In a recent episode of Financial Sense Newshour, Dr. Ed Yardeni, President and Chief Investment Strategist at Yardeni Research, shared his expert analysis on the impact of the US-China trade deal on the stock market and the broader economy. Drawing on decades of experience as an economist and strategist, Yardeni offers a clear perspective on how recent developments shape today’s volatile markets and highlights unexpected opportunities, such as gold investments.
Economic Resilience Remains Strong Despite Early Market Dip
Despite a 20% drop in the stock market earlier in 2025, Yardeni expresses optimism about the US economy’s durability. After the trade deal was announced, he lowered his recession risk estimate from 35% to 25%. He points to a resilient economy that quickly bounced back from a minor contraction in the first quarter, fueled by strong consumer spending and capital investment. The trade agreement also eased concerns about supply shortages, with China resuming Boeing orders and possibly loosening restrictions on rare earth metal exports.
“Put it all together, and the outlook for the economy has improved substantially,” Yardeni emphasized.
V-Shaped Recovery in Stock Market Validates Bullish Outlook
Yardeni correctly forecasted a sharp, V-shaped rebound in the stock market following the postponement of tariffs in April. The S&P 500 surged after the April 9 tariff delay, reinforcing his bullish stance that began in October 2022. He stresses that the market experienced a correction—not a bear market—and predicts the S&P 500 could reach 6,500 by year-end. His sector picks include technology, communication services, industrials, and financials, which he believes will drive growth moving forward.
“The stock market vigilantes reminded the President that tariffs are very bad for the stock market,” Yardeni noted, suggesting increased political sensitivity to market impacts ahead of mid-term elections.
The ‘Roaring 2020s’ Revival Hinges on Policy Shifts
Yardeni revisits his “roaring 2020s” thesis, comparing today’s economic climate to the prosperous 1920s. He warns against repeating mistakes like the 1930 Smoot-Hawley Tariff, which worsened the Great Depression. However, recent market and bond yield reactions forced a policy shift away from tariffs. Yardeni believes if the administration pursues pro-growth policies—such as tax cuts, deregulation, and infrastructure investment—the US bull market will gain strong momentum.
“The stock market certainly is signaling that the roaring 2020s idea is very much back in play,” he said.
Gold’s Unexpected Rise: Central Banks Lead Demand
While not traditionally bullish on gold, Yardeni forecasts gold prices rising to $4,000 by the end of 2025 and $5,000 by 2026. The driving force, he explains, is central banks in China, Russia, and Iran accumulating gold to reduce reliance on the US dollar amid geopolitical tensions. Despite a recent $100 dip, gold remains resilient, underscoring its appeal as a strategic hedge.
“Somebody just keeps buying this shiny metal. I think it’s these central banks,” Yardeni explained.
Checks and Balances Protect Economic Stability
Yardeni highlights the role of legal and institutional checks in tempering aggressive trade policies. Court challenges to tariff authority, combined with market pushback, led to a partial policy retreat. He predicts some courts may rule that certain executive actions were unconstitutional. This system of checks and balances, he says, protects the economy from unchecked policy disruptions, emphasizing the need for investors to remain agile and well-informed.
Looking Ahead: Strategic Moves in a Dynamic Market
Yardeni’s analysis portrays a market landscape marked by resilience and opportunity. With economies rebounding and smart policy adjustments underway, investors have multiple avenues to consider—whether riding the bull market, hedging with gold, or a combination of both. For ongoing insights, visit yardeniquicktakes.com for Yardeni’s comprehensive macroeconomic and market commentary.
