- Veteran economist and president of Yardeni Research, Ed Yardeni, addressed President Donald Trump’s economic advisers at a White House lunch this week. He told Business Insider what he said.
- Yardeni said Trump did not attend the meeting, which was arranged by Larry Kudlow, director of the White House’s National Economic Council.
- Among the main themes the economist addressed were US-China trade tensions and volatility in the stock market.
Veteran economist and strategist Ed Yardeni shared his perspective on the economy and the market with President Donald Trump’s top economic advisers at the White House this week, and his biggest talking points included the US-China trade war and stock market volatility.
Trade uncertainty has rocked the stock market in recent months, with many economists citing the trade war as the biggest threat to the US economy next year. Stocks saw a boost this week on hopes of a resolution.
Yardeni, who discussed the presentation in a phone interview with Business Insider on Thursday, said he was invited by Larry Kudlow, director of the president’s National Economic Council. However, Kudlow was not in attendance for the lunch on Wednesday, Yardeni said, and neither was President Trump.
He said that he and Jason Trennert, CEO and chief investment strategist of Strategas Research Partners, presented to a group of 10 people, among them “several of the president’s top economic advisers.” Yardeni went into the lunch with four key themes: trade between the US and China, monetary and fiscal policies, productivity and the supply side, and the stock market.
He would not elaborate further on the attendees or on the advisers’ reactions to his presentation, but said the group was a “bunch of Cool Hand Lukes” who “kept their cards close to the vest” and revealed little by way of reaction to Yardeni’s points.
“I don’t have a clue whether it just simply corroborated things they’re thinking, or I gave them new insights,” he said.
Yardeni is no stranger to the intersection of markets and policy. He spent decades on Wall Street in a variety of top positions like chief investment strategist of Deutsche Bank and chief economist of Prudential, and worked at the US Treasury and at the Federal Reserve in both Washington, DC, and New York.
Here are the eight charts he ran through:
Manufacturing production and capacity
“President Trump won because he promised to bring good jobs back to the US,” Yardeni wrote on his presentation.
“Rapid technological change is both disrupting and energizing our economy. The first effect tends to dampen productivity, while the second tends to boost it.”
Real retail sales growth in China
“China’s one-child policy has created a demographic nightmare for the country,” Yardeni wrote in his presentation, pointing to slowing retail sales growth as an indicator for the country’s economic health.
“Hiding in plain sight is that China is seeking to become a super-power before it turns into the world’s largest nursing home,” he wrote, adding that the country is still heavily dependent on trading with the rest of the world.
Price inflation vs. unemployment rate
“There’s no trade-off between price inflation and unemployment,” Yardeni wrote, attempting to show that while unemployment in the US has fallen below 4%, inflation remains historically low.
Unemployment rate vs. the non-accelerating inflation rate of unemployment, or “NAIRU”
In another chart on the labour market, Yardeni examined the non-accelerating inflation rate of unemployment, or “NAIRU,” a measure based on the school of thought that a low-enough level of unemployment would give way to higher inflation.
Non-farm business productivity
“The productivity cycle may be starting to turn toward faster growth,” Yardeni wrote in his presentation, showing non-farm business productivity has turned higher.
Real average hourly earnings for production and nonsupervisory workers
Yardeni brought this chart of real average hourly earnings (for production and nonsupervisory workers) along to showcase that real wages are in fact rising to record highs.
“I actually threw that in there because when the president was campaigning, he said a few times that real incomes have stagnated… and I wanted to chart that real wages, inflation-adjusted, have been in uptrend,” he told Business Insider.
S&P 500 operating profit margin
“The cut in the corporate tax rate boosted profit margins and profits,” Yardeni wrote atop this chart of the S&P 500’s operating profit margin.
“I didn’t say this at the meeting but Trump is probably the most bullish and bearish president we’ve ever had” in terms of tax reform (on the bullish end) and uncertain trade policy (on the bearish end), Yardeni said.
“The volatility in the S&P 500 has been exacerbated by ‘algos,'” Yardeni wrote, referring to “algorithms” or algorithmic trading by machines that he thinks is rocking the stock market.
Yardeni said he suggested in his final point that the advisers take a close look at the way “high-frequency algorithms” are impacting the market and told Business Insider that Trump might be interested in addressing the issue given his concern with stock market trends.
“I wouldn’t be surprised if he asked his advisers to explain the volatility.”
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