- Ed Yardeni said many tech stocks look terribly cheap and are good buying opportunities.
- Aggressive rate hikes are coming, but companies are teeming with cash — and that will support markets, he said.
- The end of the Fed’s easy money policy isn’t a bad thing, the seasoned strategist said.
According to veteran strategist Ed Yardeni, tech stocks are looking cheap, and now is a good time for dip buyers to jump in.
The sell-off in US government bonds and stocks intensified after
Chairman Jerome Powell signaled Monday that the central bank is ready to act even more aggressively to fight inflation. Investors now anticipate slowing US economic growth and an end to the easy money policy of the past two years.
But Yardeni said he doesn’t think Powell’s comments are “killing” the market, and he thinks investors are looking for bargains.
“The technology seems awfully cheap to me,” he told CNBC in an interview on Monday. “There are a lot of cheap tech stocks, so I think there are opportunities.”
The S&P 500 index peaked at 4,796 on January 3, but is down 6% from that level as investors grapple with Russia’s war in Ukraine and the bank’s policy tightening central. By comparison, the tech-heavy Nasdaq is down 11.2% year-to-date.
Tech companies like PayPal,
Video, Facebook parent Meta are all over 35% lower over the same period.
“This correction we’ve had since January 3 has attracted buyers,” Yardeni said. “I would call them bottom buyers or corrective buyers.”
Energy, materials and financials are other promising sectors in the current environment, according to Yardeni, who last year predicted that the S&P 500 would hit 5,000 by the end of 2022.
The seasoned strategist thinks the “Fed put” – the belief that the central bank will intervene to halt the decline of the stock market – is over.
“Even if we had a real tantrum in the stock market, the Fed just has too big an inflation problem to back down,” he said.
Goldman Sachs takes Powell’s comments as a sign that the Fed will raise interest rates by 50 basis points in May and June, a prediction Yardeni agrees with.
“The Fed is going to have to keep raising rates no matter what. That’s not going to give us easy credit conditions to keep the market up,” he added.
But a positive sign is that companies are brimming with cash, which means share buybacks, dividend payouts and mergers and acquisitions activity will be strong, he said.
“They’ve raised over $2 trillion in the bond market in the last three years,” he said. “They refinanced a lot of their debt at historically low interest rates.”
“I think all of these areas will continue to support the market.”
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