A Big Market Bull Just Turned Cautious | Ed Yardeni

Adam Taggart | Thoughtful Money® Sep 20, 2026 1:01:37

Summary

Ed Yardeni pushes his S&P 500 year-end target from $8,400 to mid-2027 as Middle East re-escalation, oil prices, and Fed tightening bite.

The bull-turned-cautious still keeps his 'roaring 2020s' base case at 70%, but now sees room for a buying opportunity if markets reset.

Copper, steel, and aluminum stand out as commodity winners from the AI infrastructure and grid buildout, Yardeni says.

Bank of Japan tightening and the unwinding yen carry trade are key near-term risks, alongside a possible credit event tied to government deficits.

Top takeaway The host frames the most plausible recession trigger as something coming from the credit markets — a private credit or private equity blowup, or foreign buyers stepping away from Treasury auctions.
He flags AI capex as the 'lead sled dog' of earnings and asks whether corporate America will see real incremental revenue from AI, or whether it becomes 'dot-com like' with tomorrow's valuation pulled into today; he also raises congressional regulatory pressure on AI as a wildcard.

Top takeaway The guest walks back his S&P 500 target to mid-2027 from end-2026 ($8,400), shifting from bullish to less bullish; he trims his 'Roaring 2020s' subjective probability from 80% to 70% and lifts the bear scenario from 20% to 30%.
He reframes the bull case as 'FIMO' (fabulous earnings momentum) — analysts keep raising earnings but PE multiples have compressed, and he expects the PE to shrink more from here.
Near-term worries are Middle East re-escalation keeping oil higher for longer (inflation stickier, Fed likely to hike twice more this year) and the Bank of Japan unwinding the yen carry trade and pushing global bond yields higher.
He treats 4-5% bond yields as the 'old normal' returning and argues the US economy is less rate-sensitive now, with baby boomers' roughly $110 trillion in net worth funding the consumer; he pushes back on the K-shaped economy story in favor of a 'G-shaped' recovery.
Investment themes: market-weight tech plus comm services (about 45% of portfolio via NASDAQ 100 or sector ETFs), plus financials and fintech, industrials, biotech and healthcare, materials (copper, steel, aluminum), energy, and emerging markets ex-China; he sees AI compute demand as structural rather than a near-term bubble.

Top takeaway Yardeni says Bessent has been leaning on the Bank of Japan to keep raising rates to support the yen, worried that if the yen weakens further Japan could intervene by selling US Treasuries.
He sketches out a 'Bessent twist/put' — a hypothetical bazooka in which Treasury buys long-end Treasuries and refinances with T-bills if credit markets panic.