US economy Strong, but politics and geopolitics pose risks for markets, says Ed Yardeni

US economy is doing very well, and it’s unclear if the Federal Reserve needed to lower interest rates, wonders Ed Yardeni, President of Yardeni Research. However, since they did, it’s good news for the stock market.

Talking to CNBC-TV18, Yardeni also spoke about the upcoming US Presidential elections, predicting that it will be a close race. He warned that if the election results are too close and there is a conflict over who won, it could negatively affect the markets. Another potential risk he mentioned is if either the Democrats or Republicans win by a large margin, which could also be bad for the market.

According to Yardeni, the best outcome for the markets would be a gridlock situation. In this scenario, even if either Donald Trump or Kamala Harris were to win the presidency, they would not have full control of the House and Senate, making it harder to pass their policies. Yardeni pointed out that neither candidate prioritises reducing deficits or controlling the inflationary effects of their policies, which adds risk to the market.

Yardeni said the main risks to the market come from domestic politics and global events, not the US economy, which is doing well. He believes the US Fed does not need to lower interest rates anymore and has mentioned before that he is in the “none and done” camp, meaning he does not expect any more rate cuts in November or December.

Also Read: Ed Yardeni says Fed unlikely to cut rates again in 2024

On gold, Yardeni highlighted that its recent success is largely driven by geopolitical issues. He explained that since the US imposed sanctions on Russia, China has been increasing its gold purchases, which helps explain why gold prices are performing well.

Gold prices crossed $2,700 per ounce for the first time on Friday, October 18, driven by increasing geopolitical tensions in the Middle East and uncertainty surrounding the US elections.

Also Read: Gold rates surge to all-time high: Key factors explained

In India, the price of 24K gold surpassed ₹78,000 per 10 grams, while MCX gold futures exceeded ₹77,000 per 10 grams.

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