Ed Yardeni remains bullish on the U.S. stock market, which he thinks is experiencing a "roaring 2020s kind of scenario" and could benefit from "M&A mania" under theTrump administration.
The Yardeni Research president, speaking Wednesday on CNBC's "Closing Bell," continues to expect the S&P 500 to hit 7,000 by year end and said that small- and mid-cap bank and technology stocks may benefit from an expected uptick in mergers and acquisitions.
Moreover, the researcher's $285-a-share average earnings forecast for the S&P 500 for 2025, likely the highest on Wall Street, "may be a conservative number," Yardeni said.
He and stock analysts have raised their fourth-quarter 2024 earnings outlooks. Last year ended with better-than-expected earnings momentum, he noted.
“I think we’ve got a roaring 2020s kind of bull market here and valuations clearly are stretched on the larger caps, and the SMID-cap (small- and mid-caps) are looking more interesting, particularly the mid-caps more than the small-caps,” based on the fundamentals, Yardeni said.
The mid-cap S&P 400 has better earnings performance expectations than the small-cap S&P 600 fundamentals, he suggested.
The stock market will continue to be driven by earnings, according to Yardeni, who said that productivity is continuing to improve and appears to be back to normal growth. Technology is boosting productivity, which means record profit margins and the S&P 500 likely reaching $400 a share by 2029, Yardeni said, detailing the "roaring 2020s" scenario.
Last week, concerns over the bond market melted, a Federal Reserve official indicated that the central bank may cut more than once this year and the inflation report was better than expected, Yardeni noted.
Image: Bloomberg
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