Productivity also underpins Yardeni’s view. He notes that while productivity in the United States has been volatile on a quarter over quarter basis, the three-year average for labour productivity is now sitting just below three per cent, according to the bureau of labour statistics, above the two per cent historical average. Labour inflation, he notes, has also slowed significantly making the marginal cost of productivity growth that much lower in the Untied States.
Courtesy of Hamilton ETFs
Risks and adjustments in a bull market
For all his bullishness, Yardeni does see some risks that advisors and investors should consider. He notes, though, that some of the most discussed risks on the market don’t rate as highly in his estimation. Earnings multiples, he says, are high but not astronomical. He argues that US economic resilience should continue to support earnings growth. He believes the K-shaped economy and the wealth gap between baby boomers and younger generations should be offset by retirements, decumulation, and passing on of that baby boomer wealth to younger generations and the broader US economy.
In the near-term, Yardeni sees the risk of a market swoon in June as investors consolidate from the gains they’ve made since March. Energy inventories are still bone dry and surging oil prices could derail a lot of global economic growth. He also notes that the United States now represents over 65 per cent of the MSCI world index. For all his bullish views on that market, he believes there is some merit in a slight underweight to the United States, making room for emerging markets in portfolios. Despite those risks, he argues that the metrics that imply a looming bear market aren’t worthwhile.
