Ed Yardeni "S&P to reach 7700 next year… must maintain investment positions amid US-China trade tensions"

'Bond vigilantes' term creator Ed Yardeni interview

"The AI boom is a cash-based investment, unlikely to collapse"

"Baby boomer consumption is propping up the U.S. economy"

"Tariffs are the main culprit of inflation… bonds are less attractive"

"Gold will reach $10,000 per ounce within 10 years"

"The S&P500 index is expected to reach 7000 by the end of this year, 7700 next year, and 10,000 by the end of 2029."

Ed Yardeni, a leading investment strategist on Wall Street, said this in a Zoom interview with the Korea Economic Daily on the 17th (local time). Yardeni is the head and chief economist of Yardeni Research and is famous for first discovering and naming the bond vigilantes in 1983.

Yardeni asserted that the artificial intelligence (AI) currently driving the New York stock market is fundamentally different from the dot-com bubble. He expects companies with strong cash power to continue investing steadily. With geopolitical risks such as the Russia-Ukraine war and US-China trade tensions continuing, he forecast that the international gold price will reach 5,000 dollars next year and 10,000 dollars within 10 years.

"The AI craze is completely different from the dot-com era"

Yardeni said that contrary to many people's concerns, the current AI craze is "completely different" from the 1999 dot-com bubble. He explained that the dot-com bubble was strictly a 'telecom equipment bubble.'

He said, "At that time the internet was hailed as a new innovation, and many dot-com companies emerged," adding, "these companies purchased large amounts of telecom equipment to connect to the internet, which led telecom companies to grow substantially, but as most dot-com companies failed, demand for telecom equipment plunged." Excessively indebted telecom companies collapsed and the bubble burst.

Yardeni argues that the current AI boom is not a speculative bubble built on debt. With AI spreading, hyperscalers that operate large-scale data centers are investing in data centers and AI software with their own cash rather than debt. Representative hyperscalers include Alphabet, Microsoft (MS), and Amazon.

Yardeni said, "If returns from AI investments are lower than expected, they will simply scale back investment," and "this is closer to a temporary adjustment than a 'bubble collapse.'"

Earlier this year when China launched DeepSeek, the market worried that hyperscalers were wasting money, but these companies rebounded by saying in earnings reports, "We have no plans to cut back investment."

Yardeni said, "This phenomenon is not an 'AI bubble' but an 'AI fear bubble,' i.e., excessive anxiety," and "of course some companies will fail, but an overall collapse will not occur."

○ Baby boomers propping up the economy

Yardeni pointed to the baby boomer generation as another pillar supporting the U.S. economy. He said, "Anyone who has followed my work steadily will know that for the past three years I have consistently argued that 'the U.S. economy will not fall into a recession.'"

He emphasized, "The resilience of the U.S. economy continues," and "in particular, consumption by the retiring baby boomer generation is playing a major supporting role."

Yardeni explained, "They hold net assets amounting not to 8 trillion dollars but 80 trillion dollars, and they are supporting not only their own consumption but also the spending of their adult children."

Tariff risks make bonds less attractive

Yardeni cited tariffs-induced inflation and geopolitical tensions as the biggest risks to the U.S. economy. While U.S. government officials claim tariffs did not affect inflation, he believes that is clearly wrong.

Yardeni said, "Looking at the data, if there had been no tariffs, inflation would already have fallen to 2%," adding, "The fact that current inflation is stuck in the 3% range is precisely because of tariffs, and this is clearly visible in durable goods prices." Last year durable goods prices fell 4% year-on-year, but now they have turned to a 1% increase, he said.

He said, "The inflationary stimulus from tariffs is still in progress and may continue for about another six months," and "a Fed rate cut in the short term could rather fuel asset inflation." As a result, long-term yields on U.S. Treasuries could rise again, and bond investing is currently "less attractive."

Gold bullish market started since last year

Instead, Yardeni expects the bullish gold market to continue. After Russia invaded Ukraine, the U.S. and Europe froze Russian assets, and central banks began to increase gold holdings instead of dollars. Yardeni said, "Countries opposing the United States, such as China, Iran, Russia, North Korea, and Venezuela, actively bought gold."

The prospect of Donald Trump returning to the presidency also increased global uncertainty and spurred gold purchases. Yardeni analyzed, "The collapse of the 'wealth effect' due to China's real estate slump also had an impact." As property values fell, Chinese investors began to prefer gold as an asset that would not lose money.

Yardeni said, "Next year I expect 5,000 dollars per troy ounce, and within 10 years 10,000 dollars per troy ounce, and it is currently on that trajectory."

Yardeni urged focusing on the fact that global bull markets continue thanks to AI despite many variables. He forecast, "For now, investors should maintain their investment positions," and "U.S. GDP, consumption, investment, and stock prices are all at record highs and growth will continue."

New York = Correspondent Shin-young Park nyusos@hankyung.com