Ed Yardeni of Yardeni Research has cut his 2026 S&P 500 price target from 8,400 to 7,900, the highest forecast on Wall Street until this trim. He points to rising bond yields, the Iran war, and midterm-election uncertainty, though he still expects the index to reach 8,400 by mid-2027 and 10,000 by the end of the decade.
One of Wall Street's most bullish strategists just pulled back. Ed Yardeni slashed his S&P 500 price target from 8,400 to 7,900, a level that suggests little upside in the final 3.5 months of the year with the index already trading around 7,600. His prior 8,400 target had been the highest on the Street.
The S&P 500 has fallen about 2.3% over the past month, even as the index is still having a decent year overall. But between the Iran war and elevated inflation expectations, strategists have grown more cautious.
Rising bond yields weigh on sentiment
Yardeni's biggest near-term worry is bond yields. The yield on the 10-year Treasury note recently surpassed 5%, while mortgage rates sit near 7%. That move comes despite the Federal Open Market Committee raising its benchmark lending rate by a quarter point this week, putting the federal funds rate in a range of 3.75% to 4%.
Investors had priced in that move after hotter-than-expected inflation data released last week, but Yardeni warned the move may be a few months too late. He had previously argued that a rate hike in July would have pushed the 10-year yield lower by bolstering the Fed's inflation-fighting credibility.
Iran war and midterms add uncertainty
Beyond yields, Yardeni is watching the Iran war, which shows no sign of de-escalating, and November's midterm elections, where Democrats have a real chance to flip Congress. Together, these forces investors to reevaluate their view of policy and how it could affect certain sectors over the next few years.
The Motley Fool's Bram Berkowitz expects markets to stay choppy with more negative sentiment until midterms bring more clarity.
Long-term view still bullish
Despite the near-term trim, Yardeni remains optimistic further out. He still sees the S&P 500 reaching 8,400 by mid-2027. He has also reiterated his decade-end target of 10,000.
Source: The Motley Fool
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