Still Roaring

Episode Overview

• Ed Yardeni argues that despite numerous shocks—including the pandemic, supply chain disruptions, and aggressive monetary tightening—the U.S. economy has shown remarkable resilience and avoided a widely predicted recession.
• He dismisses concerns about a stock market bubble, suggesting there is more of a "bubble in bubble fears," and maintains a long-term bullish outlook driven by corporate earnings and productivity gains.
• The episode explores structural changes in the labor market, including a decline in the foreign-born workforce and the potential impact of AI on entry-level jobs, as key factors shaping the current economic landscape.
• Yardeni reiterates his "Roaring 2020s" thesis, where productivity improvements, spurred by technology and labor shortages, will be the primary engine of economic growth.

Key Concepts

• Economic Resilience: The core theme is the U.S. economy's ability to withstand significant shocks without collapsing into recession. Yardeni points to the recovery from the pandemic, the navigation of supply chain issues, and the absorption of the fastest monetary tightening cycle in decades as proof of this underlying strength.
• "Bubble in Bubble Fears": Rather than believing the stock market is in a speculative bubble, Yardeni argues that the dominant sentiment is an excessive fear of a bubble. He believes the bull market is fundamentally supported by earnings growth and has further upside potential.
• The "Roaring 2020s" Scenario: This is Yardeni's outlook for the decade, characterized by strong productivity growth. He posits that labor shortages and technological advancements like AI are forcing companies to become more efficient, which will fuel economic expansion and corporate profits.
• Rolling Recessions vs. Economy-Wide Recession: Yardeni suggests that instead of a broad recession, the economy has experienced a series of "rolling recessions" where different sectors weaken at different times, allowing the overall economy to continue growing.
• Structural Labor Market Shifts: The discussion highlights significant changes in the labor supply, including a sharp drop in the foreign-born labor force and a skills mismatch for younger workers entering the job market, possibly exacerbated by the rise of AI.

Quotes

• At 00:57 - "We got a bubble in bubble fears." - Describing his view that the constant discussion and worry about a stock market bubble is more significant than the bubble itself.
• At 01:17 - "I reserved the right to change my mind as often as the president... seemed to be changing his mind about what he wanted to do with tariffs..." - Explaining his past flexibility in forecasting by drawing a parallel to the political unpredictability of the time.
• At 01:39 - "I think what the stock market is discounting is the resilience of the US economy." - Stating the fundamental reason he believes the market continues to perform well despite negative headlines.
• At 01:53 - "I've described it as the most widely anticipated recession of all time that just didn't happen." - Summarizing the persistent but so-far incorrect predictions of an economic downturn over the past several years.
• At 03:17 - "We have recessions, they're just kind of rolling recessions that are hitting the economy in different places at different times, but not adding up to an economy-wide recession." - Explaining his theory on why a broad economic collapse has been averted despite sectoral weaknesses.

Takeaways

• The US economy's resilience is a key factor supporting the current bull market, suggesting investors should focus on underlying strength rather than just headline risks.
• Productivity growth is emerging as the most critical driver for the economy and corporate earnings in the 2020s, with technology and AI playing a central role.
• While the labor market shows signs of softening, particularly for entry-level positions, the overall economy remains at full employment, and real wages are rising, which supports consumer spending.
• The concept of "rolling recessions" in different sectors may be a new paradigm, preventing the kind of widespread, synchronized downturn that many have been expecting.