The Market Rebound Is The Real Deal, Says Ed Yardeni

Santa treated investors to a 600-point plunge in the Dow Jones on Christmas Eve, but stocks have been on fire since then — with more gains to come, according to Yardeni Research President Edward Yardeni.

What Happened

The Christmas Eve sell-off was immediately followed by the Dow Jones' biggest one-day gain of more than 1,000 points, as investors "are coming back to their senses," Yardeni said during a recent CNBC "Trading Nation" segment.

Investors were "way too pessimistic" concerning recession fears, Federal Reserve policy and the Sino-American trade spat, the investment manager said. As Yardeni said he expected, the aforementioned concerns are now "coming around in the right direction," which he said adds justification to the recent rebound in stocks.

Why It's Important

At the end of 2018, the contrarian bull-bear ratio fell below one, which suggests there are too many bears in the market, Yardeni told CNBC. The Investors Intelligence index boasts an "awfully good track record as a contrary indicator," he said. 

"Bearishness was just so widespread that the market had a technical bounce, and now the fundamentals are going the right way." 

What's Next

The S&P 500 index is no longer in correction territory as the end of the third week of January and is on the longest weekly winning streak since August, with four straight weeks of gains. Looking forward to the full year, the S&P 500 index could rise by as much as 15 percent as attractive valuations, low interest rates and encouraging inflation data will be "setting Wall Street up for a very good year," Yardeni said. 

Related Links:

Recapping The Market's Crazy December

A Peek Into The Markets: US Stock Futures Drop Ahead Of Earnings