Renowned strategist Ed Yardeni, known as one of Wall Street’s most optimistic figures, recently revised his market predictions downward due to concerns about President Donald Trump’s tariffs, which he believes could lead to stagflation. “It’s become clear to us and others on Wall Street that these tariffs aren’t just bargaining tools to reduce global tariffs and promote free trade,” Yardeni shared in a client note on Thursday. “They actually function as trade barriers, prompting retaliatory measures from other countries, and risk impacting U.S. inflation and economic growth negatively.”
Yardeni Research adjusted its best-case scenario for the S&P 500 in 2025, reducing the target by nearly 9% to 6,400 from the previous 7,000. They also set a worst-case target at 5,800. Despite this adjustment, the new best-case target of 6,400 still represents a more than 10% increase from Wednesday’s closing figures.
Since taking office in January, Trump’s aggressive tariff policies and abrupt policy changes have led to increased market volatility. This has raised concerns about reduced consumer spending, slowed economic growth, diminished profits, and even the potential for a recession. The S&P 500 has dropped roughly 9% from its latest peak, edging closely to correction territory. On Thursday, investors were hit with a new challenge: the threat from the White House to impose 200% tariffs on all alcoholic products from the European Union in response to the bloc’s 50% tariff on American whiskey.
Yardeni described U.S. trade policy as chaotic. “The potential for these policies to lead to stagflation cannot be ignored,” he cautioned. “In light of the heightened stagflation risk, we are decreasing our S&P 500 valuation expectations and year-end price targets.” Yardeni noted that if the tariffs persist, the associated price increase and uncertainty around inflation could likely induce the Federal Open Market Committee to maintain its current stance.
Goldman Sachs recently followed suit, becoming the first major sell-side bank on Wall Street to reduce its S&P 500 target, lowering their goal to 6,200 from 6,500. It’s worth noting that an earlier statement from Yardeni Research misstated the percentage gain expected from their new target of 6,400, which actually offers more than a 10% increase from the market close on Wednesday.
