Yardeni holds S&P 500 target at 8,250, says AI rally is real

Ed Yardeni is holding firm on his 8,250 year-end S&P 500 target, arguing the AI-driven rally is backed by real earnings growth.

The S&P 500 will reach 8,250 by year-end, Ed Yardeni said, as an earnings-led melt-up driven by artificial intelligence investment continues to accelerate.

"We've never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months," Yardeni, president of Yardeni Research, said on CNBC's Squawk Box. "The result has been an earnings-led melt-up in the stock market."

The S&P 500 closed at 7,398.93 on Friday, up 16.5% from this year's low. Yardeni's 8,250 target implies an 11.5% upside from that level. More than 400 S&P 500 companies have reported first-quarter results, with 84% exceeding earnings estimates — the highest beat rate since the second quarter of 2021, according to FactSet. Those companies posted 25.6% year-over-year earnings expansion, far above the five-year average of 7.1%.

Yardeni raised his subjective probability of a continued "Roaring '20s" scenario to 80% from 60%, merging it with his melt-up thesis. He maintains a 10,000 target for the S&P 500 by the end of 2029, which he said "might arrive ahead of schedule."

Earnings Breadth Widens as Analysts Turn More Bullish

The percentages of S&P 500 companies with positive year-over-year growth in forward revenue per share and earnings per share reached 89.6% and 84.6%, respectively, last week, Yardeni noted. Consensus earnings estimates have surged above his own 2026 and 2027 targets, currently standing at $336.49 and $386.70, respectively. Yardeni sees S&P 500 earnings per share climbing to $330 this year and $375 in 2027, with profit margins expected to rise to 15% and 16.3%.

HSBC also raised its 2026 S&P 500 forecast to 7,650, noting the benchmark could top 8,000, and revised its year-end earnings estimate higher by 8%. Morgan Stanley's Mike Wilson observed that the current earnings season has seen both median earnings-per-share growth and EPS surprises at four-year highs.

Risks Remain as Oil Surges

Yardeni acknowledged risks to his outlook. West Texas Intermediate crude has surged 71% this year as the U.S.-Iran war pushes energy prices higher, which could fuel stagflation if sustained. "Another round of fighting could be even more troublesome, as it could result in stagflation," he said. A more persistent inflation problem would force central banks to raise interest rates, potentially triggering a bond vigilante response.

The 10-year Treasury yield rose Monday, while the dollar index edged higher. Gold traded at $4,682 an ounce. Yardeni said many market sectors look overbought compared with their 200-day moving averages, but he is sticking with his 20% odds of a recession that causes a bear market.

A separate technical note from BTIG's Jonathan Krinsky highlighted an unusual divergence: the S&P 500 closed more than 7% above its 50-day moving average on Friday, yet only 52% of its components finished above their own 50-day averages — the lowest breadth reading for such an extended index level in three decades.

This article is for informational purposes only and does not constitute investment advice.