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China and a potential earnings recession are the top 2 obstacles for investors here, says Ed Yardeni

Key Points
  • Investors may be taking a pause as they await the outcome of the U.S.-China trade negotiations and earnings results, longtime bull Edward Yardeni says.
  • BMO Capital Markets' Brian Belski says he doesn't expect an earnings recession will happen, citing a strong U.S. economy.
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Ed Yardeni: We all know an earnings recession is coming soon

Investors may be taking a pause as they await the outcome of the U.S.-China trade negotiations and earnings results for the first quarter of this year, longtime bull Edward Yardeni told CNBC on Tuesday.

Yardeni said Wall Street is worried that if President Donald Trump's administration does secure a deal with China there will be a sell on the news.

"So, we're just waiting to see if there's going to be a 'peace dividend' from a likely deal from the Chinese," Yardeni, the chief investment strategist at Yardeni Research, said in an interview on "Squawk Alley. "

U.S. stocks were little changed Tuesday as investors weighed ongoing trade negotiations between the U.S. and China. Secretary of State Mike Pompeo said Monday he thought both parties were "on the cusp " of a deal.

Markets moved lower Monday, closing off their lows. The Dow Jones Industrial Average and on Monday saw their worst day in nearly a month.

Yardeni also said there's an expectation among some analysts of an earnings recession in the first and second quarters of 2019, which has investors taking a breath.

In February, Morgan Stanley said the long-awaited earnings recession had finally arrived but investors were still too optimistic and should anticipate more disappointment as the year goes on.

Brian Belski, chief investment strategist at BMO Capital Markets, told CNBC's "Power Lunch" he is not buying that. He said he doesn't expect an earnings recession will happen, citing a strong U.S. economy.

"Interest rates are low. The economy is starting to tick up a little bit. Earnings are better," Belski said.