During an interview with CNBC, the economist said he remains very optimistic about equity markets despite concerns about oil prices and rising debt.
- Yardeni said the U.S. economy is also benefiting from the stimulus created by hyperscalers’ capital expenditures.
- He pointed to the resilience of the U.S. economy reflected in corporate earnings, noting that analysts currently expect S&P 500 earnings to reach $408 per share next year.
- Yardeni cautioned that geopolitics and crude oil prices remain the red flags for equity markets amid ongoing tensions between the U.S. and Iran.
Ed Yardeni, President of Yardeni Research, on Tuesday downplayed concerns about an AI bubble, saying the current rally in equity markets is driven by a strong economy and robust earnings.
During an interview with CNBC, the economist said he remains very optimistic about equity markets despite concerns about oil prices and rising debt.
“The economy has been extremely strong, and that has translated into what I call ‘FEMO’ (Fabulous Earnings Momentum), to distinguish it from ‘FOMO’ (Fear Of Missing Out),” he said.
Yardeni Believes FOMO Drove 1999 Rally In Equities
Yardeni added that he believes the 1999 equity rally, before the dot-com bubble burst, was driven by FOMO.
“We have stress-tested the economy numerous times, even with tariffs,” he said, while highlighting that the U.S. economy remains resilient despite this.
Yardeni said the U.S. economy is also benefiting from the stimulus created by hyperscalers’ capital expenditures.
“There is a lot of resilience in the economy that’s showing up in earnings. Right now, analysts are collectively looking for [earnings of] $408 a share for the S&P 500 next year,” he added.
Geopolitics, Crude Oil Prices Remain The Red Flags For Yardeni
The economist believes that geopolitics and crude oil prices remain the red flags for equity markets amid ongoing tensions between the U.S. and Iran. However, he expressed surprise that crude oil prices have remained capped despite the naval blockade of Iran.
At the time of writing, U.S. West Texas Intermediate (WTI) futures expiring in October were up 0.54%, hovering around $84.19 a barrel. Brent crude futures expiring in October were up 0.22%, at $91.07 a barrel. Crude oil prices have risen about 3% over the past month.
Meanwhile, President Donald Trump on Monday threatened to bomb Oman if it interfered in the ongoing talks between the U.S. and Iran regarding the Strait of Hormuz. He also reiterated that the goal of the United States is to prevent Iran from obtaining a nuclear weapon.
Yardeni Sees S&P 500 At 8,400 By Year-End, 10,000 By End Of 2029
Yardeni raised his year-end 2026 S&P 500 target to 8,400 from 8,250, citing FEMO. He also maintained his 10,000 target for the end of 2029, while assuming the economy and corporate earnings will remain resilient without a recession.
The economist also raised his S&P 500 EPS estimate to $375 for 2026 from $330 after a strong second-quarter (Q2) earnings season. With 90% of S&P 500 companies having reported, he said they broadly beat analyst forecasts for earnings and profit margins.
The S&P 500 index has rallied 13% so far, and Yardeni’s target implies a further upside of more than 8% from current levels.
Meanwhile, U.S. equities declined in Tuesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.36%; the Invesco QQQ Trust ETF (QQQ) fell 1.01%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) declined 0.1%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bullish’ territory.
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