(Bloomberg) – Ed Yardeni shares good news regarding Federal Reserve taper Day: Stock melt-ups will be sustained thanks to Corporate America’s earnings firepower. 

Yardeni Research Inc. president claims that there will be a profit boom which will propel Yardeni to 4,800 in the next year (an upside of 3.6% against the Tuesday close) and to 5,200 at the end 2022. 

Yardeni takes on the bull-market doubters that see record stock price as result of policy stimulus.

He cites the S&P 500’s forward earnings, which bottomed in May 2020 and has soared 54.2% by the end of this October. It is notable that operating earnings per share rose to $52.38 last Week, an improvement of 6.7% from the beginning of the season.

“An earnings-led bull market is much better than a P/E-led bull market,” strategists led by Yardeni wrote in the Wednesday note. “The former is less prone to selloffs and corrections because it is supported by fundamentally strong earnings.”

The , S&P 500, and all closed at record highs on Tuesday, shrugging off turbulent bond markets signaling rate hikes will be faster than initially anticipated and potentially damaging to economic growth. 

Wall Street analysts argue that Wall Street’s stock rally seems perfectly justified because of the American firms’ ability to deliver profit growth upside surprises and defy all economic disruptions. 

“Despite lots of reasons to worry about rising costs as well as parts and labor shortages, forward guidance, on balance, boosted consensus earnings expectations for Q4 and for the four quarters of next year,” according to the Yardeni note. “That’s clearly remarkable under the circumstances!”

Some of Yardeni’s forecasts:

• The forward earnings per share for this year will end at $220, up from $217 now. It will rise to $235 by 2022 and $225 at 2023.
• The S&P 500 is set to end 2021 at 4,800, 2022 at 5,200, and 2023 at 5,500
• In an earnings driven rally, the forward P/E will be high at its current level.

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