need to Slow Down
Ed Yardeni is worried about financial markets as stock valuations soar past profit expectations, according to Markets Insider.
On Monday, Ed Yardeni, president of Yardeni Research stated that investors need to"come to their senses." Equity valuations have outpaced expectations for near-term profits, leading to a price-earnings build-up that is eerily similar to the dotcom bubble. The S&P 500's price-to-earnings ratio has now grown to 22 as of Friday, almost 3 percent greater than its peak in February.
"Are stock investors delusional? Not yet, but that could be an apt characterization if stock prices continue to rise faster than forward earnings," he said. Furthermore, the economic environment doesn't support the market rally. Rising COVID-19 cases pose a serious risk to equities. Yardeni also noted that the shift to online classes could create "a serious problem for parents' ability to return to work."
The Federal Reserve "continues to keep the wild party going" with its support packages that protect investors from "the harsh reality of the health crisis" and its economic fallout, Yardeni said. "There's certainly mounting evidence that the V-shaped economic recovery during May and June is slowing or even stalling in July," the strategist said. "That could lead to more delinquencies and defaults on loans and bonds."