Despite the continued strength of the US economy, market veteran Ed Yardeni predicts a potential 10% correction in the stock market. Yardeni cautions that the stock market could fall and test its 200-day moving average around 4,700 in the next few months. Rising bond yields and declining stock prices, with the S&P 500 falling below its 50-day moving average, indicate a possible correction.
Yardeni believes that the market may be moving towards being oversold after reaching overbought levels last month. However, he also points out that despite the potential correction, the US economy remains strong. Strong March retail sales and an increased GDP growth estimate of 2.8% demonstrate this resilience.
Consumers are still spending due to rising disposable income, a comfortable retirement for many Americans, and an influx of immigrants contributing to the economy. Real disposable income is on the rise, leading to increased consumer spending and overall economic growth. Despite market volatility, the economic outlook remains positive.