4-5% yields on the 10-year signal 'a vote of confidence in the economy', says Ed Yardeni

• S&P 500 year-end target remains 8400, with a 70% probability, driven by 'fabulous earnings momentum' (FEMO) despite lowered P/E expectations.
• 4-5% yields on the 10-year Treasury are seen as a 'vote of confidence' in the economy's ability to withstand higher rates, with potential for the Treasury to manage bond market pressure.
• The economy benefits from strong productivity and low unit labor cost inflation (1.4%), supporting a continued technology boom, including AI advancements.
• AI presents philosophical challenges, with potential for global cooperation on guardrails, even from the Chinese government, due to its transformative power.

Ed Yardeni maintains a bullish outlook for the S&P 500, targeting 8400 by year-end, despite acknowledging risks from rising oil and bond yields. He emphasizes 'fabulous earnings momentum' and strong productivity, viewing current 10-year Treasury yields as a vote of confidence in the economy's resilience. He also discusses the geopolitical implications of AI, suggesting it could lead to cooperation between the US and China.