Independent Financial Research & Analysis
Daily briefings, 7,300+ real-time charts, and macro insights from Dr. Ed Yardeni and his research team.
Research
Latest Research
Recent insights from our research team
GLOBAL MARKET CALL: 'Go Global' Should Outperform When Strait Reopens
Our call to Go Global rather than Stay Home has paid off so far this year, despite the latest war in the Middle East, which boosted Stay Home, especially in March. However, Go Global was mostly driven by the AI trade in South Korea and Taiwan. The Emerging Markets MSCI ETF (EEM) is up 25.4% ytd against 10.9% for the S&P 500. Moreover, we recommended staying out of China. The EM ex-China ETF (EMXC) is up 39.0% ytd. Europe, Japan, and many EMs that are net petroleum importers should outperform when the Strait of Hormuz reopens, at least on a short-term basis. Here's more: (1) Go Global vs Stay Home. The ratio of the US MSCI to the All Country World (ACW) ex-US MSCI stock price index had been on a solid upward trend since 2010, peaking at a record high in early 2025 (chart). It fell below this trend in late 2025. It rebounded during the war because the US is a net petroleum exporter. The ratio remains below the trendline. The forward earnings per share of the ACW ex-US MSCI has been rising rapidly, along with the comparable series for the US (chart). The strength is broad-based across regions, with India a notable upside surprise. This is a bit surprising, though the AI-led boom in South Korea and Taiwan certainly explains much of the strength in the overseas measure of forward earnings. The US MSCI’s forward P/E is currently 21.5 versus 14.2 for the ACW ex-US MSCI, and the gap has widened recently (chart). There's clearly room for multiple expansion overseas, though that's been true for a long time. At the country level, the AI-driven cohort continues to dominate. On a ytd basis, South Korea and Taiwan closed up 28.0% and 14.4% in May, respectively, with EM ex-China up 11.0%, while the US gained 5.3% during the month (chart). The Korea Institute for Industrial Economics and Trade just lifted its 2026 export forecast to $924.4 billion, up 30.3% y/y, led by semiconductor exports. Looking further down the pecking order, several laggards are oil importers positioned to benefit from a reopening of the Strait. (2) Emerging markets. The EM rally's extraordinary concentration is the catch. EMXC is up 39.0% ytd, EEM is up 25.4% ytd, and WisdomTree True EM is down 2.5% ytd (chart). The gap between EMXC and EEM reflects the China drag. The gaps between both and True EM reflect the South Korea and Taiwan tailwind. The Emerging Markets MSCI tracks the FIBER industrial materials price index closely (chart). FIBER captures aluminum, copper, oil, and other listed commodities. Both continue to rise, suggesting that this time the AI trade is the source of global reflation. The classic inverse correlation between EM equities and the DXY dollar index isn't evident this time, as the former soars while the latter remains firm (chart). The AI trade, not currency tailwinds, is doing the work for EM right now. The EM MSCI Currency Ratio has been declining since 2011 (chart). It looked set to break out of its downtrend in early 2025. Last year's tariffs and this year's war pushed the ratio back down. We watch this ratio as an EM stress indicator, recalling the EM currency crises during the 1990s. (3) Global inflation. US CPI goods inflation rate has been tracking the FRBNY Global Supply Chain Pressure Index closely, especially in recent months (chart). Goods inflation is a global supply-chain story, not just a US one. The chart suggests inflation may prove to be a more troublesome global issue than the markets are currently discounting.
ECONOMIC WEEK AHEAD: JUNE 1-5
The S&P 500 climbed to another record high on Friday, closing at 7,580.05. Fabulous earnings momentum (FEMO) and falling oil prices boosted stock prices. Brent crude settled at $92.05 a barrel, the lowest weekly close since April 17. Axios reports that the US and Iran have reached a ceasefire-extension deal, pending President Trump's approval. The odds that the US blockade of the Strait of Hormuz will be lifted by June 30 are up to 68% from 42% on May 20. The 10-year US Treasury yield fell 12 basis points for the week to 4.45% (chart). So far, the bond yield continues to follow our "Old Normal" script. The 10-year Treasury yield has been range-bound between 4% and 5% since mid-2023. That was also its range (with a few brief exceptions) from 2001 to 2007 before the Great Financial Crisis and the Great Virus Crisis. The week ahead is heavy on labor market data releases, including JOLTS (Tue), ADP private payrolls (Wed), Challenger layoff announcements (Thu), and BLS employment (Fri). ISM PMI reports will be released on Monday (manufacturing) and Wednesday (non-manufacturing). Thursday brings revised Q1-2026 productivity and unit labor costs, along with weekly jobless claims. Eight Fed speeches fill the docket, with Barr appearing twice plus Waller, Kashkari, Hammack, Logan, Barkin, and Daly. The Fed's Beige Book will be released on Wednesday afternoon. Broadcom reports its Q2 results on Wednesday. Here are the key economic releases most likely to shape investors' thinking this week: (1) ISM PMIs. ISM and S&P Global release the May results of their purchasing managers’ surveys this week, the M-PMI (Mon) and NM-PMI (Wed). Manufacturing has been expanding for four straight months as of April, while services industries’ business has been drifting lower but has remained in expansion. The y/y growth rate of S&P 500 forward earnings has tended to lead the M-PMI. The former is pointing to further upside for the latter, given recent FEMO (chart). (2) Employment. May's employment report (Fri) is the headliner for the week. April's payrolls rose 115,000, with the three-month average cooling to 48,000. April's unemployment rate held at 4.3% and likely stayed there in May, given the low pace of initial unemployment claims. Jobless claims also suggest that Challenger layoff announcements (Thu) remained subdued in May. April's announced layoffs printed at 83,400, well below the 2022-2023 peaks (chart). As we discussed on Thursday, the ADP NER Pulse implies a monthly private payroll pace of about 143,000 through May 9. May's ADP private payrolls report (Wed) should also confirm continued hiring strength. April's report came in at 109,000, with Education & Health Services contributing 61,000 (chart). April's JOLTS data (Tue) should show labor market turnover activity continuing to normalize. March's quits rate held at 2.0%, back in its mid-2010s range. The job openings rate at 4.2% is also back to its pre-pandemic normal. The hires rate at 3.4% showed improvement (chart). (3) Productivity and labor costs. Q1's revised nonfarm productivity and unit labor costs (Thu) should confirm the divergence underway between price and labor cost inflation. The headline PCED was 3.8% y/y in April, while unit labor costs rose just 1.2% over the past four quarters (chart). According to the preliminary Q1 report, productivity rose 2.9% y/y, above its long-run average of 2.1% (chart). It might be revised down as was real GDP growth during Q1.
US MARKET CALL: FEMO-Driven Stock Market Meltup
As stock prices continue to soar, fears of an AI bubble are increasing. The tech bubble of the 1990s was driven by fear of missing out (FOMO). This time, fabulous earnings momentum (FEMO) is driving tech stock prices higher. An earnings-led meltup like this should be more sustainable than a P/E-led meltup fueled by irrational exuberance. That’s especially true of FEMO meltups, like this one, that have been climbing a wall of worry. Consider the following: (1) Stock prices. The S&P 500 closed at a record 7,580.06 on Friday, 11.0% above its 200-day moving average (chart). The equal-weight index closed at 8,442.40, 7.2% above its 200-dma. Both are elevated and may pull back. On May 10, we raised our year-end target for the S&P 500 from 7,700 to 8,250. We are sticking with it. On Friday, the Russell 2000 closed at a record 2,919.34, 14.2% above its 200-dma (chart). We expect that the stock market's breadth will continue to broaden once the Gulf War ends. (2) S&P 500/400/600 earnings. S&P 500 forward earnings is at a record high. The latest analysts' consensus has S&P 500 operating EPS at $339.24 for 2026 and $394.52 for 2027 (chart). When we raised our year-end S&P 500 target to 8,250, we raised our comparable earnings forecasts to $330 and $375. The analysts are even more bullish than we are. We might have to follow their lead again. Needless to say, technology is leading the way in the analysts' FEMO derby. S&P 500 Information Technology operating EPS is forecast to grow 47.2% in 2026 and 32.7% in 2027, after growing 24.7% in 2025 (chart). The consensus quarterly EPS growth rates continue to rise. Q1-2026 earnings growth is currently tracking at 19.3% y/y, up from a low of 12.5% in April, just before the start of the Q1-2026 earnings season. Q4-2026 is now tracking at a remarkable 24.5% y/y (chart). FEMO is running wild across the market-cap spectrum. S&P 400 MidCap and S&P 600 SmallCap forward EPS are also rising rapidly to fresh record highs (chart). A full 85.8% of S&P 500 companies have positive forward y/y earnings growth, while 88.8% have positive forward y/y revenue growth. Both are near previous cycle highs (chart). The breadth of earnings growth is still improving. (3) S&P 500 valuation. Despite S&P 500 Information Technology and Communication Services leading the FEMO charge, their combined forward P/E is just 23.2, not much above the overall S&P 500's 21.2 (chart). In 1998-2000, this same combined forward P/E rose over 40.0. That was FOMO then versus FEMO now. Investors apparently are dumbfounded by the pace of earnings growth and haven't raised the valuation multiples that they are willing to pay for that growth commensurately. If they do, then we will worry about a bubble. (4) S&P 500 technicals. Investor sentiment is not exuberant. The Investors Intelligence Bull/Bear Ratio is 2.00, which is below its 2.60 long-term average, while the AAII Bull/Bear Ratio is 0.85, also below its 1.19 long-term average (chart). This suggests that there is more upside for stock prices. On the other hand, several S&P 1500 sectors look seriously extended compared to their 200-dma (chart). (5) Bonds. We continue to expect the 10-year Treasury bond yield to mostly range between 4.25% and 4.75% this year (chart). The release last week of April's hawkish FOMC minutes calmed the Bond Vigilantes, who want the Fed to be more vigilant about inflation. (6) Commodities. The combination of the AI infrastructure boom and the war in the Middle East has boosted commodity prices so far this year (chart). The price of copper rose to another record high last week (chart). It is at the top end of its bullish channel. (7) Gold. The price of gold seems to be finding significant support at its intermediate uptrend line, its 200-dma, and its low earlier this year (chart). If Trump agrees to the current ceasefire proposal, which might open the Strait of Hormuz, gold's price is likely to rise. The war has been bearish, not bullish, for gold.
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 7,396+ real-time charts with instant visual previews
PHILIP MORRIS INTERNATIONAL: FORWARD LTEG, STRG & STEG
S&P 500/400/600 TRANSACTION & PAYMENT PROCESSING SERVICES: STOCK PRICE INDEX
LOWE'S: FORWARD OPERATING EARNINGS PER SHARE
LOWE'S: FORWARD PROFIT MARGIN
Sample charts from our collection of 7,396+ 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.
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.