Since Donald Trump assumed the presidency last year, economic signals have been confusing, often contradictory.

In fact, even the president’s views on the economy have been confusing, said Ed Yardeni, president of Yardeni Research, in a webcast entitled “Predicting the Markets in Trump World” on Wednesday.

“Trump is a weird dude, you have to say that,” said Yardeni. “I don’t know any president that has been this bullish and this bearish for the stock market. He cuts taxes, that’s bullish, then in January he talks about tariffs on aluminum and steel.”

Almost halfway into 2018, markets and the economy have presented investors with a lot of noise related to trade and growth. Yardeni believes he’s found the signal that should presage the momentum of markets and the economy in the near term: positive earnings growth.

Notably, the S&P 500 earnings picture improved before the passage of Trump’s signature tax reform package in December, said Yardeni. Though some investors and analysts credit the president with creating an economic turnaround, Yardeni argues that the global economy was improving independent of his pro-business policies as it emerged from a “rolling recession” of flat revenue growth caused by a collapse in commodity prices.

“I am suggesting that we may continue to see an expansion with these rolling recessions along the way,” said Yardeni. “They moved through energy and commodities from 2014 to 2016. Lately, they’ve been rolling through retailing. That sector is moving to restructure and cut back capacity. That’s a rolling recession. We’ll see how technology disrupts other industries in the coming years. It may experience rolling recessions [itself].”

From a valuation standpoint, U.S. equities look more attractive, as forward-looking valuations have eased after analysts had to revise their estimates drastically upward in January due to the tax cut package.

Yet the market is discounting earnings, said Yardeni, because analysts tend to be optimistic during economic expansions and eventually revise their estimates lower. While a blended average of analyst estimates states that S&P 500 earnings will grow by 21 percent in 2018, Yardeni thinks that number will come down to 18 percent.

Valuations should continue to fluctuate to either side of 15x forward earnings, said Yardeni, which means the S&P 500 should cross the 3000 mark in the coming months.

Fourth quarter earnings calls were particularly upbeat due to the tax cuts, said Yardeni, while the recent conference calls for the first quarter of this year were “more subdued” due to trade concerns, he said, adding that those concerns amount mostly to noise.

“I don’t think Trump wants to shut off world trade. I think he’s a Reagan protectionist who wants fairer trade,” said Yardeni. “I think he succeeds through more bilateral agreements that will save globalization from its worst detractors.”

Yardeni also argued that monetary policy will continue to normalize, but probably not to the point where central bankers would create a financial crisis. By mid-2019, the Federal Funds Rate should approach 2.5 percent, he said, with the 10-year Treasury yielding between 3 and 3.5 percent. Deficits, while a concern, are more of a “background” issue, he added.

Inflation, on the other hand, would cause interest rates to rise and valuation multiples to decrease, he said. A return of inflation would increase the chance that the Federal Reserve will overshoot with its interest rate increases and push the economy into a recession, said Yardeni, who noted that many other factors help keep inflation in check, such as global trade, technological innovation and aging demographics.

“Technology been a source of competition. We can see the impact just on retailing,” said Yardeni. “It’s an important area of the economy where inflation can pop up … but 30 percent of retail sales are now online. With online shipping, now consumers can shop anywhere in the world and get the lowest prices. It’s a powerful force for disinflation.”

The Fed has tried to increase inflation to 2 percent since 2012, said Yardeni, but it hasn’t happened, even with accommodative monetary policy. “Something else is keeping inflation down,” he said.

One reason may be a kind of peace dividend, where entrepreneurs and businesses invest more in innovation during the calm between periods of conflict. Yardeni noted that inflation spiked during wars the U.S. participated in going back to the War of 1812, yet eased in the periods in between, with one significant exception.

“There hasn’t been deflation since the end of the Cold War,” said Yardeni. “Why not? My guess is that it’s the central banks’ perverse hatred of deflation. They have a 1930’s outlook. But the worst problem of deflation, plunging durable goods prices, is actually good for people.”

Yardeni also responded to widespread concerns that increasing the deficit while the Fed unwinds its balance sheet will cause a supply issue in the bond market and cause interest rates to rapidly rise. He noted that the growth in the global economy has continued since the commodities and energy-led “rolling recession” of 2014-16 and should continue or stay firm moving forward.

“I think we have a lot of wealth growing in the global economy that needs to be diversified,” said Yardeni. “There will be room for bonds in there, but I don’t know what the limit will be. I don’t see this as an immediate issue.”