In a note released Friday, Yardeni Research raised concerns that the Federal Reserve might add more stimulus to an economy that is already performing strongly.
Ed Yardeni observed: “The bull market in stocks is making everyone who owns stocks richer,” citing Gallup data that showed 62% of Americans held equities at the end of 2024, the highest level since 2008.
By the end of Q1 2025, U.S. households held $46.7 trillion in equities and mutual fund shares, according to Yardeni Research. Baby Boomers accounted for 54% of that total, with a combined net worth exceeding $82 trillion. “They are the richest retiring generation in history,” Yardeni noted, adding that many continue to see their wealth grow as the S&P 500 reaches record highs.
With markets widely expecting the Fed to cut rates on September 17, Yardeni argued that “the stock market will continue to rise as valuation multiples continue to melt up. The positive wealth effect will continue to stimulate the economy, which doesn’t really need to be stimulated.”
The note highlighted multiple indicators of economic strength: initial jobless claims remain low, second-quarter real GDP growth was revised upward to 3.3%, and real gross domestic income jumped 4.8%. Corporate cash flow stayed at a record $4 trillion, supporting capital expenditures, particularly in technology sectors.
Yardeni also pointed to rising inflationary pressures. The average of prices-paid indexes from five Federal Reserve district surveys surged to 56.0 in August, the highest level since October 2022.
“More companies may start to pass their costs on to consumers in the coming months,” Yardeni warned, raising the question of whether additional Fed easing risks overheating an already hot economy.
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