Wall Street strategist Ed Yardeni said U.S. stocks have the potential to surge to new highs thanks to the Federal Reserve's aggressive rate cuts last week, but could also lead to a return of inflation if Fed officials don't tread carefully. The latest policy decision raises the odds of a "full melt-up" in stock prices -- like the dot-com bubble that saw the S&P 500 surge 220% from 1995 to the end of the century -- to 30% from 20%. He puts the odds of a bull run at 80%, with the other 20% being a 1970s-style scenario, when global stock markets were roiled by inflation and geopolitical tensions. But there are broader risks if things start to get too hot. "If they overheat the economy and create a bubble in the stock market, then they're going to cause some problems," said the founder of Yardeni Research Inc. He added that the Fed is ignoring the upcoming U.S. presidential election, with both candidates offering policy ideas that could stoke inflation.
