Omicron Variant Won’t Stop S&P 500 From Selling New Records, Says Yardeni
Will the omicron variant of the COVID-19 virus still look like a “deja vu”?
Judging from Friday’s market sell-off, you’d think we’re about to have a repeat of February and March 2020 when the S&P 500 took a sharp nosedive.
However, a repeat performance seems unlikely, according to an expert. Instead, expect new highs for the SPDR S&P 500 exchange-traded fund, which tracks the S&P 500 Index.
“I still expect the S&P 500 to continue to hit new highs,” writes Ed Yardeni, a senior Wall Street analyst and head of Yardeni research, in a recent report published on LinkedIn. “My targets for the index are 4,800 by the end of this year, 5,200 for next year and 5,500 for 2023.”
The index was recently around 4655, according to Yahoo.
Consumers have a huge stash of cash ready to release
It points to an incredible level of savings – $ 2.9 trillion – accumulated by Americans since the pandemic began in early 2020.
He doesn’t comment on that, but this level of savings is almost anti-American. Traditionally, residents of the world’s largest economy have spent, spent, and spent more. It seems likely that in the longer run, spending – or taking away those savings – will pick up in earnest, boosting the company’s profits.
When profits rise, sooner or later we can expect the stock market to follow suit. This is because stock prices tend to reflect the potential for future profits of companies.
Silver is an economical lubricant
There is also enough money to grease the cogs of American capitalism, Yardeni shows. M2, which is a fairly broad measure of money, includes notes and coins as well as check deposits. “There is a lot of liquidity available to finance greater growth in nominal GDP,” he writes.
This is important because when there is not enough cash (or cash equivalents), the economy can slow down.
There is another factor that is becoming more and more evident. Many people are protesting against government restrictions due to the pandemic. Some even refuse to take the COVID mandate vaccines, although this can potentially means to get fired.
This should worry American politicians, many of whom will face the electorate over the next 11 months. Voters in the midterm elections are unlikely to take a positive view of incumbents who are held responsible for getting tough with pandemic rules. Remember, what will be done next will come on the back of inflation rate never seen in years and a humiliating withdrawal of US forces from Afghanistan.
In other words, don’t expect incumbent politicians to knowingly upset the electorate ahead of an important election in the next year or so.