Edward Yardeni, President at Yardeni Research, Talks Earnings

Summary

Podcast Summary: Bloomberg Talks

Episode: Edward Yardeni, President at Yardeni Research, Talks Earnings

Date: May 12, 2026
Host: Bloomberg

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Episode Overview

This episode of Bloomberg Talks features Edward Yardeni, President of Yardeni Research, renowned for his synthesis of economic and fundamental analysis. The conversation centers on the ongoing bull market, the persistent "wall of worry" among investors, and the state of corporate earnings driving market performance. Yardeni offers insights into market breadth, sector rotation, the limitations of econometric models, and how geopolitical crises intersect with investment opportunities.

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Key Discussion Points and Insights

1. The "Wall of Worry" and Bull Market Sentiment

• Market Psychology: Yardeni highlights that the current bull market is characterized by ongoing worries—ranging from geopolitical instability (like the Middle East) to concerns about consumer spending and bond markets. He emphasizes that skepticism and fear are actually healthy for market advances.
• Contrarian Perspective: He recounts making some of his best market calls at times of maximum pessimism among investors.
  • Quote:

    "I made some of my best calls on market bottoms when... my gut was hurting and everybody was, was in a panic mode."
    — Ed Yardeni [01:16]

2. Earnings as the Market's Driving Force

• Earnings Breadth Improves: Yardeni sees earnings as the main driver of the equity rally, not speculation or technical factors. He notes that S&P 500 earnings breadth is actually improving, and small and mid-cap earnings are showing signs of revival.
• Data-Driven Optimism:

  "For the S&P 500, earnings breadth is actually improving. And not only that, but we've got the small cap and mid cap earnings which had been kind of in a coma since 2022... they're starting to really perk up."
  — Ed Yardeni [02:39]

3. Market Breadth & Sector Rotation

• Breadth Concerns: The co-host raises concerns about market narrowness, with large tech names leading the advance.
• Rotation Potential: Yardeni asserts that other sectors, including consumer discretionary, communication services, and financials, are beginning to participate. He mentions improving prospects for private credit and the possibility for "legs" in small and mid-cap sectors.
• Notable Sectors:

  "Consumer discretionary has been boosted recently by improvement in Amazon... But financials I think still have prospects of doing better... Private credit situation... might actually be getting better as the economy continues to chug along."
  — Ed Yardeni [03:38]

4. Reality-Based Economics & Critique of Quantitative Methods

• Skepticism Toward Over-Quantification: Yardeni jokes about the proliferation of complex quantitative strategies and “mathiness” on Wall Street, advocating for practicality over abstraction.

• Current Analysis: He credits Ben Bernanke’s notion of "current analysis," focusing on real economic interactions rather than models for their own sake.

  • Quote:

    "I think a lot of economists start with theories, start with the models and then look for the data to confirm it. I work the other way around... And that's what I practice, I've been practicing all along is current analysis. Okay, but that's a reality-based economic."
    — Ed Yardeni [05:16]

• Political Economy vs. Social Science:

  "We used to call it political economy and then suddenly it became a social science. And it's not a science. It's political economy. It's too complicated to put in a formula."
  — Ed Yardeni [06:45]

5. Geopolitical Risks and Market Resilience

• Markets Look Through Crises: Yardeni explains that historical performance shows geopolitical crises (such as wars or tariffs) are typically buying opportunities after a brief period of fear. He cites recent market behavior following the war in Iran and the search for "exit ramps" as investors refocus on corporate earnings.
  • Quote:

    "Based on history... geopolitical crises in the past have turned out to be buying opportunities. So when we get a geopolitical crisis, we get kind of scared for a couple of weeks... Then everybody remembers that that's actually a buying opportunity."
    — Ed Yardeni [07:20]

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Notable Quotes & Memorable Moments

• On Contrarian Indicators:

  "You don't want everybody being bullish. You want people to have concerns."
  — Ed Yardeni [01:12]

• On Quantitative Jargon:

  "I don't think I'm inventing a phrase here, but it's all Greek to me."
  — Ed Yardeni [05:16]

• Lighthearted Close:
  Podcast host jokes about Ed Yardeni's dog, Max:

  "He's walking. Probably reading the Wall Street Journal, Ed. Or peeing on it. One of the two."
  — Podcast Host [08:13]

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Important Timestamps

• [01:09] Yardeni discusses climbing the wall of worry and the value of skepticism in markets.
• [02:39] Introduction of improving earnings breadth in small and mid-caps.
• [03:38] Sector rotation potential is explored.
• [05:16] Critique of econometric models; endorsement of reality-based, "current analysis."
• [06:45] Reflection on economics as "political economy" and its limits as a science.
• [07:20] Explanation of market reaction to geopolitical crises as buying opportunities.
• [08:09] Lighthearted banter about Yardeni’s dog, Max.

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Conclusion

Edward Yardeni offers a nuanced, optimistic perspective on the current bull market, crediting improving earnings as its underlying driver and emphasizing the healthy role of skepticism and fear. He expresses measured optimism for sector rotation, criticizes the overuse of quantitative models in modern economics, and explains that geopolitical crises tend to be buying opportunities, not disasters, for equity investors.

The conversation is marked by Yardeni’s straightforward, data-first approach and the hosts’ engaging style, making complex market trends accessible and relatable.

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Transcript

[Indiana University Announcer]

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[Ed Yardeni]

Bloomberg Audio Studios Podcasts Radio News In October of

[Podcast Host]

a number of years ago, Ralph Ann Kapora, the giant of technical analysis, and Edward Yardening with all of his synthesis of economics and fundamental analysis, got on board this bull market. There was fear on the streets and they said go long. It's one of the great calls of the modern age. Edward Yardening joins us this morning, readjusting ever higher ed with your beautiful CJ Lawrence like charts. Even with CJ Lawrence Green in the banner, you do a log extrapolation of The S&P 500 is that all this is is we're climb wall of worry because no one else out there has the courage to simply extrapolate forward.

[Ed Yardeni]

Well, I think we definitely are climbing a wall of worry and that's the best kind of bull market you can have. You don't want everybody being bullish. You want people to have concerns. I don't want people to worry on a personal level, but on a professional level when I see a lot of bearishness from a contrarian perspective, it usually I made some of my best calls on market bottoms when, when my gut was hurting and everybody was, was in a panic mode. So we're not in panic mode right now. But on the other hand there are a lot of people worrying about what's going on in the Middle east. And I'm not saying that's not worrisome, but it's, it's certainly adding to the concerns. They're worrying about the bond market. They're, they're worrying about a, a key economy that the consumers not going to continue to spend and they're working worrying about too much capital spending. So there's a lot of worries up there out there. But meanwhile it's really pretty simple. The, the market is also getting kind of thrust up. It's been a rocket ship because of earnings.

[Co-Host]

And what we're starting to see once again that you know, is a pillar of this market, I guess last year was, you know, kind of a, a narrower breadth in this marketplace. Is the big tech stocks leading this market higher on good earnings? Certainly. Are you concerned about that, that I guess narrowing breadth in the market?

[Ed Yardeni]

Yeah. Well again I think people are always looking for something to worry about with regards to the market and the breadth issue is back. But however, once again I would point out that the earnings story is fantastic. It's the. For the s and P500 earnings breadth is actually improving. And not only that, but we've got the small cap and mid cap earnings which had been kind of in a coma since 2022. For the past six months or so they're, they're starting to really perk up and expectations are already showing record high earnings outlook for, for the Smith caps.

[Co-Host]

So I mean again Ed, I guess towards the end of last year we did have kind of a rotation out of some of those big cap growth names into some more. Is there any legs left in that kind of trade? Maybe a small mid cap as you suggested, Maybe some other sectors here?

[Ed Yardeni]

Well, I think that other sectors will participate in this latest rally in this bull market. I think we're saying, you know, one of the problems is the magnificent seven hour are contributing to that. So consumer discretionary has been boosted recently by improvement in Amazon and communication services have done well because Google and, and Metta dominate that space. But financials I think still have prospects of doing better. You know there's signs that private credit situation is not get the worst. Might actually be be getting better as the economy continues to chug along.

[Podcast Host]

Ed Yardening with us folks again I can't say enough about his newsletter. It's wonderful daily brief really one of the major subscriptions out there. And I'm going to assume long ago and far away at Yale they didn't have econ574 applied empirical methods. This is back Ed Yardeni folks was back in a simpler time of Macro Micro. Our Simon White this morning at off the London desk has a spectacular walkthrough of derivative finance. Looking at the Greek letters of gamma dispersion and correlation and it's worry, worry, worry. Omg, things are terrible if we created a wall of worry with our mathiness in modern global Wall Street.

[Ed Yardeni]

Well, I don't think I'm inventing a phrase here, but it's all Greek to me. I actually did an econometric dissertation for James Tobin and I proved that his theory was right for corporations. And so he loved it. And I got through. I got my PhD and moved on. But yeah, I think there's too much. I think a lot of economists start with theories, start with the models and then look for the data to confirm it. I work the other way around. You know, Ben Bernanke in his memoir of being at the Fed said that when he joined the Fed he had to learn something that was rather new to him and he called the current analysis. And I kind of like that. In other words, he had to learn how the world really works. I had to learn about markets and how markets interact with data and data impacts the markets. And that's what I practice, I've been practicing all along is current analysis. Okay, but that's a reality based economic.

[Podcast Host]

Let me get this thing because Paul's got four more questions. The bottom line, Ed, is we have physics envy. And it started with, you know, Newtonian mechanics, 19th century, and now we've got alpha, beta, gamma, epsilon, delta, the others. And I just, folks, I just think the difference, the distinction between a Yardeni strategy and some of the quant strategy is the angst of the age. Worry, worry. Omg, Paul. Gamma distortion.

[Ed Yardeni]

We used, we call it, we used to call it political economy and then suddenly it became a social science. And it's not a science. It's, it's political economy. It, it's too complicated to put in a formula.

[Co-Host]

So Ed, I mean on that front there, we've got the markets got a lot of crosswinds as it relates to geopolitics. Will there be tariffs from earlier this year and last year to the war in Iran. But boy, that at least the stock market seems to look through all of that and focus on maybe just the earnings which are arguably the most fundamental.

[Ed Yardeni]

Yeah, I think what's going on in the stock market is everybody knows that based on history that, that crises, geopolitical crises in the past have turned out to be buying opportunities. So when we get a geopolitical crisis, we get kind of scared for a couple of weeks, maybe four weeks, as we did in March. And then everybody remembers that that's actually a buying opportunity. And that's exactly what happened on March 31 is suddenly investors said, well, you know, if, if the president's going to be looking for an exit ramp and we're going to have a cease fire, then we can buy stocks today at a lower price with record high earnings.

[Podcast Host]

Ed, thank you so much. How's your beast doing? I don't see your dog in the background there in your couch.

[Ed Yardeni]

Dog is. Max is walking about.

[Podcast Host]

He's walking. Probably reading the Wall Street Journal, Ed. Or peeing on it. One of the two. Edgar. Danny, thank you so much.

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