Yardeni Research has lifted its year-end S&P 500 target back to 7,000, citing the resilience of the U.S. economy and renewed investor optimism following President Trump’s resolution of trade tensions.
“We started the year there, but lowered it earlier this year in response to Trump’s Tariff Turmoil,” said Ed Yardeni, President of Yardeni Research. “We began raising our forecast again during the spring, when we concluded that the tariff issue would no longer impact the stock market by the end of the summer. We bet the resilience of the economy would boost S&P 500 earnings. So far, so good.”
The firm said the “V-shaped stock market rebound since April 9” reflects growing confidence in the economy’s durability and reduces the likelihood of a recession. Analysts described current market conditions as a “slow-motion meltup,” driven by the Fed’s rate cut on September 17 and expectations for further easing before year-end.
Yardeni Research also raised the odds of a meltup to 30% from 25%, while maintaining a 20% probability of a correction. The firm trimmed its base case for a “sustainable bull market (i.e., without a correction)” to 50% from 55%.
However, Yardeni cautioned that investor psychology is showing signs of overheating, noting that there is now “a bubble in bubble fears,” referencing a surge in Google searches for “AI bubble.”
Looking ahead, the firm expects another strong earnings season for the third quarter, forecasting earnings growth of 10.7% year-over-year, well above the 6.4% projected by industry analysts.
“The S&P 500 forward earnings per share rose to another new record high during the week of October 2,” Yardeni added, noting that the forward price-to-earnings ratio currently stands at 22.7.
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