President & Founder at Yardeni Research Ed Yardeni Talks Potential Market Breakdown

Summary

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Bloomberg Talks

Episode: President & Founder at Yardeni Research Ed Yardeni Talks Potential Market Breakdown
Date: March 10, 2026
Host: Tom Keene
Guest: Ed Yardeni, Founder & President, Yardeni Research
Co-hosts/Contributors: Damien Sasser, Alexis Christopher

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Episode Overview

This episode features Dr. Ed Yardeni, renowned market strategist and founder of Yardeni Research, discussing his outlook on the potential for a market breakdown. The conversation centers on the shifting probabilities of a market “roaring twenties” bull run, an economic meltdown, global geopolitical disruptions (notably the Strait of Hormuz crisis and war with Iran), the resilience of US markets, tech sector headwinds, and the evolving narrative around stagflation. Yardeni addresses both the near-term risks to markets and his ongoing optimism rooted in economic and earnings resilience, offering candid thoughts on investor psychology, market corrections, and the misunderstood role of data.

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Key Discussion Points and Insights

1. Yardeni’s Probability Shifts: From Roaring Bull to Cautious Bearishness

• Market Scenarios and Probabilities

  • Ed Yardeni explains his evolving outlook, previously assigning a 60% chance to continued bull (“Roaring 2020s”) but now increasing the possibility of negative shocks (35% probability for “things going wrong,” or meltdown, up from 20%) due to recent geopolitical stresses. Melt-up probability is cut to just 5%.
    • Quote: “Well now just 5% for a melt up that’s very unlikely. And 35% for things going wrong, which they are.” (00:53, Ed Yardeni)

• Geopolitical Tensions—Strait of Hormuz

  • Yardeni highlights the conflict affecting global oil supply chains and investor confidence. The Strait of Hormuz closure is unprecedented and remains the biggest short-term caution.
    • Quote: “It’s hard to get optimistic here unless we see some tankers actually going through there without any incident.” (02:21, Ed Yardeni)

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2. Market Dynamics: Tech, Earnings, and Investor Sentiment

• Tech Stock Bifurcation

  • “Magnificent Seven” tech giants, which Yardeni previously called to underweight, are down 6.3% this year. He describes increasing competition among them as an “arms race,” a shift from their previous dominance.
    • Quote: “The companies that still have moats... are fine. The problem for the Magnificent Seven is they used to be kind of like the Game of Thrones... But ever since, they’re competing like mad.” (03:23, Ed Yardeni)

• Responding to Perma Bears

  • Yardeni counters prevailing pessimism, warning that perpetual bearishness leads investors to miss out on market recoveries.
    • Quote: “Perma bears will get you out at the top... in the middle... and at the bottom you'll never be in the stock market if you have a pessimistic attitude.” (06:24, Ed Yardeni)
  • He asserts that market corrections and bear markets are typically buying opportunities, not reasons to panic.

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3. The Role of Data: Economic Resilience and Productivity

• Questioning Data’s Relevance
  • Yardeni discusses how rapid market reactions now often render economic data (payrolls, CPI) almost instantly stale, but he insists earnings and economic resilience remain essential.
    • Quote: "The market tends to go up as long as earnings are going up as long as the economy is doing well. And that's been the case for a long, long time." (06:24, Ed Yardeni)
  • He spotlights productivity gains as the underlying bullish engine, more significant than headline employment data.
    • Quote: “That's really the bullish story, is that productivity is making a huge comeback.” (07:31, Ed Yardeni)

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4. Liquidity Risks and Financial System Shocks

• Fed’s Crisis Management

  • Yardeni identifies credit crunches—more than other shocks—as inflection points for market meltdowns, but gives credit to the Fed’s recent agility (“whack a mole”) in containing crises before they spiral.
    • Quote: “It’s credit crunches that cause recessions this time around... remember that the Fed’s awfully good at playing whack a mole in the credit markets.” (08:42, Ed Yardeni)

• Tech Sector’s Current Strength

  • Unlike 2001’s tech collapse, today’s giants generate robust cash flows and their capex on AI is likely to be profitable, reducing systemic risk from the sector.
    • Quote: “They’re huge cash generators. I think their expenditures are going to prove to be very profitable.” (09:52, Ed Yardeni)

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5. Stagflation Redux, Oil Shocks, and U.S. Resilience

• Stagflation 1970s Parallels

  • Yardeni differentiates the current environment from the 1970s: the US is now an exporter and less energy-intensive, helping buffer the global oil shock, although the closure of Hormuz represents a new historical risk.
    • Quote: “The US is much less energy intensive and oh, by the way, we’re an exporter... which is a huge difference from what happened in the 1970s.” (11:20, Ed Yardeni)
  • His bearish short-term stance is “totally predicated on this geopolitical development.” (11:20)

• Alternative Data and AI Use

  • Yardeni mentions using AI tools (notably “Claude”) to analyze shipping lane data in real time as part of his firm’s evolving market research.
    • Quote: “One of the reasons I’m very positive on AI is because we’re using it all the time and we’ve become real fans of Claude... asking Claude to follow the shipping lanes.” (12:43, Ed Yardeni)

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6. Pullbacks, Corrections, and Market Psychology

• Defining Corrections

  • Yardeni clarifies the difference between pullbacks, corrections (10–20% drops), and bear markets (20%+), and observes that despite market jitters, the economy and markets have shown notable resilience.
    • Quote: “A correction is 10 to 20% decline. A bear market is more than 20%. I happen to think there is a 35% probability... that would lead to a correction of 10 to 15%. I’m actually amazed by the resilience of... the stock market.” (14:19, Ed Yardeni)

• Resilience and Upside Targets

  • Even with increased short-term risks, Yardeni maintains his year-end S&P 500 target of 7,700, echoing his faith in the long-term market upside as opportunities arise from each sell-off.
    • Quote: “Well, I haven’t given up on 7700 by the end of the year... I have this tendency to look at sell offs as buying opportunities rather than reasons to panic.” (15:21, Ed Yardeni)

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Notable Quotes

• Market Probability Shift:
  “Well now just 5% for a melt up that’s very unlikely. And 35% for things going wrong, which they are.” (00:53, Ed Yardeni)

• On Geopolitical Risks:
  “It’s hard to get optimistic here unless we see some tankers actually going through there without any incident.” (02:21, Ed Yardeni)

• On Tech Market Structure:
  “The problem for the Magnificent Seven is they used to be kind of like the Game of Thrones... But ever since, they’re competing like mad and it’s... an arms race.” (03:23, Ed Yardeni)

• On Perma Bears:
  “Perma bears will get you out at the top... in the middle... and at the bottom you’ll never be in the stock market if you have a pessimistic attitude.” (06:24, Ed Yardeni)

• On Data Relevance:
  “That’s really the bullish story, is that productivity is making a huge comeback.” (07:31, Ed Yardeni)

• On Liquidity Shocks:
  “The Fed’s awfully good at playing whack a mole in the credit markets.” (08:42, Ed Yardeni)

• On AI in Research:
  “We’ve become real fans of Claude... asking Claude to follow the shipping lanes.” (12:43, Ed Yardeni)

• On Long-Term Optimism:
  “Well, I haven’t given up on 7700 by the end of the year... I have this tendency to look at sell offs as buying opportunities rather than reasons to panic.” (15:21, Ed Yardeni)

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Timestamps for Key Segments

• 00:53 – Probabilities shift for bull vs. meltdown scenarios
• 02:21 – Strait of Hormuz crisis and market impact
• 03:23 – Magnificent Seven tech bifurcation & competition
• 06:24 – The danger of constant pessimism (“perma bears”)
• 07:31 – The overlooked importance of productivity data
• 08:42 – Historical context of liquidity shocks and Fed intervention
• 09:52 – Tech earnings vs. past tech crashes
• 11:20 – Stagflation parallels & energy market transformation
• 12:43 – Yardeni’s use of AI for real-time shipping analytics
• 14:19 – Market pullback vs. correction definitions; resilience
• 15:21 – Yardeni’s S&P 500 target and view on buying opportunities

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Memorable Moments

• Yardeni compares the “Magnificent Seven” tech giants’ competitive evolution to a Game of Thrones scenario.
• Real-time use of AI (“Claude”) by Yardeni’s firm to analyze shipping data in the midst of crisis.
• Multiple references to the psychology of market corrections—Yardeni persistently frames sell-offs as chances for long-term investors, rather than threats.

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Bottom Line

Dr. Ed Yardeni maintains a nuanced outlook: increased short-term risk of market correction due to geopolitical disruptions, particularly in the oil trade, yet strong overall faith in the US market’s resilience, productivity gains, and ongoing corporate earnings strength. While caution is warranted, Yardeni continues to see corrections as buying opportunities, not causes for panic. He leverages both history and next-generation tools like AI to guide his research, staying optimistic about the year-end prospects for the S&P 500, barring escalation of the current geopolitical crisis.

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Transcript

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Radio news Joining us In the last

[Tom Keene]

48 hours, the great bull market pinata Edward Yardeni joins us. Denny Research how the last 48 hours been when I believe you just shifted probabilities.

[Ed Yardeni]

Absolutely.

[Tom Keene]

Of your roaring thesis.

[Ed Yardeni]

I got to be a bit of a realist given what is going on. Yeah, I'm still sticking with 60% for what I call the roaring 2020. However, I had given 20% to a melt up because things kind of had that potential. Still it's not a high probability and 20% to a meltdown or recession kind of a bucket for everything that could go wrong. Well now just 5% for a melt up that's very unlikely. And 35% for things going wrong, which they are.

[Tom Keene]

Amazon does a 37 to 42 billion dollars bond offering. Damien tells me it's going to be six phone calls. Heath Terry, brilliant over at Citigroup publishes and reaffirms a viability in revenue, in profit in getting things done with all. I agree with that X synthesize in as you mentioned spreads haven't move the bond market screaming stability. These other news items screen fold them into your roaring twenties theme.

[Ed Yardeni]

Well, I mean we've, we've done pretty well with that thesis so far. We've got a few more years here left in the decade. I think this will pass.

[Tom Keene]

You short selling yourself folks. It's the Yardeni and Compora low of October a few years ago. Ed in Ralph Van Koport.

[Ed Yardeni]

Thank you.

[Tom Keene]

Nailed it. Continue.

[Ed Yardeni]

Thank you very much. So look, I think in the short term we clearly have an issue with the Strait of Hormuz. It's hard to get optimistic here unless we see some tankers actually going through there without any incident. I know the president sounds like he wants to declare victory here pretty shortly but you know, I think, I think Iran lost the war. They just don't really know it and they're not acting like it. The problem with this country is that it's a terrorist state with a terrorist organization that basically spreads terrorism around the world and they're professional terrorists. And so it's very hard to kind of beat them just by blasting them with bombs.

[Damien Sasser]

Ed, back in December, you correctly. I'm going to give Ed a softball here. He correctly called for an underweight position in the MAG7 and the basket's now down 6.3% year to date. I'm, I'm curious, do you see further weakness in US Tech stocks right here, right now, or is this a buying opportunity?

[Ed Yardeni]

Well, I think it's becoming very bifurcated. The companies that still have moats, the companies that, you know, are basically competing in still fairly stable marketplaces, I think are fine. The problem for the Magnificent Seven is they used to be kind of like the Game of Thrones. You know, it was like seven independent kingdoms that had moats and didn't really bother each other. But ever since, they're competing like mad and it's, you know, it's a arms race.

[Tom Keene]

We're going to continue with Ed Yardeni, Dr. Yardeni of Yudeni Research. Can't say enough about his research. It's an exceptionally valued Yardeni report that you get from him literally on a daily basis. Damian Sasser and Tom Keene with Ed Yardeni. We'll move forward here in a bit to further discussion of what we saw in the secretary of Defense's press conference here a bit ago. But it is about the Martin markets. Here's the summary for those of you across this nation. Waking up the Vix was 35. That is painful. We've come in dramatically to a 24.57 with red and green on the screen, but a decidedly better take today than what we witnessed in the last 48 hours with the market opening. Alexis Christopher is all right.

[Alexis Christopher]

Thanks very much, Tom. And investors continuing to try to assess how long this war with Iran will go on and what its global impact will be, especially on the oil market. So we have a mixed start here to the morning. The S&P 500 down 3 points at 6,793. Dow Jones Industrial Average down about 25 points. But the NASDAQ in the green right now by about 42 points. The Russell 2000 is down just fractionally. We've got Brent crude at 9144, the barrel down 7 1/2 percent. WTI crude down about 7% now to 88. Oh for the barrel. And the Bloomberg Dollar Spot Index at 1197 84. Spot gold, by the way, bouncing back up 1 1/2% at 5215 the ounce. And Amazon returning to the bond market selling the debt in as many as 11 tranches ranging from two to 50 years. It's the latest in a series of jumbo bond sales by hyperscalers as they gear up to invest in what else but AI? That's your Bloomberg opening bell report. Tom and Damian Alexis, thank you so much.

[Tom Keene]

Again, red and green in the screen. NASDAQ with a little bit of a bid. 24.25 and the thanks Edgar Denny with us, always associated with Professor Tobin at Yale, but before that, high above Cayuga's waters at Cornell University. Ezra Prasad is one of the great optimists of international economics. His new book out of Cornell is the Doom Loop on the economic order. He even gets Game of Thrones into the first chapters. He's got Searcy doing an economics. You more than anyone I know Ed, pushes against the concept of a doom loop. What do you say to the people that feel the gloom, feel the doom?

[Ed Yardeni]

Well, you know, there are a fair amount of perma bears out there and a lot of people listen to the perma bears and the perma bears very often sound very logical. The problem is they don't provide a balance. And perma bears will get you out at the top of the stock market, they'll get you out in the middle, they'll get you at the bottom. At the bottom you'll never be in the stock market if, if you'd have a pessimistic attitude. Also, politics sometimes gets in the way of clear and clear headed investing. The market tends to go up as long as earnings are going up as long as the economy is doing well. And that's been the case for a long, long time. So I have this view that corrections and bear markets are buying opportunities rather than reasons to panic.

[Damien Sasser]

Well, you talk about the economy doing well and in all seriousness, does economic data even matter at this point? I mean look at last week's payrolls. I mean the markets look straight through that for like three seconds and then tomorrow we're going to get a CPI print that by definition after the last week's events is already stale. So you know, talk to us a little bit about the economic touch points that you're going to be most focused on here.

[Ed Yardeni]

Well, look, I think that the economy still matters because earnings still matters. One of the I used, I used to be just an economist. I'm also a strategist and being a strategist is a lot easier. All you got to do is forecast P E times Z and that's very easy to do. Getting it, right, of course, is the challenge, but it's still, it's still those two variables. And the earnings outlook I think remains quite strong as. Because I think the economy will remain resilient. I mean, in 2022 we had an oil price shock and the economy made through it just fine. I think, I think the data that the stock market is looking at is not just the employment numbers, but they're looking at the productivity numbers. And that's really the bullish story is that productivity is making a huge comeback.

[Damien Sasser]

Well, we began our conversation, Tom, mentioning that you had upped your probability for a market meltdown from 20 to 35% for the balance of this year. You know, my question is this. You know, when I think of meltdown, I think of something on the order of a systemic liquidity shock. And this is a different sort of shock than we've witnessed in, you know, in 2000 and another, you know, kind of. What funding and financing metrics are you most focused on here? Like what kind of a liquidity shock do you think can happen?

[Ed Yardeni]

Well, clearly when you look at history, you find that more often than not it's a shock in the credit system that causes problems for the stock market and you get a financial crisis because the Fed tightens, something blows up and that becomes a credit crunch. It's credit crunches that cause recessions this time around. I think we have to recognize, remember that the Fed's awfully good at playing whack a mole in the credit markets. You know, as soon as something blows up, they move in pretty quickly. March 2023, we had a banking crisis. There's only three banks. It was solved over the weekend.

[Tom Keene]

Yeah, I got 15 ways to go here. But let me just go to the experience I mentioned earlier, this modest drawdown we had in 1987 in my memory, I don't have it in front of me, folks, is what a rebound from October 27th to the end of the year, December of 1987. I remember the sweat in August of 1998. And off we went. To the races.

[Ed Yardeni]

To the races.

[Tom Keene]

Nine.

[Ed Yardeni]

Yeah.

[Tom Keene]

What's different now in tech versus the collapse of March of 2001 earnings?

[Ed Yardeni]

We, we had a lot of dot coms back then that weren't making any money. We had a lot of telecom companies that were seller financing. So they're kind of creating their own magic. Until these companies, these Mag 7 started to kind of finance each other, we didn't really have that issue. But they're huge cash generators. I think their expenditures are going to prove to be very profitable. So I'm not particularly worried about the earnings side of the tech story.

[Tom Keene]

It's part of the show this morning. Commercial free the conversation too important at your Danny. Dina Esvinderi coming on here in a moment. Damien Sasser and Tom Keene with Alexis Christopher, Michael Barr across this Nation on YouTube. What a couple of days on YouTube. Thank you so much for this new digital distribution. I can't say enough about it. Subscribe at Bloomberg Podcasts for all that we do here in the New York morning. Damian Sassour with Ed Yardeni.

[Damien Sasser]

So, Ed, we talk about the Roaring twenties theme. We talk about, you know, the potential for a market meltdown. A market melt up. Talk to me about your stagflationary 1970s Redux theme. Redo.

[Tom Keene]

Redux.

[Damien Sasser]

Redux.

[Ed Yardeni]

Redux, Redux. Yeah.

[Tom Keene]

If you're in em, it's redux. We call that redux.

[Damien Sasser]

I mean, I mean the stagflationary, you know, you know that that word's coming back. So talk to us a little bit about what you're seeing there.

[Ed Yardeni]

Yeah, there is a certain amount of deja vu all over again. You know, every time we've had oil shocks in the past, we've typically gotten recessions and bear markets. The one near near term exception was what happened in 2022. We got a bear market but we didn't get a recession. I don't think we're going to get a recession this time, though. Recessionary expectations have gone up. But the, the U.S. is much less energy intensive and oh, by the way, we're an exporter. Yeah. Of oil and gas, which is a huge difference from what happened in the 1970s. On the other hand, shutting the Strait of Hormuz is a radically different historical development. Just hasn't happened before. And so my short term caution bearishness is totally predicated on this geopolitical development. I want to see some tankers get through the strait without getting shot at.

[Damien Sasser]

Well, I mean, you just mentioned that and that's where I was going to go. I mean, Gulf traffic is basically all for naught. Right? I mean there's nothing going through and yet. And we just saw last week US Treasury Secretary Scott Bessen basically slamming JP Morgan for putting out research about maritime insurance and things of that nature. How focused are you on some of those alternative data sets kind of trying to gauge out whether or not shipping companies even want to pass through the street of Hormuz now and insurers want to back it. Who knows?

[Ed Yardeni]

It's funny, you Ask that. One of the reasons I'm very positive on AI is because we're using it all the time and we've become real fans of Claude. And so Claude is, is in our staff now and we're, we're toying around. We're just asking Claude to follow the shipping lanes in the street and there, there's actually data. So, but we only started doing it yesterday, so I, so you deep into it. The other thing is I also want to see the data on drones. I mean it's, it's, it's fine for the President, you know, to declare that we're almost there, almost mission accomplished, but that's not, that's not going to be the case unless the drones stop flying into the neighbors, into the straits, into, you know, aiming at our ships in.

[Tom Keene]

And in March 31, I believe it's another end of the quarter if we can get there. And then into April with JP Morgan reporting. And off we go to the Q1 earnings season. What does Ed Yardeni see with a broader sense of use of cash?

[Ed Yardeni]

Well, you know, right now the, the earnings story has been phenomenally strong and that's really what's been, been driving the market. The valuation multiple, you know, got up to about 22. It's come down because of this pullback so far, which is it's not a correction yet, but I think it has.

[Tom Keene]

Why are we, I got. This is too important. Since when are we hysterical? About a year. Denny. Pullback that as you state, is not a correction as we learned it in school.

[Ed Yardeni]

Well, you know, a pullback is a drop that isn't a correction. A correction is 10 to 20% decline. A bear market is more than 20%. I happen to think that there is a 35% probability of things going badly and that would lead to a correction of 10 to 15%. I'm actually amazed by, by the resilience of the economy, of the, not just the economy but, but the stock market, the stock market wants to believe that all will be well very, very shortly. We saw this amazing reversal also in the price of oil. As though, you know, what were we thinking? There's plenty of oil out there. Well, there is plenty of oil out there. We just got to get, get to it.

[Tom Keene]

Damien, quick one in here. Quick one.

[Damien Sasser]

Well, I mean Ed, what you sound, it sounds like you're talking about just cleaner positions, right? And I mean if this is really what this amounts to, where you basically are giving a lot of, you know, risky investors the opportun of, you know, pare back their positions and clean them, so to speak. Does that mean we might look for another leg higher into the, you know, second half of this year? And can we really even see that?

[Ed Yardeni]

Well, I haven't given up on 7700 by the end of the year.

[Damien Sasser]

Okay.

[Ed Yardeni]

And so, yeah, I'm, I'm, I'm arguing that it's not necessarily going to be a few more days of the war, of the war, but it could be a few more weeks. And that again, I have this tendency to look at sell offs as buying opportunities rather than reasons to panic.

[Tom Keene]

Thank you for coming in.

[Ed Yardeni]

My pleasure. Always.

[Tom Keene]

I can't say enough about it, folks. I enthusiastically support the work of Dr. Yardeni. We protect the copyright of all of our guests. Please don't call us to get his research. Go to Yardeni Research for his fabulous daily synthesis of economics.

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