According to Ed Yardeni, the stock market may experience a 10% correction even though the US economy remains strong. Yardeni noted that there were strong retail sales in March and an updated estimate showed a 2.8% GDP growth for the first quarter. Despite this, consumers continue to spend, which is helping to keep the economy resilient.
Yardeni warned that although the US economy is performing well, the stock market may face a 10% correction in the coming months. He noted that the S&P 500 could potentially drop to its 200-day moving average at around 4,700. Rising bond yields and the decline in the percentage of S&P 500 stocks trading above their 50-day moving average indicate potential downward pressure on stock prices.
After reaching a short-term high in March, the market has since experienced a drop, falling below its 50-day moving average. Yardeni suggested that the market may be moving towards being oversold after being overbought. Despite this, the US economy is still in good shape, with strong retail sales data and an upward revision of the GDP growth estimate by the Federal Reserve.
Consumers continue to spend, supported by rising real disposable income, retirees with comfortable means of living, and an influx of immigrants contributing to economic growth. Yardeni emphasized that the US economy remains vibrant, even as the stock market faces potential corrections.