With stocks flirting with record highs, the word “bubble” has made another nervous comeback.

However, veteran strategist and economist Ed Yardeni isn’t buying into the panic. Instead, he dropped three simple words: “buy the dip.”

Despite the constant chatter over overbought tech names, Fed-related fears, and geopolitical noise, Yardeni sees robust earnings and resilient consumer spending keeping this bullish thesis alive.

Yardeni’s curt take feels more like a calm voice that cuts through the noise, suggesting that AI bubble fears and Fed policy could be masking an economy that’s performing better than expected.

Ed Yardeni says the market’s bull run still has fuel left in AI.

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Economist Yardeni: a calm voice in a crowded stock market

Ed Yardeni has seen a fair few market cycles in his career, but his recent takes show that he’s learned to keep his cool while others reach for the panic button. 

Currently the president of Yardeni Research, his résumé reads more like a market timeline; he’s also a chief strategist at Deutsche Bank and Prudential and chief economist at EF Hutton and C.J. Lawrence.

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He’s also the man behind coining the phrase “bond vigilantes,” which still echoes through every Fed press conference. 

Here are some of Ed Yardeni’s biggest market takes:

  • Called major bottoms: Turned bullish at the August 1982 lows and later said he called the December 1987 post–Crash bottom.
    Source: Investing.com
  • ForecastedDow milestones, years in advance: Predicted the Dow to finish 5,000 by 1993 (hit 1995) and 10,000 by 2000 (hit March 1999).
  • Early 1990s productivity/tech boom thesis: Argued official data understated a productivity surge, urging over-weighting technology. Additionally, during the post-pandemic rebound, he argued that equities would finish 2020 near record levels, despite the volatility. 

A simple phrase cuts through the noise for investors

In a recent CNBC appearance, Yardeni summed up the stock market investing sentiment with three clipped words: “Buy the dip.” 

He told viewers that he saw “too many bulls” in the past few weeks, seeing it as mostly a normal reset, adding, “I think this is kind of a buy-the-dip market, particularly in AI.”

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Surprisingly to most, he feels that the nervousness around AI stocks is actually healthy, recalling that in the late 1990s, “Nobody was really worried about a bubble… not the way it is today.” 

To him, a cautious tone indicates balance, not danger. The strategist said AI’s payoff is “in the cloud,” where providers are still making a fortune.

Put simply, he feels the choppiness doesn’t equate to fragility. Pullbacks are essentially the price of progress, and it’s perhaps the best time to add, not run.

Profits, not hype, drive the AI bull run

Yardeni isn’t cheering on this rally because of momentum traders or the Reddit crowd, as he’s focused on what’s under the hood: profits. 

Despite the commotion coming out of Washington, he argues that corporate earnings have been phenomenal.

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He pointed out that market pundits expect just 6.5% growth this quarter, but the results so far are “coming out 14% on a year-over-year basis.” That strength, he feels, effectively gives the market a solid floor, leading to the kind of rally that lasts because it’s built on cash flow.

Even in the hotly debated AI sector, Yardeni’s optimism feels a lot more pragmatic. To him, the current anxiety over AI feels more like irrational excitement, rather than the skepticism that usually preceded past tech revolutions.

Earnings keep doing the heavy lifting to fuel market rally

To elaborate on Yardeni’s point, the data coming in clearly show that the real engine behind the stock market rally is essentially old-fashioned earnings power. Big Tech’s profit machine hasn’t cooled, and it continues to accelerate impressively.

  • Q2 came in hot: S&P 500 EPS jumped 11.8% year over year, with businesses beating estimates by 8.4% on average. While 81% of companies topped expectations, AI spending boosted tech, communication Services, and select consumer names. 
  • Q3 still rolling: 446 S&P 500 companies have reported so far; 82.5% beat (compared to 67% long-term). Blended year-over-year EPS growth is tracking at over 16.8% (+17.8% ex-Energy).
  • Big Tech drives the tape: IT showed off the healthiest Q3 EPS expansion at +28% year over year, with Financials and Industrials also coming in hot.
  • Momentum to streak: If that pace holds, Q3 will eventually become the fourth straight quarter of double-digit S&P 500 EPS growth.

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