Yardeni told CNBC rising oil prices and Treasury yields have made him less optimistic in the short term, although strong economic growth and corporate earnings continue to support his longer-term stock-market outlook.
- Yardeni said he could not rule out the 10-year U.S. Treasury yield moving beyond 5.5%, while calling 5.25% an attractive level for bond buyers.
- He now sees the S&P 500 at 7,900 by year-end and 8,400 by mid-2027 after pushing his more optimistic year-end outlook into next year.
- Yardeni called corporate earnings “phenomenal” and said nothing suggests earnings expectations will be cut over the rest of 2026.
Ed Yardeni, President at Yardeni Research, said he could not rule out the 10-year U.S. Treasury yield reaching 5.5% or even higher, but strong corporate earnings continue to support his longer-term bullish outlook for stocks.
In an interview with CNBC on Monday, Yardeni said he has pushed his “very optimistic outlook” for the year-end, and expects his S&P 500 target of 8,400 to be reached mid-next year.
He now expects the index to reach 7,900 by year-end, while maintaining his “Roaring 2020s” scenario of 10,000 by the end of the decade.
Oil, Deficits And AI Bonds Pressure Yields
Yardeni also believes that higher-for-longer oil prices will feed into stickier inflation, adding that this could prompt the Federal Reserve to tighten rates.
At the same time, Yardeni said higher bond yields reflect an economy that is “absolutely booming,” with consumers doing well and capital spending strong.
The economist also highlighted the federal deficit, arguing that the government should not be running deficits of this size with the economy performing this well.
Yardeni additionally pointed to increased supply from AI-related corporate bonds. Discussing the 10-year U.S. Treasury yield, Yardeni said 5.25% looked “pretty attractive” and could begin drawing money away from stocks.
“I can’t guarantee you that we won’t get five-and-a-half percent before this is all over, and maybe even higher,” he told CNBC.
Yardeni said he believes the economy can handle a 10-year U.S. Treasury yield around 5.25%. He pointed to nominal gross domestic product (GDP) growth of 6.6% in the fiscal second quarter (Q2) and said it appeared to be headed toward 7% year-over-year in the third quarter.
The 10-Year Treasury yield edged up by 0.036 basis points to 5.215%, while the 30-Year bond yield rose to 5.52% at the time of writing.
The iShares 20+ Year Treasury Bond ETF (TLT) fell 0.55% in Monday’s premarket session, while the iShares 7-10 Year Treasury Bond ETF (IEF) edged down by 0.4%.
Yardeni said his experience with the “bond vigilantes” suggests bond yields have historically had a greater effect on slowing economic growth when they moved above nominal GDP growth.
‘Phenomenal’ Earnings Keep Longer-Term View Intact
Yardeni said the same economic strength contributing to higher yields has also supported corporate profits. “The earnings part of the equation has been phenomenal,” he said.
He added that nothing he sees suggests earnings expectations need to be cut over the remainder of the year or potentially into next year.
Higher rates are having a clearer effect on housing, he said. Yardeni described the economy as both K-shaped and generational, saying many younger adults cannot afford homes at current prices and mortgage rates while older Americans can benefit from higher interest income.
During the pre-market session, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.46%; the Invesco QQQ Trust ETF (QQQ) fell 0.82%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.56%.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<