Ed Yardeni cut his year-end S&P 500 target to 7,900 from 8,400, citing rising Treasury yields and oil prices. The Yardeni Research president still expects the index to reach 10,000 by the end of the decade but now urges investors to be careful.
Ed Yardeni slashed his year-end S&P 500 target to 7,900 from 8,400, trimming the upside he sees for the index over the rest of the year. The new call implies a 4.1% gain from Tuesday's close of 7,585.73, down sharply from the 11% gain his prior estimate had implied.
Yardeni pointed to higher Treasury yields, which he tied to rising energy prices, as the reason behind the downgrade. According to CNBC: "The risks of a downturn have increased over the next three to six months", Yardeni said in a note.
The benchmark 10-year Treasury note yield climbed to a high of 5.041% this week, a level not seen since 2007. Brent and U.S. crude are both up more than 20% over the past month, each trading above $100 per barrel, as the war in the Middle East shows no signs of ending.
Those moves, combined with hotter-than-expected inflation data in recent weeks, have investors expecting a quarter-point rate hike from the Federal Reserve, which would put fed funds at 3.75% to 4.00%. The CME Group's FedWatch tool shows a 93% chance the central bank increases its overnight lending rate.
Much will depend on how Fed Chair Kevin Warsh communicates the decision. The Fed decision is scheduled for 2 p.m. ET, followed by a Warsh news conference at 2:30 p.m. ET.
Despite the near-term caution, Yardeni remains bullish over the long run. He reiterated his end-of-decade target of 10,000 for the S&P 500, 32% above current levels. For now, though, he says investors should proceed with caution.
Source: US Top News and Analysis
Trading involves risk.
Risk Disclaimer
