Ed Yardeni argues that the recent war-driven geopolitical shock has made the U.S. relatively more attractive again in the near term, but he still favors a global allocation over overweighting the U.S. because overseas markets, including Europe, Japan, Korea, and many emerging markets, have cheaper valuations. He sees oil spikes as likely temporary, does not think $100 oil is a killer for the global economy, and remains broadly constructive on stocks.
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In this Wealthion interview, Ed Yardeni revisits his long-running "stay home vs. go global" framework. He says that from 2010 through most of last year he favored overweighting the U.S., and that trade worked well because U.S. equities became an outsized share of global market cap. He then says he shifted toward a global overweight by December 7, arguing that foreign valuations had become more attractive and that this view continued to work until the new war shock changed the setup. Yardeni says geopolitical risk has temporarily strengthened the U.S. dollar and made the U.S. market relatively less weak than other countries, but he believes markets are already learning to live with the conflict. He compares the current Middle East shock with Russia-Ukraine, noting that the 2022 oil spike did not push the U.S. or world economy into recession and that life generally goes on during wars. …
Near term, the war keeps favoring defensive relative positioning and makes foreign risk assets vulnerable if oil stays elevated or headlines worsen.
Over the next few months, the likely path is that investors refocus on valuations and earnings if the conflict remains contained, which would support a renewed global overweight outside the U.S.
The structural message is that U.S. market dominance is not a permanent law; cheaper regions can still outperform over time, while China remains a chronic allocation problem in his framework.
Yardeni was in the 'stay home' camp from 2010 through most of last year, and that strategy worked very well.
He says the U.S. outperformed strongly during that period and the approach worked.
He shifted to a global overweight by December 7 after deciding the U.S. had become too dominant in global market-cap terms.
He says he belatedly recommended going global and referenced the U.S. at 65% of ACWI.
The war initially reversed the 'go global' trade and temporarily made the 'stay home' view make more sense.
He says the war lifted the dollar and U.S. relative performance while pressuring other countries.
Does the U.S. economy look more attractive than elsewhere given its resilience in the face of the commodity spike and high valuations?
Yardeni says he was long the U.S. for years, then moved to a global overweight when foreign valuations became more attractive. The war has temporarily made the U.S. look relatively better again, but he still thinks going global makes sense over time.
How should Asia, especially China, manage higher energy prices, and is AI an offset?
Yardeni says China has prepared with strategic petroleum reserves and that $100 oil is not a global growth killer. He then pivots into a strongly negative view on China, saying the property bubble, demographics, and policy direction make him prefer emerging markets without China.
Are you thinking about pivoting back once there is more clarity on the war?
He says he already recommended going global and does not change views often, but the war has disrupted the forecast. He still thinks markets are looking past the conflict and that Europe, Japan, Korea, and many emerging markets remain attractive on valuation.
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