The stock market has looked past the signals from Treasurys and energy that caused the late summer swoon and is now poised to rally through at least the end of the year, according to Wall Street strategist Ed Yardeni. The Yardeni Research president said in a note to clients Monday that the bull market is back on now that concerns about higher bond yields and oil prices have eased. In Yardeni’s estimation, the bear market ended in October 2022, and the stock market has been in a bull market since, calling the August-through-October weakness simply a correction. Now that the ” Bond Vigilantes ” and their concerns have retreated, the path is clear for the S & P 500 to rise to 4600 by year-end 2023 and 5400 by year-end 2024, the note said. If the S & P 500 can reach 4,600, that would mean the index gains another 4% by the end of the year. The index is already up 15% year to date. .SPX YTD mountain The S & P 500 is up 15% year to date. Yardeni is credited with coining the term ” bond vigilantes ” in the 1980s. The idea is that bond investors focused on inflation and the level of federal debt sell bonds — thereby pushing up market yields and sending a message to policymakers that some combination of the Fed funds rate or federal spending must change. To some, the late October bond sell-off, which sent the 10-year Treasury yield above 5% for the first time since 2007 , resembled a bond vigilante move. But the 10-year Treasury yield has now fallen back below 4.7%. US10Y 1M mountain The 10-year Treasury yield has retreated from its late-October highs. And now that yields have touched 5% without causing immediate damage to the economy, investors may have the confidence to push stocks higher, Yardeni said. “We are expecting that both the bond yield and the oil price will stabilize around current levels. If so, then the Santa Claus rally may proceed through year-end as we project. During the latest stock market correction, the Bond Vigilantes saddled up and were riding high. Now stock investors may be back in the saddle again,” the note said. Yardeni does caution that the rally is not a sure bet. He put the odds of a recession by the end of 2024 at 35%.
