“Washington continues to be a source of volatility and uncertainty. Policymaking certainly has been that way the entire year and yet the stock market’s learned to deal with that quite well,” Yardeni said in an interview with ET Now.
“That’s largely because the earnings situation has been remarkably strong. The growth rate has almost been twice as fast as was initially thought, and that’s really what’s driving the U.S. stock market higher. Earnings have gone to record highs.”
Despite the ongoing policy uncertainty, Yardeni remains optimistic about the U.S. economy’s resilience.
“For the past three years we’ve had the most widely anticipated recession that never occurred,” he noted. “The economy has demonstrated its resilience in the face of very significant shocks, and here we are with real GDP at an all-time record high. I’m betting on continued resilience.”
He pointed out that while the government shutdown could slightly depress fourth-quarter data, consumer spending and technology-led capital investments are likely to remain robust.On the issue of tariffs and global trade realignment, Yardeni believes the world is already in transition.“I don’t think it’s going to be status quo very soon. Many of our trading partners are trying to find more reliable partners and diversify markets,” he explained. “Canada and India, for example, had some unhappy relationships that now seem to be mending because the Canadians want to do more business in India. And certainly, countries and companies want to diversify away from being overly dependent on China.”
Yardeni also highlighted the ongoing concern over China’s control of rare earth supplies, suggesting that the past year’s developments have triggered a global search for alternative sources.
Looking ahead to January, he expects fresh political drama in Washington.
“January could be kind of interesting because this deal is a very short one between the Democrats and Republicans,” he said. “It’s also expected that the Supreme Court might rule on the tariffs, and that could have a major impact. I think the president is going to find that the Supreme Court very likely will rule against him, which could affect the bond market.”Despite the looming policy battles, Yardeni doubts another shutdown is on the horizon.
“The administration would like to avoid another shutdown. The Democrats also got burned with this one. They’re not going to play nice, but they’re not going to shut down the government again,” he concluded.
As Washington braces for another round of fiscal and political clashes, Yardeni’s view underscores a key takeaway — that strong corporate earnings and resilient consumer activity continue to offset policy-induced volatility, keeping markets grounded despite the noise from Capitol Hill.
