Top strategist Ed Yardeni lowers S&P 500 price target after rising interest rates

One of the most optimistic stock market strategists on Wall Street is becoming more cautious. Ed Yardeni has lowered his price target for the S&P 500 at the end of this year from 8,400 to 7,900 points. Striking, because it was only last month that he raised his expectations.

The well-known strategist is particularly concerned about the rapidly rising US bond yields. As a result, he sees a greater risk of a fall in the stock market in the next three to six months. For the US economy, Yardeni remains optimistic for the time being. He still doesn't expect a recession.

The main reason for the reduction is the rising interest rates on US government bonds. When bonds yield more, high valuations of stocks become more difficult to justify.

Yardeni is therefore lowering its expected price-to-earnings ratio for the S&P 500 at the end of the year from 19.8 to 18.6. As a result, his price target drops from 8,400 to 7,900 points.

The twist is striking. In August, Yardeni increased its price target from 8,250 to 8,400 points due to the very strong earnings growth in American companies. At the time, he had one of the highest expectations on Wall Street.

Yardeni is bovendien niet de enige strateeg die voorzichtiger wordt. Ohsung Kwon van Wells Fargo verlaagde deze week zijn koersdoel voor de S&P 500 van 7.950 naar 7.700 punten. Hij waarschuwt onder meer voor afzwakkende winstgroei en toenemende risico’s binnen de technologiesector.

Not everyone gets gloomier. Strategists from Bank of America and Tallbacken Capital Advisors, among others, have raised their expectations this week.

Despite his warning, Yardeni does not expect a prolonged economic downturn. He still thinks that the US economy can continue to grow without a recession until the end of this decade. His price target for the S&P 500 at the end of the decade therefore remains at 10,000 points.

He is now shifting the previous price target of 8,400 points to mid-2027. His forecast for earnings per share of companies in the S&P 500 in 2027 also remains unchanged at $425.

In the short term, the focus will be on the Federal Reserve. The US central bank will make a new interest rate decision on Wednesday and the market is taking a strong interest rate hike into account.

That could set the bond yields, which Yardeni is worried about, in motion again. According to the strategist, a combination of higher inflation and lower economic growth would be particularly problematic for equities.