The stock market will be volatile until the election before resuming its rally to record highs, market vet Ed Yardeni says

Ed Yardeni

Market “choppiness” will likely continue until the elections before stocks can resume their climb to record highs, Ed Yardeni says.

“We’re seeing quite a bit of choppiness going on in the market here. I think it may continue until the elections, and then I think we’ll resume to new record highs,” Yardeni said in a Wednesday interview with CNBC.

In early August, the S&P 500 lost 3%, its biggest daily drop since 2022, in a historic market rout.

The volatility resumed this week, with indexes on Tuesday notching their worst losses since the August sell-off as Nvidia shares tumbled and weak manufacturing data sparked new fears about an economic slowdown.

Yardeni says the market’s return to record highs is partially dependent on the election’s outcome, and that a gridlock outcome is the best-case scenario for the market.

“If we get a sweep of the Democrats or a sweep of the Republicans, I don’t think the market is going to look forward to those kinds of regime,” Yardeni said. “I think the market much more prefers gridlock.”

Gridlock in the capitol often results in sluggish legislative action, which markets prefer as it creates less uncertainty and fewer regulatory surprises to deal with.

According to data from LPL Financial, the S&P 500 has historically climbed during a split or Republican-controlled Congress and Democratic president.

“I think gridlock will win,” Yardeni said.

“If that’s the case, then I think the market will move higher, simply because the economy is doing fine notwithstanding the tightening of monetary policy over the past couple of years, all the geopolitical and domestic political stress. But all in all, the economy is doing fine,” he added.