Market veteran Ed Yardeni recently stated that even though the US economy remains strong and there is a “no landing” scenario ahead, the stock market may still face a 10% correction. Yardeni’s analysis was based on the strong retail sales data in March and an upgraded first-quarter GDP growth estimate of 2.8%. Despite the continued economic strength supporting the “no landing” scenario, Yardeni warned that rising bond yields, with the 10-year Treasury yield hitting its highest level of the year, are starting to impact stock prices. This can be seen in the percentage of S&P 500 stocks currently trading above their 50-day moving average, which has dropped from around 80% to about 30%. The S&P 500 may have hit a short-term top on March 29 and has since fallen below its 50-day moving average, indicating a potential move towards being oversold in the market.
Despite the potential for a healthy correction in the stock market, Yardeni emphasized that the US economy is still performing well. The strong March retail sales data, which exceeded economist expectations, led to the Federal Reserve upgrading its first-quarter GDP growth estimate. Yardeni highlighted that real disposable income is rising, retirees have the means to spend comfortably, and there has been significant consumption growth driven by immigrants within the US. Overall, the continued strength of