Yardeni Research - the firm that carries Wall Street's most aggressive year-end S&P 500 projection at 8,250 - said it is taking a more cautious view of equities over the coming weeks despite the index climbing above 7,600 for the first time.
"We are turning cautious about the prospects for the stock market in the coming weeks," the firm wrote, pointing to a cluster of developments it sees as potential near-term headwinds.
Among the risks Yardeni highlighted are an unresolved conflict in the Middle East and comments from executives at Exxon and Chevron that global oil inventories are dangerously low, with the possibility that prices could surge to $150 a barrel or higher. The firm also noted the chance that the Federal Reserve could pivot from an easing bias to a tightening bias within the month, which Yardeni said could be followed by a rate hike in July. In addition, the firm flagged three large upcoming initial public offerings as a source of potential market volatility.
Those cautionary signals sit alongside a broader constructive economic read from Yardeni. The firm characterized the recent market advance as being driven by what it calls Fabulous Earnings Momentum, or FEMO, rather than by a fear-of-missing-out dynamic, and argued that an earnings-led rally is more durable.
Yardeni also sees indications that the AI boom may be extending beyond financial markets into the wider economy. The firm noted that April job openings surged to 7.62 million, the highest level since May 2024, and that the ISM manufacturing PMI rose to 54.0 in May, its strongest reading since May 2022. The Atlanta Fed's GDPNow model is cited in Yardeni's note with an estimate of Q2 real GDP growth at 3.0 percent.
Context and implications
Yardeni's shift toward near-term caution does not change its year-end projection, but it does underscore a view that markets could face heightened volatility as geopolitical risks, energy market dynamics, monetary policy uncertainty, and large equity offerings converge.
The firm's emphasis on FEMO reflects a preference for earnings-driven market advances, which it considers more sustainable than momentum built on sentiment alone. At the same time, Yardeni's note signals that factors outside of corporate earnings could still prompt short-term dislocations.
Data points cited
- S&P 500 surpassed 7,600 for the first time.
- Yardeni's year-end S&P 500 target: 8,250.
- April job openings: 7.62 million, highest since May 2024.
- ISM manufacturing PMI in May: 54.0, highest since May 2022.
- Atlanta Fed GDPNow Q2 real GDP growth estimate: 3.0 percent.
- Oil executives warned inventories are dangerously low and prices could spike to $150 a barrel or higher.