Independent Financial Research & Analysis
Daily briefings, 7,700+ real-time charts, and macro insights from Dr. Ed Yardeni and his research team.
Research
Latest Research
Recent insights from our research team
ECONOMIC WEEK AHEAD: November 9-13
The S&P 500 fell 2.7% last week, and the Nasdaq dropped 4.9%, both posting their fourth straight week of losses. Thursday’s 4.4% plunge in the S&P 500, its worst day since April 2025, came as investors weighed what the Democratic sweep of Congress means for the AI data center buildout. Both indexes rebounded Friday on strong jobs data, with the S&P 500 up 0.3% and the Nasdaq up 1.4%. October’s CPI (Tue) and PPI (Fri) headline this week’s data calendar. Ten Fed officials are scheduled to speak, and the UK and Eurozone report Q3 GDP. Wednesday’s Veterans Day holiday closes the bond market. Here’s more: (1) Earnings season. So far, 88% of S&P 500 companies have reported their Q3 results. So 60 companies still have to report, and 13 will do so this week. The "Earnings Squiggles" for 2026, 2027, and 2028 are likely to rise even further over the remainder of this year (chart). Currently, industry analysts' consensus is that S&P 500 companies’ aggregate EPS will be $366.60 this year, $426.30 next year, and $495.10 in 2028. In the past, Earnings Squiggles tended to fall because analysts were too optimistic. This time, they haven't been optimistic enough! (2) Fedspeak. Ten Fed officials are scheduled to speak this week (Goolsbee, Barkin, Waller, Logan, Schmid, Paulson, Hammack, Daly, Williams, and Jefferson). These are their first remarks after the Democratic sweep. These Fed heads are likely hawkish on balance, especially after Friday's strong employment report. In early October, the federal funds rate (FFR) futures implied 3.3 rate hikes over the next 12 months and 1.7 over the next six. Since then, those projections have fallen to 1.9 and 1.4 (chart). Friday’s employment report lifted the odds of a December rate hike to 78%. We think the FOMC still needs another 50bps of increases to reach a neutral FFR. San Francisco Fed President Mary Daly told CNBC on Friday that “the job market remains stable and solid, but not booming,” with real wages falling as pay lags inflation. She expects the Fed “will have to tighten policy further.” (3) Inflation. October’s CPI and PPI reports will be released on Tuesday and Friday, respectively. The Cleveland Fed’s Inflation Nowcasting model projects that the headline CPI rose 0.24% m/m and the core CPI 0.21% m/m. That would hold headline CPI inflation at 3.7% y/y and ease core to 2.5% from 2.6% (chart). October would mark the 68th consecutive month of CPI inflation above 2.0% y/y. The model sees both accelerating in November, to 3.9% and 2.8% y/y. The Nowcast also suggests that October’s PCED inflation will remain firmly above the Fed’s 2.0% target, with the headline and core PCED inflation rates projected at 3.8% y/y and 3.2% y/y, respectively. Both are expected to heat up a bit in November. October's PPI inflation is likely to be hotter than September's headline and core readings of 6.3% and 5.0% (chart). One of the more troublesome components of the PPI recently has been transportation & warehousing services, which jumped 16.0% y/y in September (chart). Soaring diesel prices are fueling inflation. (4) ADP & unemployment claims. Payrolls rose 165,000 in October, well above the 65,000 consensus. The unemployment rate fell to 4.1% from 4.2%. ADP’s weekly employment reading (Tue) follows a four-week average of 16,750 for the week ended October 10, down from 17,500 (chart). ADP’s monthly report showed private payrolls up 86,000 in October, beating the 67,000 consensus. Initial jobless claims (Thu) follow last week's 189,000, with the four-week average falling to 194,750, the lowest since 1969 (chart). Continuing claims were 1,718,000 for the week ended October 23, with a four-week average of 1,709,000. (5) Global. The UK’s Q3 GDP (Thu) rose at an estimated 0.7% q/q pace, up from 0.5% in Q2, when real GDP was up 1.4% y/y (chart). The Eurozone’s updated flash estimate of Q3 GDP (Fri) follows the initial 0.4% q/q reading. Real GDP rose 1.3% y/y in Q3, with Spain leading the major economies at 2.7% and France down 0.1% (chart).
US MARKETS CALL: S&P 500 Valuation Dives As Earnings Soar
The stock market dived last week. Investors priced in political backlash against data centers after Democrats swept Congress. We anticipated buying opportunities after the midterm elections, and Thursday’s selloff delivered some. This remains an earnings-led bull market. Valuations are falling while earnings are soaring. We still view the AI backlash as another speed bump, not a roadblock. We are sticking with our 7,900 year-end target for the S&P 500. I. Performance The Nasdaq entered correction territory on Thursday and closed the week below its 200-day moving average (chart). It has done this before recently. It rebounded sharply after its Spring 2025 "Liberation Day" plunge and again after the Iran war started earlier this year, quickly resuming its uptrend both times. The equal-weight S&P 500 is holding up remarkably well. It remains near its recent record high and above both its 50-day and 200-day moving averages (chart). The damage has been concentrated in the AI trade, not the broader market. The Magnificent-7 are underperforming again. The MAGS ETF is up only 2.4% ytd, versus 7.8% for the S&P 500 (chart). The Impressive-493 also took a hit this week. The XMAGS ETF includes Micron and the other semiconductor stocks hit hardest in the selloff. It is still up 10.0% ytd. Dow Theory remains bullish. The Dow Jones Industrial Average is holding up well near its highs (chart). The Transports have lagged. They should improve if oil prices continue to fall. II. Earnings Earnings season picked up this week. The blended Q3 S&P 500 EPS growth estimate (i.e., actual results for companies that have reported, estimates for those that haven’t yet) rose to 25.9% y/y from 23.8% a week earlier, helped by AMD’s solid results. Q4’s estimate edged down to 29.7% (chart). As we noted previously, Q2’s 50.4% y/y EPS growth rate was boosted by mark-to-market gains at Alphabet and Amazon. Excluding those, growth was closer to 25%, which is still very strong. Forward earnings rose to a record $418.25. It is converging on the 2027 estimate of $426.28, which continues to climb (chart). Analysts’ 2028 consensus S&P 500 EPS estimate rose to $495.14; it’s been closing in on $500—which is our target for 2030! We are bullish, but not as bullish as the analysts. The drop in the forward P/E this year suggests that investors also believe analysts are too bullish on earnings. Forward earnings for the S&P 500, S&P 400, and S&P 600 all rose to record highs again last week (chart). Earnings strength remains broad. S&P 500 forward revenues per share is up 15.9% y/y, while forward earnings per share is up 39.0% y/y (chart). III. Valuation The S&P 500 forward P/E fell to 17.6 last week, below the 2025 Liberation Day low (chart). P/E plunges typically accompany corrections and recessions. The economy shows no sign of a recession anytime soon. Investors instead fear irrational exuberance in earnings forecasts. Since the bull market began on October 12, 2022, the S&P 500 has risen 106.2%. Forward earnings is up 75.5%, while the forward P/E is up 22.5% (chart). The P/E and E both drove the rally until the forward P/E peaked in October last year. Since then, E has done all the work. Investors are finding it harder to predict the return on all the AI capital spending. They won’t pay an excessive multiple given that uncertainty. The S&P 500 Semiconductors industry accounts for much of the P/E drop. The industry index's forward P/E has plunged to 13.1, well below the S&P 500’s (chart). Semis are now cheaper than they were during the 2022 bear market. IV. Fixed Income The futures market expects about two rate hikes over the next 12 months. That explains why the 2-year Treasury yield remains well above the 3.88% federal funds rate, even after easing to 4.46% following the midterms (chart). The 10-year Treasury yield continues to fall. It dropped to 4.84% and is testing its uptrend line from last year’s low (chart). We’ll see if it bounces. Either way, it is back in the 4.00%-5.00% “old normal” range where we feel comfortable. The 10-year TIPS yield fell to 2.62%. The yield spread between the 10-year Treasury and TIPS, a widely used proxy for expected inflation, eased to 2.22% (chart). That proxy tends to move with oil prices. The recent drop in crude showed up here. V. Commodities The price of Brent crude oil fell to $98.32 a barrel in recent days (chart). No news of the re-escalation of the war in the Middle East has emerged since the midterms. Hopes for a US-Iran deal are reflected in the oil market. We still see a risk of re-escalation. Nearby gasoline futures dropped to $2.78 a gallon last week (chart). If sustained, that should start to show up as lower inflation in a couple of months. Renewed fighting in the Middle East would reverse that. Steel prices show no sign of a slowdown in data center construction. US Midwest hot-rolled coil rose to $1,357 a ton, the highest since 2022 (chart). Agricultural prices have eased. The S&P GSCI Agriculture Spot index fell to 376.77 last week (chart). Fears of a food price spike should subside.
We Promised You Buying Opportunities After The Midterms
I. The Delayed Cold Shower Since September 15, we've counseled proceeding with caution in the stock market through the midterm elections. We anticipated buying opportunities after Tuesday's elections. Stocks rallied on Wednesday. But they plunged today. The S&P 500 fell 4.4%, its worst day since the April 2025 tariff shock (charts). The Nasdaq composite sank 5.5%, entering correction territory, while the Dow dropped 3.4% and the PHLX Semiconductor index plunged 12.0%. The cold shower we warned might follow a Democratic sweep arrived a day late. We believe that Wednesday's rally was driven by short covering as two key risks failed to materialize. First, investors feared President Donald Trump might contest close elections, potentially triggering a constitutional crisis. Instead, on Wednesday morning, he acknowledged the Democrats' decisive victory and said he is willing to work with them. Second, investors feared an immediate re-escalation of the war in Iran after the midterms. But oil prices fell sharply on Wednesday on reports that the US and Iran are pursuing a diplomatic solution. On Thursday, investors began discounting the implications of the Democratic sweep for the economy's golden goose: the AI investment boom. The political backlash against data centers is gaining momentum, with 76% of voters opposing new facilities in their communities, according to NBC exit polls. Perhaps most consequentially, Texas, which accounts for nearly 30% of planned US data center additions in 2028, elected Gina Hinojosa as governor after she promised to halt new approvals. Goldman Sachs estimates that states facing possible restrictions account for roughly 45% of planned US data center capacity. Tougher permitting and higher costs could delay billions in investment and postpone returns for hyperscalers. Given the AI boom's growing importance to economic activity, the implications extend well beyond technology. As a result, the 10-year Treasury yield fell another 7bps to 4.83% today, reflecting safe-haven demand and fears of weaker economic growth. Investors also pared back Fed tightening expectations, with futures pricing just 1.7 quarter-point hikes over the next 12 months (chart). We view the political backlash as another constraint on AI investment, alongside financial and physical bottlenecks. But these are speed bumps, not roadblocks, even though Wall Street seems to be pricing in the latter. We think that's overdone. As AI adoption broadens and productivity gains accelerate, demand for compute will keep growing. Data centers will get built, albeit at a slower pace. Speed bumps should prevent the AI boom from moving too fast and crashing around the next curve. That's why we view Thursday's selloff as a buying opportunity. Our favorite Boom-Bust Ratios likely turned even more bearish after today's selloff (chart). From a contrarian perspective, panic attacks tend to be bullish. Our Roaring 2020s scenario remains on track, and we are sticking with our 7,900 year-end S&P 500 target. Late-breaking news: Texas Governor-elect Gina Hinojosa was interviewed after the market closed on CNN and said, "All currently permitted data centers in Texas will be allowed to finish construction." This essentially covers all of 2027 and likely most of 2028. She plans to pursue legislation requiring newly permitted data centers to pay taxes, protect consumers from higher power prices, preserve water availability, use union labor, and give "Texans a seat at the table." II. On Productivity and Labor Market Conditions While Wall Street frets about a potential slowdown in the AI investment boom, the latest data show that productivity growth is already accelerating, even as AI adoption remains in its early stages. Here is more: (1) Productivity. Nonfarm business productivity jumped 3.6% q/q (saar) during Q3, the strongest pace since Q3-2025, while rising 2.1% y/y (chart). The seven-year productivity growth cycle is increasing by 2.4% annually, exceeding its historical average (chart). In our Roaring 2020s scenario, productivity growth is likely to rise to 3.5%-4.0% over the remainder of this decade. (2) Unit labor costs & inflation. Unit labor costs is measured as hourly compensation divided by productivity. It rose just 2.4% y/y in Q3-2026, reinforcing our view that the labor market is not currently a source of inflationary pressure (chart). (3) Unemployment claims. Initial jobless claims fell to just 189,000 during the week ended October 31 (chart). The four-week moving average dropped to 194,750, its lowest level since 1969! Continuing claims also remain low. The message is clear: The Fed has little reason to worry about the health of the US labor market. (4) Layoff announcements. Challenger reported just 44,000 announced job cuts in October, down 71% y/y and the lowest October reading since 2023, reinforcing the message that layoffs remain subdued (chart).
Archive
Our Research Library
19 years of daily research, charts, and analysis
Topics
QuickTakes Topics
Timely commentary covering the most important market themes
Charts
Find Any Chart in Seconds
Search across 7,773+ real-time charts with instant visual previews
ITALY CENTRAL GOVERNMENT BUDGET BALANCE AS A PERCENT OF NOMINAL GDP
FRANCE CENTRAL GOVERNMENT BUDGET BALANCE AS A PERCENT OF NOMINAL GDP
NIKE: FORWARD P/E
US FEDERAL GOVERNMENT BUDGET BALANCE AS A PERCENT OF NOMINAL GDP
Sample charts from our collection of 7,773+ visualizations
Tools
Research Tools
Interactive dashboards for tracking economic conditions and market trends
Beige Book Monitor
Fed economic conditions across 12 districts with traffic-light signals.
FOMC Policy Meter
Dovish-to-hawkish policy stance tracker across FOMC meetings.
FOMC Minutes Monitor
Hawk/dove signal extraction across 10 economic themes.
FOMC SEP Monitor
Fed projections and dot plot distributions across meetings.
FOMC Statements
Every FOMC policy statement since 1997 — full text, rates, and voting records.
Private Credit Monitor
Auto-updating chronology of the private credit liquidity crisis.
Release Calendar
Major publications from the Fed, ECB, IMF, and 12 global institutions.
Try Yardeni Research free for four weeks.
Full access to everything we publish. No credit card, no obligation.