(Investing.com) - Ed Yardeni now sees the S&P 500 potentially ending 2025 at 6000 in his revised best-case scenario, as he trims earnings expectations amid rising stagflation risks tied to new U.S. tariffs.
Yardeni, president of market research firm Yardeni Research, lowered his base-case earnings forecast for the S&P 500 to $260 per share for 2025, down from $275. The 2026 estimate was also cut to $300 from $320.
The downward revisions reflect “the rising risks of stagflation, which would entail a growth recession and squeezed profit margins.”
While the firm still expects the long-term "Roaring 2020s" theme to prevail through the decade, the near-term outlook has become cloudier following a new wave of tariffs introduced under the Trump administration.
A 25% tariff on imported autos and parts takes effect in early April, on top of similar levies on steel and aluminum. The administration is also considering a broader 20% tariff on all imports, which Yardeni warns could limit the chances of future tariff reductions.
The equity strategist has reduced the probability of his base-case Roaring 2020s scenario to 55% from 65%, while raising the chance of a stagflationary outcome to 45%, which could include “a shallow recession later this year, following a buy-in-advance shopping spree during April and May.”
As for the price targets, the firm’s S&P 500 target range for 2025 is now 5100 to 6000. “In our base-case scenario, the S&P 500 would end the year at 6000, representing a small gain on a year-over-year basis,” the note said. For 2026, the projected range is 5950 to 7000.
Forward earnings per share (EPS) are projected to reach $300 by the end of 2025 and $350 by 2026. Yardeni assumes a forward P/E range of 17 to 20, depending on how much pressure the economy and profit margins face in coming quarters.
“The top of the range reflects our base-case scenario remaining intact even this year, while the bottom of the range is more consistent with the risks that could thwart that. If a recession occurs, the forward P/E would be lower than 17,” he explains.
Yardeni continues to target a level of 10,000 for the S&P 500 by the end of the decade.
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By Vahid Karaahmetovic
April 1, 2025
