Ed Yardeni: Earnings are driving the market, layoffs playing a part

Market Trends & Optimism - Major indices are recovering from last week's losses due to optimism about the end of the government shutdown and easing AI trade concerns [1] - Analyst consensus expectations for 2026 are being raised, indicating positive market sentiment [4] Earnings Performance - Earnings have been phenomenal, with a high-quality meltup based on fundamentals [3] - First and second quarters saw low double-digit year-over-year increases, exceeding initial expectations of low to mid-single digits [4] - Third-quarter S&P 500 earnings are projected to increase by approximately 14%, significantly higher than the initial estimate of 65% [5] Productivity & Labor Market - Productivity is booming, contributing to strong earnings, as evidenced by revised-up real GDP numbers and revised-down labor market numbers [6] - Layoffs are occurring primarily in technology and warehousing sectors, largely driven by productivity improvements [7] - Structural problems exist in the labor market, with slower labor supply growth, but AI and management tools are augmenting productivity, leading to potentially low unemployment rates [9][10] Economic Outlook - The speaker has been optimistic about a "roaring 2020s" scenario since 2020 and feels increasingly confident about it [8][9] - Real wages and household consumption are at all-time record highs, despite some individuals facing economic struggles [13]