S&P 500 Outlook: Analyst Eyes 7,700 by 2026

Ed Yardeni's Unwavering Bullish S&P 500 Forecast to 2026

Despite prevailing market volatility and ongoing discussions regarding a potential "AI bubble," veteran market strategist Ed Yardeni stands firm on his optimistic projections for the S&P 500. The esteemed analyst, renowned for his data-driven approach, has consistently reaffirmed his long-term targets, suggesting that the current bull market remains fundamentally sound. His steadfast outlook provides a crucial anchor for investors navigating complex economic landscapes.

A Consistent Vision Amidst Market Fluctuations

Yardeni's confidence is not easily shaken. Even as the stock market experiences periods of "messy pullback," he reiterates a consistent message: the bull market is robustly intact. His conviction is rooted in concrete observations, notably the S&P 500's performance in late October, which saw the index flirt with the 6,890 mark. This figure aligns remarkably close to his ambitious 7,000 target set for the end of 2025. Such proximity reinforces his belief in the index's trajectory and the underlying strength of the economy.

Furthermore, Yardeni extends his long-term conviction, projecting the S&P 500 to ascend to 7,700 by the close of 2026. This forward-looking forecast is predicated on several key pillars: sustained record-breaking corporate earnings, a broadening participation across various market segments, and an economy demonstrating remarkable resilience against potential downturns. These factors, he argues, collectively form a powerful engine for continued market growth.

Decoding Ed Yardeni: A Wall Street Luminary

To fully appreciate the significance of Yardeni's pronouncements, it is essential to understand his background and influence. Ed Yardeni is a highly respected figure on Wall Street, currently leading Yardeni Research, an independent firm specializing in economics and investment strategy. His extensive career includes pivotal roles as chief economist or chief investment strategist at prominent institutions such as EF Hutton, Prudential, and Deutsche Bank. This rich professional history has equipped him with a profound understanding of market dynamics and macroeconomics.

Yardeni is also credited with coining influential terms that have become integral to financial discourse. He popularized the concept of "bond vigilantes," a phrase used to describe investors who exert pressure on government bond yields, effectively punishing governments perceived to be engaging in excessive spending. Additionally, he played a significant role in advancing the "Fed model," a widely recognized framework that correlates earnings yields with Treasury yields to assess whether equity valuations are attractive or expensive. These contributions underscore his analytical prowess and lasting impact on investment strategy.

The Enduring Logic Behind the Bullish Case

Yardeni's methodology involves a strategic zoom-out from daily market fluctuations to evaluate the broader structural mechanics at play. He posits that the much-discussed AI boom is not collapsing but rather transitioning into a more sustainable growth phase. This perspective is supported by the S&P 500's impressive year-to-date performance, tracking over 12%, which remains consistent with its ten-year average. Such steady progress suggests a healthy, rather than overheated, market environment.

Further supporting his thesis, the cap-weighted S&P 500 index maintains a significant lead, trading approximately 7.2% above its 200-day moving average. This metric indicates robust momentum driven primarily by mega-cap stocks. Crucially, the equal-weighted S&P, which offers a broader view of market health by mitigating the influence of a few large companies, is situated directly on its 200-day trend line. This suggests that while broader market segments may have experienced some cooling, they have not fundamentally broken down, indicating underlying stability.

The Nasdaq, a benchmark for technology and growth stocks, reinforces this narrative, being up over 15%, perfectly aligning with its decade-long growth pattern. For Yardeni, however, the paramount factor underpinning his 7,700 S&P 500 target for 2026 is the consistent strength of corporate earnings. Companies have consistently surpassed earnings estimates by a factor of two for three consecutive quarters. Forward earnings are projected to converge towards an impressive $309.28 for 2026, with the "Impressive 493" (S&P excluding the "Magnificent Seven") also reaching new earnings records, indicating a widespread profit generation.

Market Consensus and Diverging Views

Yardeni's optimistic stance is echoed, and in some cases even surpassed, by other prominent financial institutions. Deutsche Bank, for instance, has presented an even more bullish outlook, forecasting the S&P 500 to hit 8,000 by the end of 2026. Morgan Stanley's Mike Wilson also projects 7,800 for 2026, attributing this to robust earnings growth and the efficiencies gained from AI integration. BMO's Brian Belski recently revised his 2025 target upwards to 7,000, citing a "Goldilocks" economic growth scenario coupled with a more accommodative Federal Reserve.

Conversely, some institutions maintain a more conservative perspective. Goldman Sachs, as reported by Reuters, has lifted its 2025 target to 6,800, based on anticipated rate cuts and solid corporate profits, but remains slightly more cautious than its peers. Similarly, HSBC's base case for 2025 is $6,500, with a bullish scenario of $7,000 contingent on trade tariffs remaining contained, according to Reuters. These varying forecasts highlight the dynamic nature of market predictions and the diverse factors analysts consider.

The "Known Unknown" of GPU Depreciation

One area Yardeni identifies as a source of market apprehension, contributing to its "jumpy" sentiment, is the uncertainty surrounding hyperscaler GPU accounting practices. Investors are increasingly grappling with the realization that the actual lifespan and economic depreciation of these critical chips remain unclear. The industry's standard four-to-six-year depreciation schedules come under scrutiny when hardware advancements rapidly leapfrog previous generations annually.

This ambiguity is a significant factor contributing to the decline in the "Magnificent Seven" (Mag-7) forward Price-to-Earnings (P/E) ratio, which has dropped from 31.0 to 28.1. Yardeni anticipates that these multiples could further compress as investors seek greater clarity on the true economic life of these assets. This concern is not isolated; Michael Burry, famously known as "the Big Short," has also voiced similar warnings, suggesting that extended GPU depreciation schedules might be inflating reported earnings, thereby obscuring the actual economic value of chips, particularly from companies like Nvidia.

Conclusion: A Long-Term Bullish Stance Rooted in Fundamentals

In essence, Ed Yardeni's enduring bullish forecast for the S&P 500 is not a mere speculation but a conclusion drawn from a thorough analysis of fundamental market drivers. His perspective transcends short-term market noise, focusing on the robust underpinnings of corporate profitability, expanding market breadth, and an economy that consistently defies pessimistic expectations. While acknowledging specific "known unknowns" such as GPU depreciation, his overarching message remains clear: a disciplined, long-term investment approach, guided by solid economic data, is the most prudent strategy, often yielding substantial returns over time.