Wall Street Bull Turns Cautious: Ed Yardeni Cuts S&P 500 Target As Trump's Tariffs Threat Stagflation

Ed Yardeni, one of the most bullish voices on the Street, has slashed his year-end price target, citing the mounting risks from President Donald Trump‘s tariff policies, which are no longer mere negotiating tactics but outright trade barriers.

In a note shared Thursday, Yardeni lowered his S&P 500 best-case target from 7,000 to 6,400 for the end of 2025 and from 8,000 to 7,200 for the end of 2026. In his worst-case scenario, the index, tracked by the SPDR S&P 500 ETF SPY, could drop to 5,800 by the end of 2025 and 6,500 by the end of 2026.

From Market Cheerleader To Cautious Observer

At the start of the year, Yardeni was among Wall Street’s most optimistic analysts, projecting an 18% surge in the S&P 500 to 7,000 by December 2025—an outlook that aligned with Wells Fargo and Deutsche Bank. Oppenheimer Asset Management was even more aggressive, with a 7,100 target. Yet, the economic landscape has shifted.

“We continue to bet on the resilience of the economy,” Yardeni said. “However, we acknowledge that it is being severely stress-tested now by Trump 2.0’s tariff turmoil and shotgun approach to paring the federal workforce.”

The biggest surprise, he added, is that Trump was not bluffing about his trade policies.

Yardeni Sticks To Hawkish Fed Call

According to Yardeni, tariffs function as a tax, and while importers and exporters absorb some of the cost, consumers ultimately bear the brunt in the form of higher prices.

That dynamic complicates the Federal Reserve’s ability to cut interest rates, even as financial markets continue to price in over three rate reductions of 25 basis points each in the next 12 months.

“The latest inflation data may provide some cover for the doves at the Federal Reserve who want to cut the federal funds rate later this year,” Yardeni said. “We remain in the none-and-done camp.”

A key concern for Yardeni is the persistence of services inflation, which remains well above the 3% annual increase typically associated with the Fed’s 2% inflation target.

Manufacturing and services data also point to rising prices. The Institute for Supply Management manufacturing and services Purchasing Managers’ Indexes suggest inflationary pressures are building. However, a potential counterbalance comes from energy markets, where contained prices could “prevent a 1970s-style inflationary spiral.”

‘Tear Down Tariff Walls’

Yardeni highlighted a political dimension to Trump’s trade strategy. He indicated the administration might soften its stance before the 2026 midterm elections to avoid triggering a recession that could cost Republicans control of Congress.

“We expect Mr. Trump to relent lest he cause a recession that reverses the GOP majority in Congress,” he said.

Still, with tariffs already in motion, Yardeni is scaling back his expectations. While he is not turning outrightly bearish, he is acknowledging that the economic outlook has become more fragile.

His final message? “Mr. Trump, don’t build your tariff wall! Tear down tariff walls around the world by negotiating free-trade deals!”

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Image created using artificial intelligence via Midjourney.