Yardeni Says Fed Cut Raises Odds of ‘Outright Melt-Up’ in Stocks
- Compares impact of policy easing to dot-com boom in late 1990s
- Risks from fast easing are equity bubble, overheating economy
Ed Yardeni
Photographer: Christopher Goodney/BloombergThis article is for subscribers only.
US stocks can soar to fresh highs thanks to the Federal Reserve’s aggressive half-point interest rate cut last week, but it also could cause inflation to resurface if central bankers don’t tread carefully, according to Wall Street strategist Ed Yardeni.
The latest policy decision lifted the odds of an “outright melt-up” in equity prices — like during the dot-com bubble when the S&P 500 Index roared 220% from 1995 to the end of the century — to 30% from 20%. He placed the chances of a bull market at 80%, while reserving a 20% probability for a 1970s-like scenario, when stock markets around the world were gripped by volatility due to inflation and geopolitical tensions.