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
Bond Yields On The Spectrum: From Good To Ugly
Is the bond selloff the Revenge of the Bond Vigilantes, i.e., a looming debt crisis? Not yet. Despite the recent surge, the 10-year Treasury yield remains below the growth rate of nominal GDP. That points toward an upward repricing of the neutral interest rate. Ed and Elias examine the spectrum of forces behind higher yields, from rising R* to a potential debt-crisis scenario. The real warning sign would be if the yield rises above nominal GDP growth. In addition, they consider two other spectrum scenarios: the war in the Middle East and the yen-carry trade. … Also: The latest labor market data suggest resilient but noninflationary strength. … And: Dr Ed reviews “Tony” (+).
ECONOMIC WEEK AHEAD: October 5-9
Most of last week's economic indicator reports were strong: Initial jobless claims fell to near a 57-year low, ADP private payrolls rose 90,000 in September, and the ISM M-PMI was in expansion for a ninth straight month. Friday's employment report was the exception. Nonfarm payrolls rose just 29,000 in September, well below expectations, while July and August were revised down by a combined 60,000. The unemployment rate edged up to 4.2%. Odds of a 25bps hike in the federal funds rate (FFR) at the October 27-28 FOMC meeting fell to 22%, with odds of one at the December meeting at 67%. Odds of two hikes by December is at just 3%. In other words, the market still expects a rate hike this year, though it has all but ruled out two. However, we still think the Fed ought to hike at least enough to reverse last year's three 25bps "insurance" cuts. September's hike reversed one, which leaves two more to go. This week's data calendar is light, with Wednesday's FOMC minutes the main event. Here's more: (1) FOMC minutes. September's FOMC meeting minutes (Wed) should reveal how much support the Committee has for tightening beyond what the dot plot in the September meeting’s Summary of Economic Projections implies. The median projection of meeting participants showed the FFR at 4.1% at the end of this year and next, i.e., one more 25bps hike in 2026 followed by a hold lasting throughout 2027 (chart). Fed Chair Kevin Warsh said the September hike "removed a dose of accommodation," implying that the FFR remains below the neutral rate. The median longer-run neutral rate estimate in September’s dot plot rose to 3.25%, a post-pandemic high. The FFR futures market’s prediction is more hawkish than the Fed officials’ median. FFR futures imply 3.3 rate hikes over the next 12 months and 1.7 over the next six months (chart). The 2-year Treasury yield is at 4.78%, well above the 4.00% top of the FFR target range, with 12-month futures at 4.70% (chart). (2) PMIs. S&P Global's flash NM-PMI jumped to 58.7 in September from 56.5 in August, suggesting that ISM's NM-PMI (Mon), which was 55.4 in August, remained strong last month (chart). Services prices-paid components deserve close attention, as the supercore PCED inflation rate has been rising since October 2025. (3) ADP employment & jobless claims. ADP's weekly employment reading (Tue), covering the weeks ended September 12 and 19, follows a rise in the four-week average to 20,000 for the week ended September 5, up from a late-July bottom of 8,250 (chart). That pace closely matched September's ADP private payrolls gain of 90,000. Initial jobless claims (Thu) follow last week's 197,000, the lowest since July 18. The four-week average fell to 200,000. Continuing claims dropped to 1,701,000 for the week ended September 18, the lowest since March 2023, with the four-week average at 1,739,000. The low level of initial claims confirmed September's low unemployment rate of 4.2% (chart). (4) Global. Eurozone retail sales ex autos fell 0.6% m/m in July, following June's record high (chart). August's data (Tue) should show whether that was just a blip. Bank of England Governor Andrew Bailey may signal whether rising energy prices warrant a hike when he speaks at the Central Bank of Turkey's conference (Thu), after three Monetary Policy Committee members voted for one in September. The markets put the odds of a November hike at 88%, with roughly 66bps of additional tightening priced in for 2027. Canada's employment report for September (Fri) follows August's 41,700 job loss, with the unemployment rate holding at 6.4% (chart).
US MARKET CALL: Stocks Ignoring Bonds, For Now
The 10-year US Treasury bond yield has climbed above 5.25%, and the S&P 500 hasn’t flinched. The stock index is just 2.2% below our year-end target of 7,900. It could overshoot our target in the coming days now that crude oil shipments from the Persian Gulf producers reportedly are averaging around 98% of pre-war totals, excluding Iran. Producers and shippers have found workarounds to their usual Strait of Hormuz routes, including alternative pipeline routes, ship-to-ship transfers, and naval-escorted night transits. The question is: How long stocks can ignore bonds if yields keep rising despite lower oil prices? If yields are simply repricing to reflect stronger-than-expected economic growth, then earnings will remain strong. The downside risk is to the stock market's valuation multiple if bond yields are rising on concerns about mounting government debt, possibly exacerbated by the unwinding of the yen carry trade. For now, we are sticking with our S&P 500 targets of 7,900 by year-end and 8,400 by mid-year 2027. Here's more: I. Bonds The 10-year Treasury yield rose to 5.24% on Friday, and the 10-year TIPS yield rose to 2.91% (chart). Since the start of the year, the nominal yield is up 109bps, and the TIPS yield is up 95bps. Real yields account for nearly all of the increase, while inflation expectations have barely budged. We read that as a vote of confidence in the economy and a sign of strong demand for credit. Friday's employment report disappointed. Payrolls rose only 29,000 in September versus forecasts of 80,000-100,000, with 60,000 of additional downward revisions for July and August. The 10-year yield dipped on the news, then recovered, suggesting that more than the economy's strength or weakness is driving yields. The 2-year yield is 4.78%, well above the 3.88% federal funds rate and discounting more Fed rate hikes ahead (chart). We see the payroll miss as an outlier among otherwise solid labor market indicators. Credit markets are starting to show signs of stress as interest rates move higher. Credit default swap spreads have widened in recent weeks (chart). Private credit is also show some distress again. The Virtus Private Credit Strategy ETF and the VanEck BDC Income ETF have taken another leg down (chart). The slide coincides with another quarter of heavy redemption requests at nontraded private credit funds, many of which remain above their 5% quarterly withdrawal limits. The stress has remained within private credit. It hasn't spilled over into the broad stock market. II. Stocks The S&P 500 closed at 7,722.72 on Friday, 1.0% below its August 13 record high (chart). The S&P 500's summer stall has turned into a fall stall. The equal-weight S&P 500 is down 5.9% from its August 14 record high and is now only 2.0% above its 200-day moving average. Concentration worries have returned with the Magnificent-7's rebound since mid-August. XMAGS is up 13.6% ytd, versus 10.1% for MAGS and 12.8% for the S&P 500 (chart). The broad market's outperformance has shrunk considerably since August. The rebound in the stock prices of the hyperscalers since late July has been led by Meta (chart). The Russell 2000 is down 7.7% from its record high on August 14 and 1.8% above its 200-day moving average (chart). SmallCaps are very sensitive to interest rates. If high bond yields start to bite the economy, the SmallCaps will be the first to react. III. Earnings The fabulous earnings momentum (FEMO) story remains intact. S&P 500 forward earnings rose to a record $406.45 per share last week. The 2027 consensus estimate has flattened over the past few weeks around $419 (chart). We still expect both to climb to $425 by year-end on better-than-expected Q3 and Q4 earnings. JPMorgan kicks off the Q3 earnings reporting season on October 13. Industry analysts expect Q3 earnings to rise 23.4% y/y and Q4 earnings to rise 28.2% (chart). Both estimates have edged down ahead of reporting season, as they usually do. We expect companies to clear the lowered bar. IV. Valuation Since mid-August, the stock market's slippage has come entirely from a lower multiple. S&P 500 forward earnings is up 28.2% ytd, compared with 12.8% for the price index, while the forward P/E is down 12.8% (chart). The S&P 500’s forward P/E is 19.0, the Mag-7’s is 22.9, and the SMidCaps’ (i.e., SmallCaps and MidCaps collectively) is below 15 (chart). Our 7,900 S&P 500 target assumes an 18.6 multiple. With the 10-year yield above 5.00%, we see more downside than upside for valuations through year-end. V. Sentiment The two bull/bear ratios we follow are pointing in opposite directions. The Investors Intelligence ratio is 3.75, well above its 2.61 average, while the AAII ratio is 0.74, well below its 1.18 average (chart). Newsletter writers are too bullish. Individual investors are too bearish. Individual investors may seem to be bearish, but they are fully invested. Equities rose to a record 37.8% of household net worth and 48.2% of household financial assets in Q2 (chart). AAII members hold 71.7% of their portfolios in stocks, 14.8% in bonds, and only 13.3% in cash (chart). Retail investors are in this market with both feet.
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 7,723+ real-time charts with instant visual previews
LOWE'S: STOCK PRICE INDEX, EARNINGS & P/E
ACCENTURE: FORWARD REVENUES
CONOCOPHILLIPS: STOCK PRICE (COP)
BNY MELLON: PRICE, FORWARD EARNINGS & VALUATION
Sample charts from our collection of 7,723+ 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.