There is a growing concern over the bull market on Wall Street. Ed Yadeni, CEO of Yadeny Research, who is considered a’long-term optimist’, also worried that the stock market could collapse in the second half of the year after a further rise. It is based on the logic that the movement of technology stocks and bitcoin is similar to just before the dotcom bubble burst in 1999.
In an interview with CNBC on the 8th (local time), Mr. Yadeni said, “Nasdaq has risen more than 200% from the end of 1998 to early 2000. Even now, the Nasdaq has risen almost 100% (from the end of March of last year), and probably goes a similar path. “There will be,” he argued, “everything I see is pointing to Melt-up.” Melt-up refers to a state in which bubbles boil and prices have skyrocketed. On this day, the NASDAQ index ended at a record high of 13,201.98.
Yadeni pointed to Bitcoin’s surge as an extreme example of a market overheating. Bitcoin has risen 36% this year and has soared more than 300% over the past six months. “Bitcoin is definitely a sign of speculative excess,” he said. “It is important to look at the charts (notice the overheating signal) whether you have Bitcoin or not.”
CEO Yadeni thought that this bubble could burst in the second half of this year. In the first half of the year, it is expected that the economic recovery will continue due to the spread of the corona vaccine and the expansion of fiscal and monetary policies. “In the first half of the year, the’blue wave’ (the Democratic Party’s domination of the US Senate and House) will likely lead to more fiscal spending, and the US Central Bank (Fed) will support a significant portion of these government spending through quantitative easing,” he said. Interest rates will also be kept fairly low.”
However, it was expected that the risk of inflation would increase if the economy thrives on massive stimulus and increased demand. “In the second half of the year, consumer prices are expected to rise, which will have a negative impact on overvalued assets,” he said.
Yadeni pointed out that the Fed may have a hard time keeping the benchmark 10-year Treasury bond rate low at the 1% level. “The 10-year interest rate is under upward pressure,” he said. “At some point, I think the Fed may say,’The economy is good, but the yield on bonds should be higher.’
Yadeni has worked at the Federal Bank of New York and the US Treasury Department, and served as a senior US stock strategist at Deutsche Bank and Prudential. Yadeni said that for now, he is closely watching economic fundamentals and market indicators. “In general, melt-up leads to melt-down,” he added, adding that he hopes that his logic will prove to be wrong.
“The US stock market has been moving faster than I expected,” said Yadeni. “I hope that the S&P 500 will reach my year-end forecast of 4300 with a greater margin.”
Reporter Kim Hyun-seok [email protected]
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