1 of Wall Street’s Most Bullish Market Strategists Just Slashed His 2026 S&P 500 Price Target by 500 Points

The broader benchmark S&P 500 (^GSPC -0.07%) has seemingly hit a wall over the past month, down about 2.3%.

On the whole, the S&P 500 is still having a decent year, but considering the Iran war and high inflation expectations, among other concerns, it’s not hard to see why investors and market strategists have grown concerned.

Recently, one of Wall Street’s most bullish strategists trimmed his S&P 500 price target for the year.

Ed Yardeni of Yardeni Research recently slashed his forecast from 8,400 to 7,900, which suggests minimal upside in the final 3.5 months of the year, with the index already around 7,600. 8,400 had been the highest price target on the Street.

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Rising bond yields and limited visibility

Yardeni sees several concerns on the horizon. The Iran war continues and midterm elections in November add more uncertaintly, particularly as the Democrats have a real chance to flip Congress.

At a minimum, this forces investors to reevaluate their view of policy and how that could impact certain sectors over the next few years.

However, Yardeni’s biggest near-term concern has to do with rising bond yields. The yield on the U.S. 10-year Treasury note recently supassed 5% and mortgage rates are near 7%.

“We’ve said it before, and will say it again: We will worry about a debt crisis when the bond market worries about a debt crisis,” Yardeni said in a research note, as reported by Barrons. “We are starting to worry now that the 10-year U.S. Treasury bond yield may be on the verge of breaking out above 5%.”

As of this writing on Wednesday, Sept. 16, the Federal Open Market Committee had just concluded its recent meeting, announcing a quarter-point rate hike to its overnight benchmark lending rate. The federal funds rate is now within a range of 3.75% to 4%.

Investors had prepared for such an outcome following hotter-than-expected inflation data released last week, but Yardeni warned that the move may be a few months too late.

“We had previously argued that a Fed rate hike in July would have pushed the 10-year yield lower by bolstering the Fed’s inflation-fighting credibility,” Yardeni stated.

Longer term, Yardeni is more optimistic. He still sees the S&P 500 reaching 8,400 by mid-2027 and reiterated his decade-end price target of 10,000.

It could be tough sledding for the next few months

As Yardeni noted, there are certainly no shortage of challenges. The Iran war shows no signs of de-escalating, meaning oil prices could remain high and lead to another rate hike, potentially even this year.

It will be interesting to see how bond yields proceed now that the FOMC has hiked interest rates for the first time this year.

While bond yields are heavily influenced by the trajectory of the federal funds rate, its possible that buyers of U.S. debt interpret the rate hike to mean that the FOMC and Chair Kevin Warsh are indeed serious about reining in inflation.

This could actually lead to a decline in bond yields, although it’s tough to predict.

Overall, I would expect markets to be somewhat choppy and with more negative sentiment until midterms, when investors will have more clarity. But this year has been anything but predictable, so investors should avoid trying to time the market and stick to their long-term investment plans.