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A treat on this special edition of Bloomberg Surveillance. Ed Yard Denny for an extended conversation, Ed. I read your note carefully yesterday, folks. I can't say enough about the value of subscribing to Yard Denny's Quick Takes. You assessed the bond market. Should people that own shares be afraid of higher yields?

A treat on this special edition of Bloomberg Surveillance. Ed Yard Denny for an extended conversation, Ed. I read your note carefully yesterday, folks. I can't say enough about the value of subscribing to Yard Denny's Quick Takes. You assessed the bond market. Should people that own shares be afraid of higher yields?

I think they should be concerned, But all in all, I think bond yields of normalized. I think that's important to keep that in mind. They were abnormally low between the Great Financial Crisis and the Great Virus Crisis because the Fed was manipulating rates. It was rigging the bond market with the short term rate, the Federal funds rate being down to zero, and then of course quantitative easing. And now the bond market has been sort of liberated, free to tell us what the line demand and the credit markets really is. And I think we're back to where we were before the Great Financial Crisis, when bondyls range between four and five percent. So I don't think we should freak out about that. I think we should actually welcome it because it's a sign that the economy is doing just quite well.

I think they should be concerned, But all in all, I think bond yields of normalized. I think that's important to keep that in mind. They were abnormally low between the Great Financial Crisis and the Great Virus Crisis because the Fed was manipulating rates. It was rigging the bond market with the short term rate, the Federal funds rate being down to zero, and then of course quantitative easing. And now the bond market has been sort of liberated, free to tell us what the line demand and the credit markets really is. And I think we're back to where we were before the Great Financial Crisis, when bondyls range between four and five percent. So I don't think we should freak out about that. I think we should actually welcome it because it's a sign that the economy is doing just quite well.

You think parts for people on the planet the degree with doctor.

You think parts for people on the planet the degree with doctor.

So Ed, I mean, given that backdrop, I mean, how do you think this Federal Reserve is going to proceed for the remayner of twenty twenty five.

So Ed, I mean, given that backdrop, I mean, how do you think this Federal Reserve is going to proceed for the remayner of twenty twenty five.

Well, it's interesting, you know, the faedis they just won't listen to me. I don't won't I understand why I have been Back in August of last year, we were saying, my collie Eric Waterstein and I were saying that the economy is resilient, it's strong, it's demonstrated that it could withstand a tightening of monetary policy. And again, I think the FED not only tightened the monetary policy when they took the Fed funds right zero of five and a half percent between twenty twenty two and twenty twenty three, I think they also normalized interest rates, both the Federal funds rate and the bond deal.

Well, it's interesting, you know, the faedis they just won't listen to me. I don't won't I understand why I have been Back in August of last year, we were saying, my collie Eric Waterstein and I were saying that the economy is resilient, it's strong, it's demonstrated that it could withstand a tightening of monetary policy. And again, I think the FED not only tightened the monetary policy when they took the Fed funds right zero of five and a half percent between twenty twenty two and twenty twenty three, I think they also normalized interest rates, both the Federal funds rate and the bond deal.

They're kind of back to normal.

They're kind of back to normal.

But so in August we thought there was no need for the Fed to act, but they didn't listen. So they did not just twenty five basis points. They did fifty basis points in September eighteenth, and we argued that that would probably lead to higher bond yields. And that's exactly what's happened. We've had the FED funds rate down one hundred basis points.

But so in August we thought there was no need for the Fed to act, but they didn't listen. So they did not just twenty five basis points. They did fifty basis points in September eighteenth, and we argued that that would probably lead to higher bond yields. And that's exactly what's happened. We've had the FED funds rate down one hundred basis points.

This is brilliant.

This is brilliant.

Paul, I can't say enough about this overnight on LinkedIn, Paul Dunovan of UBS and he'll be with us folks in the coming days. Like doctor Yar Dunny was collegially scathing by to FED and the recent decisions exactly so.

Paul, I can't say enough about this overnight on LinkedIn, Paul Dunovan of UBS and he'll be with us folks in the coming days. Like doctor Yar Dunny was collegially scathing by to FED and the recent decisions exactly so.

And I mean, Harry, let me just.

And I mean, Harry, let me just.

Answer your question. The bottom line is I think they're definitely on pause. That's the message we're getting from the Fed. I think it may be done and done, or maybe one or two and done.

Answer your question. The bottom line is I think they're definitely on pause. That's the message we're getting from the Fed. I think it may be done and done, or maybe one or two and done.

But I think the PAD doesn't have to lower interest rates.

But I think the PAD doesn't have to lower interest rates.

Anymore as we just complete two years twenty twenty three, twenty twenty four of north of twenty percent returns in s and P five hundred index. And how do you think about twenty twenty five stocks, bonds, all that kind of stuff. How are you talking to your clients this year?

Anymore as we just complete two years twenty twenty three, twenty twenty four of north of twenty percent returns in s and P five hundred index. And how do you think about twenty twenty five stocks, bonds, all that kind of stuff. How are you talking to your clients this year?

Well, I go terms roaring twenty twenties, baby, yeah, I mean, so far, so good. Back in twenty nineteen, we suggested that the decade ahead. The twenty twenties could be the Roaring twenty twenties. That we noticed that there's a shortage of labor skill, labor especially, and that there was a tremendous plethora of technological innovations that were actually useful, that actually work, and are relatively inexpensive to implement, and that these technologies would lead to a productivity growth boom we've had before. This one seems to be much more sustainable and potentially much more significant.

Well, I go terms roaring twenty twenties, baby, yeah, I mean, so far, so good. Back in twenty nineteen, we suggested that the decade ahead. The twenty twenties could be the Roaring twenty twenties. That we noticed that there's a shortage of labor skill, labor especially, and that there was a tremendous plethora of technological innovations that were actually useful, that actually work, and are relatively inexpensive to implement, and that these technologies would lead to a productivity growth boom we've had before. This one seems to be much more sustainable and potentially much more significant.

Ed Yard Denny with us folks a special edition of Bloomberg Savannahs We're with you till nine o'clock, where am Mariy Horden and David Gura will join from Washington with the services at the National Cathedral for James Earl Carter. Thrilled, tot ann Mary Horden and David Gurrow will give us their perspective on that. We are thrilled as well to give you ed Yard Denny this morning. I can't say enough about in October. I think it was two years ago, ed Yard Denny, and ed I'm going to give credit to the great technician Ralph N. Kemport as well, said climb on board equities. You maintain your enthusiasm, Doctor Yard Denny. I looked at the lineup of hedge fund performance, and everybody hedged last year. Very few people were full Yard Denny describe full Yard Denny.

Ed Yard Denny with us folks a special edition of Bloomberg Savannahs We're with you till nine o'clock, where am Mariy Horden and David Gura will join from Washington with the services at the National Cathedral for James Earl Carter. Thrilled, tot ann Mary Horden and David Gurrow will give us their perspective on that. We are thrilled as well to give you ed Yard Denny this morning. I can't say enough about in October. I think it was two years ago, ed Yard Denny, and ed I'm going to give credit to the great technician Ralph N. Kemport as well, said climb on board equities. You maintain your enthusiasm, Doctor Yard Denny. I looked at the lineup of hedge fund performance, and everybody hedged last year. Very few people were full Yard Denny describe full Yard Denny.

Well fully ARDNNI right now is to stay invested. It's hard for me to tell people who've been in cash to jump in here because the market isn't cheap. But if you've been fully invested, particularly in technology, communication services, industrials, financials, which is the sectors we favored, we would actually stay with them. I know they're not cheap, but on the other hand, their earnings outlook is really quite quite good for the year.

Well fully ARDNNI right now is to stay invested. It's hard for me to tell people who've been in cash to jump in here because the market isn't cheap. But if you've been fully invested, particularly in technology, communication services, industrials, financials, which is the sectors we favored, we would actually stay with them. I know they're not cheap, but on the other hand, their earnings outlook is really quite quite good for the year.

For the current year, we.

For the current year, we.

Have two hundred and eighty five dollars a share for the S and P five hundred. That beats all the other strategists on the street. And that's consistent with the roaring twenty twenties idea of a productivity led economic boom.

Have two hundred and eighty five dollars a share for the S and P five hundred. That beats all the other strategists on the street. And that's consistent with the roaring twenty twenties idea of a productivity led economic boom.

And it seems like for twenty twenty five, you know, given where the FED is ie probably a little bit, you know, maybe a couple of cuts at most, for twenty twenty five, it sounds like it's a year where earnings really have to push this market. Higher earnings have to come through it. Do you have concerns about some of the earnings sessments out there for this market?

And it seems like for twenty twenty five, you know, given where the FED is ie probably a little bit, you know, maybe a couple of cuts at most, for twenty twenty five, it sounds like it's a year where earnings really have to push this market. Higher earnings have to come through it. Do you have concerns about some of the earnings sessments out there for this market?

Well, look, not only does the Fed not listen to me, but the market doesn't listen to me. I would love to have a nice, civilized, gradual bull market from here that's driven just by earnings and not valuations. Valuations are not cheap. The buffet ratio is at an all time record high. The forward pe is around twenty two. Back right before the tech wreck of two thousand, it was twenty five, so we're not far from that. I mean, information technology and communication services account for a hop forty percent of the S and P five hundred, and we know the thirty percent of the S and P five hundred is the magnificent seven. Look, I don't think these stocks are going to magnificent seven are going to go away. I think they're here to stay. I think they're going to continue to account for high valuation multiple. I think they're going to continue to perform. But I'm also accounting on the SMP four hundred and ninety three to do well. So a year on target is seven thousand on the S and P five hundred which I think can be driven mostly up by earnings.

Well, look, not only does the Fed not listen to me, but the market doesn't listen to me. I would love to have a nice, civilized, gradual bull market from here that's driven just by earnings and not valuations. Valuations are not cheap. The buffet ratio is at an all time record high. The forward pe is around twenty two. Back right before the tech wreck of two thousand, it was twenty five, so we're not far from that. I mean, information technology and communication services account for a hop forty percent of the S and P five hundred, and we know the thirty percent of the S and P five hundred is the magnificent seven. Look, I don't think these stocks are going to magnificent seven are going to go away. I think they're here to stay. I think they're going to continue to account for high valuation multiple. I think they're going to continue to perform. But I'm also accounting on the SMP four hundred and ninety three to do well. So a year on target is seven thousand on the S and P five hundred which I think can be driven mostly up by earnings.

Tell us about the linkashire of nominal GDP into revenue which supports your earnings, call the margin called the development of free cash flow. Do we have a buoyancy of five percent nominal GDP sustained?

Tell us about the linkashire of nominal GDP into revenue which supports your earnings, call the margin called the development of free cash flow. Do we have a buoyancy of five percent nominal GDP sustained?

I think so.

I think so.

I think again, consistent with a roaring twenty twenties scenario. I think the productivity, which is currently quadrupled from zero point five percent at an annual rate on a five year trailing basis. It was zero point five percent back at the end of twenty fifteen, and now we're at two percent, so we've already seen a significant productivity growth boom. But two percent is kind of average for the historical average. So what we're counting on is productivity to do a bit better than that, maybe three, three and a half even four percent, which to some people might sound delusional, but if you look at previous productivity growth booms, that's what we get to, and we think we're going to get to that handily by the end of the decade because of the technologies that are available out there. So yeah, I think three percent growth is kind of what we're at right now. Maybe a little less than that on a year over your basis, three and a half to four percent real GDP is possible. Add two percent wow inflation, and you get five to six percent.

I think again, consistent with a roaring twenty twenties scenario. I think the productivity, which is currently quadrupled from zero point five percent at an annual rate on a five year trailing basis. It was zero point five percent back at the end of twenty fifteen, and now we're at two percent, so we've already seen a significant productivity growth boom. But two percent is kind of average for the historical average. So what we're counting on is productivity to do a bit better than that, maybe three, three and a half even four percent, which to some people might sound delusional, but if you look at previous productivity growth booms, that's what we get to, and we think we're going to get to that handily by the end of the decade because of the technologies that are available out there. So yeah, I think three percent growth is kind of what we're at right now. Maybe a little less than that on a year over your basis, three and a half to four percent real GDP is possible. Add two percent wow inflation, and you get five to six percent.

I can't emphasize enough. Paul how a lone yard Denny is on this. There's some bulls out there, John stofis.

I can't emphasize enough. Paul how a lone yard Denny is on this. There's some bulls out there, John stofis.

I'm alone. I'm alone, but I don't feel lonely. Don't feel lonely.

I'm alone. I'm alone, but I don't feel lonely. Don't feel lonely.

But the idea that we're going to sustain three percent real GDP, how many guests are telling it's.

But the idea that we're going to sustain three percent real GDP, how many guests are telling it's.

Pretty loan call exactly? Hey, Ed, what are you suggesting folks doing a fixed and can market Because a lot of folks feel pretty comfortable with four point two five percent into your treasury. Do they need to take credit risk?

Pretty loan call exactly? Hey, Ed, what are you suggesting folks doing a fixed and can market Because a lot of folks feel pretty comfortable with four point two five percent into your treasury. Do they need to take credit risk?

They don't really need to take credit risk, and I welcome that. I think that's again normalization.

They don't really need to take credit risk, and I welcome that. I think that's again normalization.

We should have an economy where if investors don't want to take risk, they shouldn't be punished with zero to two percent yields on their money market funds. I think they should be getting a reasonable return, and four four and a half percent is certainly a reasonable.

We should have an economy where if investors don't want to take risk, they shouldn't be punished with zero to two percent yields on their money market funds. I think they should be getting a reasonable return, and four four and a half percent is certainly a reasonable.

Return on a two year On the other.

Return on a two year On the other.

Hand, people who want to lock it in can certainly go for the four and a half and higher percents that are available in the capital markets, so you don't have to take risk, but there's greater reward obviously if you're willing to go extend into the bond market, going to the corporates, maybe even into the high yields.

Hand, people who want to lock it in can certainly go for the four and a half and higher percents that are available in the capital markets, so you don't have to take risk, but there's greater reward obviously if you're willing to go extend into the bond market, going to the corporates, maybe even into the high yields.

Edgar Denny, thank you so much, greatly, greatly appreciate it. This morning, Edward Jardnney there with a call of seven thousand XPX, I didn't in my head. I'm sorry. I can't like interpolate the extra late on the Dow Jones ridest average.

Edgar Denny, thank you so much, greatly, greatly appreciate it. This morning, Edward Jardnney there with a call of seven thousand XPX, I didn't in my head. I'm sorry. I can't like interpolate the extra late on the Dow Jones ridest average.

But it's a big number.

But it's a big number.