Wall Street Strategist Yardeni: Fed Rate Cut Raises Likelihood of Stock Market ‘Meltdown’

Wall Street strategist Ed Yardeni says US stocks are likely to soar to new highs thanks to the Federal Reserve's sharp rate cut last week, but it could also lead to a return of inflation if Fed officials aren't cautious. The latest policy decision raises the likelihood of a ‘complete meltdown’ in stock prices - as the S&P 500 Index did during the dot-com bubble when it soared 220 per cent from 1995 to the end of the last century - from 20 per cent to 30 per cent. from 20 per cent to 30 per cent. He puts the likelihood of a bull market at 80 per cent, with a 20 per cent chance of a scenario similar to the 1970s, when global stock markets were rattled by inflation and geopolitical tensions. But there are wider risks if the situation starts to become overheated. ‘If they let the economy overheat and create a bubble in the stock market, then they're going to create some problems,’ the Yardeni Research Inc. founder said. He added that the Fed is ignoring the upcoming U.S. presidential election, and both candidates have proposed policy ideas that could trigger inflation.