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Wall Street is enjoying a strong bounce at the end of a turbulent week that sent the S&P 500 into correction territory for the first time since October 2023.
The S&P 500 – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – was up 2% by late afternoon trading in New York, eyeing the strongest surge in more than four months.
Yet, veteran investor Ed Yardeni isn’t convinced the worst is over, calling the rebound more of a “scared cat bounce” rather than a sign of a final market bottom.
In an email sent Friday, Yardeni, president of Yardeni Research, highlighted two key developments that fueled the end-week rally.
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The first is the likelihood that a government shutdown will be avoided. Senate Democratic Leader Chuck Schumer said Thursday he would support a Republican-backed short-term funding bill, removing an immediate threat to government operations.
The second, more surprising catalyst was President Donald Trump‘s silence on tariffs.
Investors appeared to cheer the absence of trade-related rhetoric, with Yardeni saying, “Any day without a Trump tariff comment is a good day for the market.”
Yardeni pointed to a key development that could potentially soften Donald Trump’s aggressive trade stance going forward.
In an unsigned letter to the U.S. trade representative, Tesla Inc. (NASDAQ:TSLA) said that while it “supports” fair trade, it fears U.S. exporters could face “disproportionate impacts” if other nations retaliate against tariffs.
Despite Friday’s relief rally, Yardeni remains cautious. He recently cut his year-end S&P 500 price target from 7,000 to 6,400 for 2025 and from 8,000 to 7,200 for 2026, citing ongoing risks to economic growth.
Yet, he stopped short of forecasting a recession, a growing concern among market watchers.
“We continue to bet on the resilience of the economy,” Yardeni said. He expects Trump will avoid policies that could trigger a downturn before the 2026 midterms, as a recession would threaten Republican control of Congress.
The market’s choppy start to 2025 hasn’t been entirely unexpected, but the downside volatility has been sharper than anticipated.
While bearish sentiment is high, Yardeni suggests that a more convincing bottom would come when markets rise despite renewed tariff threats from Trump.
