Market veteran Ed Yardeni predicts a potential 10% correction in the stock market despite the continued strength of the US economy. Yardeni noted that strong retail sales in March and an updated first-quarter GDP growth estimate of 2.8% point to a robust economy. Consumers are driving this growth as they continue spending, defying recession fears.
Yardeni cautioned that the stock market could fall 10% and test its 200-day moving average around 4,700 in the next few months. Rising bond yields and declining stock prices, with the S&P 500 falling below its 50-day moving average, indicate a possible correction. Yardeni believes the market may be moving towards being oversold after reaching overbought levels last month.
Despite the potential correction, the US economy remains strong. Strong March retail sales and an increased GDP growth estimate of 2.8% demonstrate the economy’s resilience. Yardeni pointed out that consumers are still spending due to rising disposable income, a comfortable retirement for many Americans, and an influx of immigrants contributing to the economy.
In conclusion, Yardeni suggested that although the stock market may face a correction, the US economy continues to show strength. Real disposable income is on the rise, leading to increased consumer spending and overall economic growth. Despite market volatility, the economic outlook remains positive.