Will The Bull Rally Continue In 2025? | Ed Yardeni

The market has has two blockbuster years. Can it pull off a third?

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This week the Federal Reserve spooked markets by slowing the expected pace of future rate cuts.

The S&P instantly dropped 3% on the news and bond yields spiked (though half of those losses were recovered by Friday’s close).

Is this just temporary heartburn as the markets digest the news?

Or might this signal that markets have just peaked?

For perspective, we're fortunate to be joined by Dr. Ed Yardeni, President of Yardeni Research.

While Ed thinks that 2025 may start off a little "sloppy" for stocks, he thinks a prolonged earnings bull market is more likely than not to ensue afterwards.

To hear his arguments why, click here or on the video below:

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Adam’s Notes: Ed Yardeni (recorded 12.19.24)

EXECUTIVE SUMMARY:

• The Federal Reserve reduced rates by a total of 100 basis points, including an unexpected 50-basis-point cut in September, signaling a more cautious approach to future cuts. This announcement led to a sharp 3% drop in the S&P 500 and an 80-basis-point rise in bond yields. The market had previously priced in more aggressive cuts, leading to disappointment and volatility.

• Ed highlighted that the U.S. economy has demonstrated resilience, with real GDP growth revised upward to over 3% in Q3 and the Q4 forecast showing similar strength. Unemployment remains near 4%, indicating full employment, while inflation continues to moderate toward the Fed's 2% target. He argued there was no urgent need for the recent rate cuts, as the economy was performing well.

• Given today’s lofty valuations, Ed wouldn’t be surprised to see a potential 10% market correction in the near term,