Ed Yardeni Adjusts S&P 500 Targets Amid Rising Stagflation Fears

Changes Reflect Economic Concerns

Economist and market strategist Ed Yardeni, known for his bullish outlook in recent years, has revised his S&P 500 targets for 2025 and 2026, citing evolving economic conditions and escalating trade tensions linked to former President Donald Trump’s tariffs.

Yardeni, president of Yardeni Research, has significantly lowered his best-case year-end S&P 500 target to 6,400 from an earlier prediction of 7,000. Furthermore, his 2026 S&P 500 target has been adjusted from 8,000 down to 7,200. This shift marks a notable change in his outlook, as he previously expressed confidence in the resilience of the American economy as recently as March 3. ### Wall Street’s Reevaluation of Trump’s Tariffs

The reconsideration of Yardeni’s targets comes as more economists and analysts on Wall Street react to Trump’s trade policies, which have increasingly been viewed not as negotiating tools but as barriers to trade. "It has dawned on Wall Street (and us!) that President Trump’s tariffs aren’t negotiating chips to help the US lower tariffs around the world, promoting free trade. They’re trade barriers, triggering other countries to respond in kind, and they jeopardize US inflation and economic growth," said Yardeni.

Yardeni’s perspective reflects a broader trend in the financial industry. Recently, HSBC downgraded U.S. stocks to neutral, while upgrading European stocks to overweight. Meanwhile, Goldman Sachs cut its year-end S&P 500 target to 6,200 from 6,500 and reduced its GDP growth forecast to 1.7%.

Earnings Expectations Amid Tariff Pressures

Despite the lower targets, Yardeni continues to predict that S&P 500 companies will achieve earnings per share of $285 in 2025 and $320 in 2026—figures dependent on ongoing economic growth. However, Yardeni emphasized that these projections are contingent upon President Trump potentially easing up on tariffs in the face of an economic slowdown. "We expect he will relent to avoid a recession that would cost the Republicans their majorities in both houses of Congress in the mid-term elections in late 2026," he noted.

Market Reaction

The S&P 500 index has faced significant volatility, plummeting from a high of 6,147.43 in mid-February to 5,521 as of Thursday’s close. This decline marks an intermediate correction, driven by investor reactions to the aggressive tariffs imposed under Trump’s administration and subsequent market responses. High-profile stocks such as Tesla and Nvidia have experienced considerable downturns, falling below their 200-day moving averages.

Despite these challenges, both Yardeni Research and Goldman Sachs maintain an expectation that the stock market will regain some ground by year-end.

Conclusion

As the situation continues to evolve, market participants will be closely monitoring how trade policies and economic indicators interplay in shaping the future of the S&P 500. Yardeni’s adjustments encapsulate a broader sentiment among analysts regarding the potential impacts of fiscal policy on market performance. Stakeholders are advised to stay informed on upcoming developments that could further influence economic stability and stock market dynamics.