Have markets hit the bottom? Ed Yardeni says it’s not over until inflation peaks

Markets have been on a roller coaster lately. The S&P 500 is in a bear market.

Ed Yardeni, a Wall Street veteran, said he doesn't think markets will climb out of their current state quickly.

He said investors have learned not to fight the Fed. The idea is that investors should align their investments with the Fed's policies.

What changed dramatically this year is ‘don’t fight the Fed’ now means don’t fight the Fed when it’s fighting inflation.

The idea of not fighting the Fed was once if the Fed was going to be easy. Yardeni said that he wanted to be long equity. Don't fight the Fed now means don't fight the Fed when inflation is high. On a short-term basis, that is not a good environment for the stock market.

With inflation soaring to new highs this year, the Fed raised interest rates last week for the first time in two decades. Another hike of 50 or 75 basis points is likely at the next meeting of the Fed.

Stagflation is the risk of the economy as economic growth tails off and prices rise.

Wall Street has fallen in response to the Fed raising interest rates. The S&P 500 fell for the 10th week in a row and is now in a bear market. All but one of the sectors closed more than 10% below their recent highs. The average fell below 30,000 for the first time in more than two years.

Yardeni said it won't be over until there are conclusive signs that inflation has peaked. Market watchers blame rising prices on the Fed overstimulating the economy.

He said that a peak in inflation is needed before the market will go up.

Yardeni thinks that the markets are at an exhaustion stage.

It is too late to be afraid. He told CNBC that he thinks long-term investors will find some great opportunities here.

There are growing doubts about the Fed's ability to achieve a soft landing in the economy. A recession isn't usually caused by a bear market.

According to Mark Jolley, global strategist at CCB International Securities, this will be the first recession that hurts the rich for a long time.

We are on track to have the worst year of wealth destruction since 1938 because of the decline in bond and equity prices.

Jolley suggested that mortgages are at risk as the value of assets bought with borrowed money will fall.

He said that anything in the economy that is long has gone down in value. Imagine what would happen to the banking system if house prices went down.