Although the benchmark S&P 500 is exhibiting a short-term resurgence, economist and market strategist Ed Yardeni is slashing his target for the index for the end of 2025.
Notably, Yardeni, often regarded as one of Wall Street’s most optimistic analysts, lowered his year-end 2025 target for the S&P 500 to 6,400 from his previous estimate of 7,000.
The revision also contains a lower adjustment for 2026, where he predicted that the index might reach 7,200 rather than 8,000 due to growing stagflation concerns.
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Yardeni’s most recent projection departs from his past positive posture, where he voiced hope in the strength of the American economy only as late as March 3.
Notably, the analyst kept his estimates for corporate earnings despite the changed targets; he expects S&P 500 businesses to have combined earnings per share (EPS) of $285 in 2025 and $320 in 2026.
However, he admitted possible headwinds, especially since market leaders such as Tesla (NASDAQ: TSLA) and Nvidia (NASDAQ: NVDA) have struggled recently.
Indeed, the electric vehicle (EV) manufacturer has mostly wiped out its post-election gains as it faces slowed investor interest due to declining sales, competition from Chinese manufacturers, and backlash against CEO Elon Musk’s political involvement.
On the other hand, Nvidia has mostly been impacted by the general market sell-off despite the company reporting a blockbuster earnings report for Q4 and a positive outlook for its next-generation Blackwell chips.
Impact of President Trump’s tariffs
A key factor influencing Yardeni’s outlook is the impact of trade policies under a second Donald Trump term. Many on Wall Street, including Yardeni Research, initially believed Trump’s tariff threats were negotiation tactics to promote free trade.
In contrast, the Trump administration has imposed tariffs on Canada, Mexico, China, and steel and aluminum imports, with additional trade barriers expected in the coming weeks.
Notably, Yardeni warned that these tariffs could act as economic headwinds, exacerbating inflationary pressures and dampening growth. The realization that tariffs are more than just leverage in trade negotiations has led to increasing concerns on Wall Street, further influencing Yardeni’s more cautious market outlook.
“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,” Yardeni said.
His downgrade follows similar moves by major financial institutions and analysts. For instance, HSBC downgraded U.S. stocks to ‘Neutral’ while upgrading European equities to ‘Overweight’. Banking giant Goldman Sachs also cut its year-end S&P 500 target to 6,200 from 6,500 and trimmed its GDP growth forecast to 1.7%.
Conversely, citing policy uncertainties, financial difficulties, and earnings pressure, Morgan Stanley’s Michael Wilson, according to a Finbold report, anticipates the S&P 500’s to drop to 5,500 and resistance at 6,100 in the first half of 2025.
S&P 500 analysis
At the close of the last trading session, the index posted its best day of 2025, finding support at 5,500. Indeed, the benchmark gained over 2% to close at 5,638.94, with a total inflow of over $1 trillion on March 14.
From a technical perspective, a March 15 analysis by Financelot indicated that the S&P 500 is on the edge of a major trend shift. The analysis suggested that a deeper correction could follow if the index breaks below its parabolic trendline, similar to the downturns in 2000 and 2008.
The outlook leveraging the Elliott Wave theory indicates that the S&P 500 may have completed its fifth and final wave of the bullish cycle. If this holds, a corrective phase could be underway, with potential downside targets between 4,800 and 4,200.
Meanwhile, the Relative Strength Index (RSI) is hovering around 60 but has started to decline. If it drops below 50, it would confirm weakening buying pressure and increase the risk of fur her downside.
The index’s uncertainty has recently accelerated with new elements emerging. For instance, the potential U.S. government shutdown has added to market uncertainty, though it may soon be averted.
While past shutdowns had limited impact, broader concerns persist over Trump’s escalating trade war, tariffs, and federal spending cuts at a time when businesses and households report declining confidence, raising fears of an economic slowdown.
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