Yardeni Raises Odds of US Market Meltdown to 35% on Iran War

ozfhllfjnm0ge9g2vcqruu3c_media_dl_1.png BloombergArticle content(Bloomberg) — US stocks are facing a growing risk of a sharp selloff this year as the escalating war in Iran hurts global markets, according to veteran strategist Ed Yardeni, updating his outlook for what he describes as “fast-moving times.”Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentYardeni has raised the probability of a market meltdown to 35% for the rest of the year, up from 20% previously. At the same time, he slashed the odds of a meltup — a rally driven more by investor enthusiasm than underlying fundamentals — to just 5% from 20%. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe shift in those weightings comes as oil prices surge above $100 a barrel and investors brace for a prolonged conflict in the Middle East that could send energy costs even higher. Expectations for Federal Reserve’s interest-rate cuts have already been pared back as investors come to terms with the prospect of slower growth and rising inflation at the same time.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“The US economy and stock market are stuck between Iran and a hard place currently. So is the Fed,” Yardeni wrote in a note. “If the oil shock persists, the Fed’s dual mandate would be stuck between the increasing risk of higher inflation and rising unemployment.”Article contentThe dollar has emerged as the haven asset of choice, with the Bloomberg Dollar Spot index up almost 2% since the war began. S&P 500 futures fell 1.6% in early Asia trading on Monday, signaling fresh pressure on equities just as hedge funds added to short US stock bets. Benchmark 10-year Treasuries yields jumped six basis points as traders priced in higher inflation.Article contentInvestors have pushed back expectations for the Fed’s next quarter-point rate cut to September. At the end of February, before the war erupted, traders had fully priced in a move by July. Some bond options traders are now betting the Fed may not cut rates at all this year. Article contentArticle contentYardeni has gotten market calls right in the past. In December, the strategist recommended effectively going underweight the so-called Magnificent Seven technology stocks versus the rest of the S&P 500. Article contentHis base case remains intact. The so-called “Roaring 2020s” scenario, which envisages a decade of robust and sustainable US growth fueled by rapid productivity gains, still carries a 60% probability through the end of the year.Article contentThe outlook is better over the coming decade. Yardeni assigns an 85% chance of a continuation of the Roaring 2020s. He also sees a 15% chance of a “stagflating 1970s redux.”Article content“If investors start expecting stagflation, a bear market is more likely,” he wrote. Article content—With assistance from Masaki Kondo.Article content(Updates with Fed rate cut expectations in sixth paragraph.)Article contentTrending Yardeni Raises Odds of US Market Meltdown to 35% on Iran War PMN Business South Korean Stocks Sink as Global Funds Sell on Iran War Risks PMN Business Garry Marr: Why your house is still costing you, even if you've paid it off Personal Finance These eight charts show 'rupture' with Canada under Trump's tariffs Economy Here are 5 things worried investors can do as the Iran war plays out Investor Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.

Yardeni Raises Odds of US Market Meltdown to 35% on Iran War PMN Business South Korean Stocks Sink as Global Funds Sell on Iran War Risks PMN Business Garry Marr: Why your house is still costing you, even if you've paid it off Personal Finance These eight charts show 'rupture' with Canada under Trump's tariffs Economy Here are 5 things worried investors can do as the Iran war plays out Investor