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Stock rally could pause soon: Yardeni

Wednesday, 31 Jul 2013 | 6:02 PM ET
Stock rally could take a pause soon: Yardeni
Wednesday, 31 Jul 2013 | 5:08 PM ET
While the market still has a bullish trend, a few near-term factors might be reason for a pause, Ed Yardeni says of Yardeni Research says.

While stocks are maintaining a bullish trend, a few near-term factors might be reason for a pause, Ed Yardeni of Yardeni Research said Wednesday.

The Federal Open Market Committee meeting on Sept. 18 would be the first speed bump for the stock rally, which is when it would "possibly" discuss the end of quantitative easing, he said. "That will certainly be a date to be reckoned with."

That event would be followed by sequestration, or automatic federal budget cuts, in October.

"We forget that these sequesters now will happen every year for a 10-year period, and they add up," he said. "There will also be a debt-limit fracas down in Washington, I'm sure. And then Obamacare hits us in October."

On CNBC's "Fast Money," Yardeni noted that the bullish trend was so far intact because the Fed has signaled that it would keep short-term interest rates "near zero for a very long time."

Yardeni also said that in the longer-term, stocks would continue to trend upward.

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"We've had three major corrections in this bull market. 'Go away in May and come back in October' just didn't work out," he said. "Sometimes you have to know to come back in July. Sometimes you have to know to go away in April.

"I think this bull market's going to carry us for a couple more years, quite honestly. If that's the case, I think you just stay with it."

Yardeni added that "some consolidation would be overdue."

(Read more: Herbalife's a $300 stock: Robert Chapman)

Another factor, he also said, was the amount of cash in play.

"When you add up the amount of cash that S&P 500 companies have plowed back into the market through dividends and buybacks, it adds up to a staggering $2 trillion," Yardeni said. "It's probably more than that now, and that's really what's been driving this bull market. I think you are going to see some buying by individual investors and foreign investors, but it's that cash flow that's driving the market. I think it continues."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

— CNBC's Stephanie Landsman contributed research to this report. Follow her on Twitter @StephLandsman.

Trader disclosure: On July 31, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long EBAY; Karen Finerman is long M; Karen Finerman is long DIS; Karen Finerman is long GM; Karen Finerman is long AIG; Karen Finerman is long SODA; Karen Finerman is long SPY; Karen Finerman is long MDY PUTS; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami's wife, Linda Snow, works at Merck; Tim Seymour is long BAC; Tim Seymour is long SBUX; Tim Seymour is long GM; Tim Seymour is long POT; Tim Seymour is long WLT; Brian Kelly is long Yen; Brian Kelly is short US dollar; Brian Kelly is short Copper; Brian Kelly is short Silver; Brian Kelly is short British Pound; Brian Kelly is short Aussie.

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