Stocks Bull Yardeni Cuts S&P 500 View to 7,900 on Downturn Risks

(Bloomberg) -- Ed Yardeni, one of the biggest stock bulls on Wall Street, is slashing his year-end forecast for the S&P 500 Index a month after raising it, citing increasing risks of a downturn in the next three to six months.

The president and chief investment strategist of Yardeni Research Inc. cut his target to 7,900 from 8,400, which was the highest estimate on the Street as of last month. The new target implies a 4.1% increase from where the equity gauge closed on Tuesday. It also falls in the middle of pack, based on a Bloomberg survey of more than 20 strategists.

"Given the recent backup in bond yields, we are lowering our estimate for the forward P/E of the S&P 500 at year-end from 19.8 to 18.6, which lowers our year-end target from 8,400 to 7,900," Yardeni wrote in a note to clients.

The veteran strategist upgraded his S&P 500 target to 8,400 from 8,250 in August, a level that topped his own Street-high target for the gauge amid "fabulous" earnings momentum.

Earlier: Yardeni Raises S&P 500 View to 8,400 on 'Fabulous Earnings'

Yardeni is the second strategist this week to lower his view for the S&P 500 as analysts grow increasingly skeptical heading into the end of a midterm election year. Wells Fargo & Co.'s Ohsung Kwon cut his target to 7,700 from 7,950, saying a decade-long earnings growth cycle will eventually slow down while technology-sector risks are mounting.

Others, however, have boosted their outlooks this week, including Bank of America Corp.'s Savita Subramanian and Tallbacken Capital Advisors' Michael Purves, whose 8,500 target is now a Street high.

Yardeni still expects that "the economy will grow without a recession through the end of the decade." The analyst said his target for the end of this decade remains at 10,000.

He added that the previous year-end forecast of 8,400 has now become a mid-2027 target for the S&P 500. His 2027 earnings-per-share target of $425 is unchanged.

All eyes are on the Federal Reserve as they vote on whether to raise interest rates on Wednesday, an outcome most traders anticipate as Chairman Kevin Warsh vows to get inflation under control. Yardeni wrote in a previous note that "for stocks, the stagflationary mix of higher inflation and slower growth would be particularly troublesome."