Markets have had their 'Santa Claus rally' but a strong economy could drive stocks even higher, veteran Wall Street bull Ed Yardeni says

• Stock markets had an early "Santa Claus rally" in November, but veteran bull Ed Yardeni believes there's more to come next year.
• "November was one of the best months ever for the market," the Yardeni Research boss told CNBC. "It broadened quite dramatically the small-cap and mid-cap stocks. It was just a great, great month for the market."
• The disappointing November jobs report shouldn't worry investors, according to him, because it suggests the first quarter will avoid a double-dip recession.
• Coordinated global monetary policy will continue to enable a bullish backdrop for stocks, he said.

Stock markets may have massively outperformed in November, but expansionary monetary policy could drive them even higher next year, longstanding bull Ed Yardeni told CNBC.

"The market already had its Santa Claus rally," he said on CNBC's "Trading Nation."

"But it just keeps going up anyways, and no matter how much you try to look at it fundamentally, I think the fact is there is so much liquidity with interest rates so low driving the market higher."

The benchmark S&P 500 index ended November up 11.8%, notching its best monthly performance in 33 years. Its gains reflected optimism around COVID-19 vaccine development and a resolution to US presidential election uncertainty.

"November was one of the best months ever for the market," Yardeni said. "It broadened quite dramatically the small-cap and mid-cap stocks. It was just a great, great month for the market."

However, a record number of coronavirus cases in the US and the disappointing jobs report for November is fuelling concerns over the pace of economic recovery. US employers added only 245,000 jobs in November, far lower than the 460,000 expected.

Yardeni, however, believes a 'V'-shaped recovery is in progress.

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"I really wasn't that disappointed," he said of the jobs figure. "Government had a drop of almost 100,000 [payrolls] because census workers just had part-time jobs. Excluding that, we were up over 300,000. Wages were up, and the workweek held up pretty well."

Not only does he believe the US economy will bounce back sharper by spring next year, but that global monetary policy will enable a bullish backdrop for stocks.

"You've got the major central banks just pouring liquidity," he noted. "I'm not just watching the Federal Reserve balance sheet every week. I watch the ECB, and the Bank of Japan. They're all continuing to expand their balance sheets."

Aside from his optimism for the stock market, he recognized the need for further federal aid for individuals and businesses that endured the worst of their fears this year.

"There are a lot of people who have been left behind," he said. "Either they lost their jobs and now are being threatened with possibly losing their unemployment insurance. And then, of course, there are a lot of businesses who barely survived the first and second waves of this pandemic."

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