Market veteran Ed Yardeni told ET Now that investors remain composed despite the prolonged stalemate in Washington. “Well, it is not making the markets nervous. The markets have been remarkably calm over the past several weeks. Nothing much seems to phase the markets,” he said.
According to Yardeni, the key driver of this resilience is the strength of corporate earnings. “I think that clearly the earnings story has been very strong and we are about to get a Q3, third quarter earnings season next week. The banks should report very solid earnings,” he added.
While Oracle’s recent profit warning on its AI infrastructure business briefly rattled sentiment, Yardeni expects any jitters to be temporary. “Today, the market had a little bit of a nervous attack because of the news that Oracle may not be seeing as high a profit margin as they had hoped for on some of their AI infrastructure. But I think when the third quarter numbers come out, the cloud computing companies will in fact report some very good cloud demand,” he noted.
He believes the growing adoption of artificial intelligence will continue to fuel demand for cloud services. “Clearly, a lot of people are at least experimenting with AI and that is going to create a lot of demand for the cloud,” Yardeni said, adding that solid earnings from both cloud companies and banks should offset any short-term volatility.
On the political front, Yardeni also weighed in on former President Donald Trump’s recent comments about potential trade negotiations. Responding to Trump’s statement about having a “constructive deal with Canada” and renewed concerns over steel imports, Yardeni said the situation remains fluid.“Well, this is sort of an ongoing negotiations that Trump is engaged in with leaders around the world. There are still talks going on with India. Looks like the deal with Japan might be renegotiated, at least the new Japanese prime minister said that she would like to renegotiate the deal. The South Koreans are revisiting,” he explained.He pointed out that most of these trade understandings lack formal agreements. “None of these deals seem to be in writing. They all seem to be kind of verbal, vague agreements, and everybody is just kind of waiting for a point in time when President Trump says we have a deal. It is a done deal and we are going to write it up,” Yardeni said.
While tariffs continue to generate revenue for the U.S. government, Yardeni acknowledged they are also creating challenges for some nations. “There are obviously tariffs in place now that are raising revenues for the US government and creating some problems for countries like India. But it is a work in progress. There does not seem to be any finality to any of this. So, we will just have to play it by ear,” he concluded.
Despite political uncertainty and policy unpredictability, the market’s ability to stay steady underscores the strength of corporate America’s earnings engine — a factor that may continue to buffer investors from Washington’s turbulence in the near term.
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