Investing.com -- Ed Yardeni has lowered his S&P 500 year-end target, citing the growing risk of stagflation fueled by U.S. President Donald Trump’s trade policies.
Yardeni, President of market research firm Yardeni Research, noted that the administration’s tariffs are not merely negotiating tools but outright trade barriers, leading to retaliatory measures from other countries and raising concerns about inflation and economic growth.
“We expect Mr. Trump to relent lest he cause a recession that reverses the GOP majority in Congress during the 2026 mid-term elections,” Yardeni stated. However, with trade uncertainty escalating, the firm has revised its valuation expectations and forward price targets for the benchmark index.
Despite maintaining strong earnings estimates for S&P 500 companies—$285 per share this year and $320 in 2026—Yardeni is cutting its forward price-to-earnings (P/E) multiple forecast.
The veteran investor now projects a best-case S&P 500 target of 6,400 for the end of 2025, down from a prior estimate of 7,000. For 2026, the target has been lowered from 8,000 to 7,200.
Yardeni also outlined worst-case scenarios, assuming an 18x forward P/E ratio. This would put the S&P 500 at 5,800 by year-end and 6,500 in 2026, should economic conditions deteriorate further.
The downward revision follows similar moves by Goldman Sachs, which recently cut its own S&P 500 target from 6,500 to 6,200.
Yardeni’s concerns stem from broader macroeconomic risks, including the administration’s push to replace traditional tax revenues with tariffs, an approach the expert described as “dangerous and delusional nonsense.”
The report noted that tariffs function as taxes on consumers and businesses, with the potential to fuel inflation while slowing economic growth.
“It certainly isn’t passing the sanity test in the U.S. stock market,” Yardeni emphasized.
While recent economic indicators, including labor market data and inflation expectations, have remained relatively stable, Yardeni warns that the combination of restrictive fiscal policy and trade uncertainty could weigh on markets.
“We can’t ignore the potential stagflationary impact of the policies that Trump 2.0 is currently implementing haphazardly,” he wrote.
The investor maintains the view that the economy has been resilient but cautions that it is now “severely stress-tested by Trump 2.0’s tariff turmoil and shotgun approach to paring the federal workforce.”