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
GLOBAL MARKETS CALL: Interest Rates Are Troubling
I. Global Economy The global economy has been surprisingly resilient so far this year. There were dips earlier this year, when the Middle East war was in full swing; but in recent months, global industrial production and exports have rebounded to their record highs from before the war (chart). The All Country World MSCI forward revenues per share has continued to soar to record highs this year (chart). The All Country World ex-US MSCI is up a very solid 10.0% y/y, with forward earnings up a record 39.7% (chart). II. Global Interest Rates The significant increase in oil prices so far this year hasn't knocked the wind out of the global economy’s sails. The question is whether rapidly rising interest rates will do so. The rapid rise in 2-year government note yields worldwide signals that major central banks need to raise their policy rates further in response to the inflationary impact of higher-for-longer oil prices resulting from the recent re-escalation of the Middle East war (chart). Unfortunately, these higher rates also exacerbate the outlook for large government deficits worldwide. A diplomatic settlement of the war would certainly help to bring down oil prices and interest rates. However, President Donald Trump has reportedly rejected an offer by Iran to reopen the Strait of Hormuz and end the conflict. He intends to resume bombing Iran after the midterm elections if Iran doesn't agree to dismantle its nuclear program. That means higher-for-longer oil prices, sticky inflation, and more central bank tightening. The synchronized worldwide rise in bond yields this year likely stems from factors beyond inflation. In our September 17 QuickTakes titled “Global Bond Rout Made In Japan?,” we wrote, "Higher Japanese interest rates and likely further yen appreciation have been forcing traders to unwind their yen-carry trades. This might explain the rout in the global bond market since 2024." In Japan, the 2-year government note yield suggests that the Bank of Japan needs to hike its official policy rate three more times to 2.00% from 1.25% currently (chart). III. Global Stock Markets Meanwhile, global stock markets are rising together to new record highs even as bond yields rise to multi-decade highs (chart). The global stock bull market is driven by fabulous earnings momentum (FEMO) not just in the US, but worldwide (chart). How can that be? Perhaps the AI buildout might explain why this is happening. IV. Go Global vs Stay Home On a ytd basis, Stay Home and Go Global have performed about the same. In dollars, the ACWX is up 14.5%, while SPY is up 13.5% (chart). EMXC (39.2%) has outperformed EEM (24.3%). The same rankings have held so far during September (chart). V. Weekly Focus (1) The OECD recently released its interim economic outlook, noting that global growth has held up better than initially feared following earlier Middle East conflict escalation and crude oil spikes. Global GDP growth for the year is projected at 2.9% (a slight 0.1% upward revision). (2) Flash PMI releases across the Eurozone and the UK highlight a two-speed overseas environment: Domestic service sectors continue to expand at a modest clip, while export-oriented manufacturing remains hamstrung by weak external demand and lingering supply-chain cost frictions (chart). (3) OECD data tracking the past week signal that the recent moderation in oil prices (retreating below $100/bbl) was heavily cushioned by the strategic release of global oil reserves, a sharper-than-expected decline in China's energy imports, and a pivot toward alternative fuels like coal (chart).
US MARKETS CALL: Invasion Of The Bond Vigilante Algorithms
I. Credit Last week's events confirm our "Proceed With Caution" call in September 15's QuickTakes. The main event was the jump in the 10-year US Treasury yield above 5.00% to an intraday high of 5.22% on Friday (chart). At the end of the day, it closed lower, at 5.18%, after news that Iran proposed reopening the Strait of Hormuz and ending fighting in the Middle East war. The Wall Street Journal subsequently reported that President Donald Trump has told his staff privately that he’s skeptical that Iran will meet his demands and that the US likely will launch a renewed bombing campaign after the November midterm elections. We suspect that the bond market has been hacked by Bond Vigilante algorithms. They respond to news headlines with huge trades that exacerbate bond market volatility (chart). The US Treasury bond volatility index (a.k.a. MOVE) jumped sharply higher on Friday. We also suspect that the unwinding of the yen-carry trade might explain the worldwide uptrend in bond yields. Of course, central banks have also been tightening in response to the inflation shock from the Middle East war. The credit market always sees trouble coming before the stock market does—for example, the news Friday that a big data center project is being halted. Oracle, SoftBank, and OpenAI are tied together in the $500 billion “Stargate” alliance; OpenAI provides the model demand, SoftBank arranges the massive capital, and Oracle provides the cloud infrastructure to train the next generation of frontier AI models. On Friday, Oracle issued a force majeure notice on Project Jupiter, the flagship 2.45 GW New Mexico data center, because the state denied the 17-mile gas pipeline permit to power its Bloom Energy fuel cells. The banks that funded the construction are stuck with more loans than they planned to hold for now. II. Performance So far, the stock market hasn't been troubled by these developments in the credit market. Indeed, the Nasdaq rose to a new record high on Tuesday of last week (chart). The S&P 500 closed on Friday at 7743.41, only 0.7% below its August 13 record high (chart). Less reassuring, the equal-weight S&P 500 is down 5.2% over the same period. But it remains just above its 200-day moving average. Concerns about market concentration are back, as the Magnificent-7 have outperformed the Impressive-493 since mid-August (chart). The Russell 2000 is also down 7.6% from its record high on August 14, though it is still above its 200-day moving average (chart). The index is sensitive to interest rates and recession odds. III. Earnings Better-than-expected economic growth has also pushed bond yields higher. Of course, a strong economy generates strong corporate earnings. The forward EPS of the S&P 500 edged down last week from its record high the week before (chart). We expect the uptrend to resume as companies report Q3 earnings in October. The quarter's real GDP is tracking at 5.0% saar, according to the Federal Reserve Bank of Atlanta’s GDPNow model. Industry analysts slightly lowered their EPS growth estimates for Q3 and Q4 last week (chart). That's typical as a reporting season approaches. Nevertheless, the uptrends in the forward EPS of the S&P 500, S&P 400, and S&P 600 remain intact. IV. Valuation While S&P 500 forward earnings is up 28.3% ytd, the forward P/E is down 12.3% (chart). The index has gotten cheaper as earnings growth outpaced the stock price index. While the earnings outlook remains very strong, the valuation multiple may continue to fall in response to the concerns we reviewed on September 15 when we advised proceeding with caution (chart). That's why we pushed our 8400 target for the S&P 500 from the end of this year to the middle of next year. We are now targeting 7900 by the end of this year. V. Sentiment The bull-bear ratios we follow are mixed (chart). In tandem, they are not providing either a buy or a sell signal.
Baby Boom Briefing
Consumer spending resilience increasingly has become a balance-sheet story rather than an income-statement story. The personal saving rate has been falling since January 2024 as consumer outlays have outpaced disposable personal income (chart). Many economists believe that this is unsustainable. Not us. We think that the saving rate will turn negative by the end of the decade as retiring Baby Boomers finance their spending with their sizeable net worth. Indeed, there is a clear inverse correlation between the personal saving rate and the ratio of household net worth to disposable personal income (DPI). As household net worth increases relative to DPI, consumers tend to save less of their DPI. Inflation-adjusted consumer spending rose at a 3.2% annualized rate in Q2, the strongest pace since Q3-2025, even as real disposable personal income fell at a 1.5% annualized rate, the largest decline since Q2-2022. On a monthly basis, the former has been rising. If current trends continue, inflation-adjusted consumer spending will exceed total disposable income by 2030 (chart). In this scenario, the personal saving rate would turn negative. This prospect is already prompting the economy’s naysayers to say a negative personal saving rate isn’t sustainable. They conclude that diminishing savings will force consumers to retrench. However, there are no compelling signs yet that America’s shoppers are about to slow down. August's retail sales report showed a strong rebound in consumer spending, beating consensus expectations and erasing July's pullback. Many of the major components of retail sales rose to record highs in August (chart). So what helps explain consumers' ongoing strength? A closer look at Baby Boomers' balance sheets provides the answer. Consider the following: (1) Almost all Baby Boomers are seniors. After World War II, 76 million Baby Boomers were born between 1946 and 1964 (chart). They are currently 62 to 80 years old. They will all be seniors (aged 65 and older) by the end of the decade in 2029. As a result, the number of households headed by a senior rose to a record 39.3 million last year, the largest of all the other age cohorts (chart). Households headed by a senior now account for almost a third of all households (chart). (2) They have most of the wealth. Baby Boomers own an extraordinary share of total household net worth. As of Q2-2026, they held $97.4 trillion of net worth, or a bit more than half of the total (chart). The Silent Generation held another $19.8 trillion, much of which will eventually pass to Boomer households. Together, the total is $117.2 trillion, making the senior cohort the wealthiest in world history! To be exact, Baby Boomers currently account for 53.0% of total US household net worth (chart). Together with the Silent Generation, they account for 64.0% of household net worth. (3) They hold lots of assets. Baby Boomers also own a disproportionate share of the assets that have appreciated in value, such as stocks and real estate. They hold $35.2 trillion, or 55.0%, of household corporate equities and mutual fund shares (charts). Baby Boomers also own $20.6 trillion, or 41.0%, of all household real estate wealth, the largest share of any generation (charts). In other words, Baby Boomers are heavily exposed to the assets that have generated some of the most positive wealth effects on consumption in recent years. (4) They are less sensitive to higher interest rates. Higher interest rates are bad news for young households. For most Baby Boomers, however, they are a boon. Baby Boomers currently hold roughly $9.6 trillion in deposits and money market funds (chart). The Silent Generation holds another $2.3 trillion. Higher short-term interest rates have boosted interest income for many older households. (5) They've paid down much of their debt. They've reduced their debt burdens. Baby Boomers account for only 21.0% of total household liabilities, down from 58.0% in 1990 (chart). Disaggregating these liabilities reveals that the Baby Boomers account for 20.0% of consumer credit and 18.0% of household mortgage loans (charts). Both of these percentages have declined sharply in recent years. Many Baby Boomers either paid off their mortgages or locked in historically low mortgage rates during the pandemic. As a result, many have little incentive to sell their homes or downsize in retirement. By staying put, they limit the supply of existing homes for sale, boosting house prices and increasing their homeowners' equity (chart)! The important point is that higher interest rates are not experienced the same way across generations. For younger households, higher rates are mostly a borrowing cost. For many older households, higher rates can also be a source of income, while locked-in low-rate mortgages and limited debt exposure reduce the drag from tighter credit conditions. (6) They are less dependent on the labor market. Unlike younger households, many Baby Boomers are already retired or approaching retirement, so their spending decisions are less directly tied to monthly changes in wage growth, hiring conditions, or job security. Some may be indirectly affected if their adult children struggle to find jobs or earn enough income to support themselves. However, Baby Boomers' overall financial position is increasingly tied to their balance sheets rather than their paychecks. Taken together, these factors put Baby Boomers in a unique position to keep spending. They hold much of the wealth, benefit from higher interest rates, and depend less on the labor market than younger generations. In other words, they will remain an important driver of consumer spending for years to come.
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 7,700+ real-time charts with instant visual previews
SOUTHERN COMPANY: FORWARD PROFIT MARGIN
SOUTHERN COMPANY: FORWARD REVENUES
ORACLE: FORWARD OPERATING EARNINGS PER SHARE
SOUTHERN COMPANY: FORWARD P/E
Sample charts from our collection of 7,700+ 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.