A Rosy Scenario for the Economy

Here's what might boost growth and the stock market.


Investment strategist Ed Yardeni outlines an upbeat scenario for the economy and the stock market:

So where do I see the S&P 500 by the end of the year? On Tuesday, Joe and I lowered our forward earnings forecast to $100 per share for the end of this year, down from $103. It is currently at $99.92. So barring a more severe economic downturn than we are expecting, we feel relatively comfortable with this flatline projection. The current forward P/E is 13.6. We think it is more likely to go up than down from here. Indeed, we expect a nice P/E-led rally in stocks later this year if:(1) the price of oil stabilizes south of $150, (2) core inflation remains around 2 percent, (3) headline inflation moderates,(4) home sales and prices stop falling,(5) the Fed holds its fire, (6) the dollar firms, and(7) the global economy continues to expand. We think a big rally could be triggered by a rash of foreign companies acquiring US companies.