Yardeni Research lowered its year-end target to 7,900 from 8,400, while increasing its odds of a bearish outcome from 20% to 30%.

  • Lee said in an interview with CNBC that the S&P 500 could easily cross 8,200 by year-end, driven higher by a rally in technology stocks and the Magnificent Seven. 
  • Yardeni Research’s lowered target largely reflects the recent rise in Treasury yields, with 10-year U.S. Treasury yields crossing 5% this week.
  • Meanwhile, Goldman Sachs Research also noted that stocks have historically struggled during the initial stages of Fed hiking cycles. 

As the S&P 500 has soared to fresh highs in 2026 despite rising oil prices, inflationary concerns, and rising long-term bond yields, Wall Street is split on how the benchmark index could perform as the end of the year nears. 

Fundstrat’s head of tech research, Tom Lee, remains firmly optimistic, noting that the S&P 500 is likely to rally higher by the end of 2026. However, Yardeni Research lowered its year-end target to below 8,000 and raised its odds of a bearish outcome from 20% to 30%. 

Lee’s Optimism Hinges On AI Performance

In an interview with CNBC’s Closing Bell, Lee said the S&P 500 could “easily be above 8,200 by the end of the year,” driven higher by a rally in technology stocks and the Magnificent Seven (Mag7). 

“So as long as the AI trade isn’t extinguished, which we don’t expect, I think it’s going to come out of this correction,” he said. 

Lee also said that the benchmark index is poised for a “substantial rally” into the end of the month, likely after the Fed’s expected rate hike, while adding that investors have accumulated substantial cash on the sidelines and that much of the pessimism surrounding the market may already be priced in.

“I think the fourth quarter could be one of the biggest rallies, and I think it continues to next year to one of the biggest rallies of our lifetime,” he said. Lee added that he does not think the market is at peak earnings yet. 

Yardeni Research Takes Opposing View

Meanwhile, Yardeni Research lowered its year-end S&P 500 target to 7,900 from 8,400 earlier, saying in a post that “the risks of a downturn have increased over the next three to six months, as reflected in the higher odds we assign to a bearish scenario.” The firm moved its S&P 500 target of 8,400 to mid-2027, but maintained its end-of-decade target at 10,000.

The analyst also lowered the subjective odds of its ‘Roaring 2020s’ base-case scenario from 80% to 70% and raised the odds of a bearish outcome. 

The lowered target largely reflects the recent rise in Treasury yields, with 10-year U.S. Treasury yields crossing 5% this week. At the time of writing, the U.S. 10-year Treasury yield was trading at 4.988%, while the U.S. 30-year Treasury yield was trading at 5.355%. 

Yardeni Research also lowered its year-end forward price-to-earnings assumption to 18.6 from 19.8, while maintaining its 2027 S&P 500 earnings forecast of $425. 

Meanwhile, Goldman Sachs Research also noted that stocks have historically struggled during the initial stages of Fed hiking cycles. The S&P 500 has averaged a 2% decline over three months after past hiking cycles began, but gained an average of 9% over 12 months, with 2022 as the only exception.

"The medium-term impact of Fed tightening on equities will depend on how tightening affects earnings growth, which is the most important driver of stocks," Ben Snider, chief U.S. equity strategist at Goldman Sachs, said in its report. 

How Are Markets Reacting?

Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) was up 0.20% at the time of writing amid ‘bearish’ sentiment. The Vanguard S&P 500 ETF (VOO) was also up 0.20% amid ‘neutral’ sentiment. 

Meanwhile, the SPDR Dow Jones Industrial Average ETF Trust (DIA) and the Invesco QQQ Trust (QQQ) also climbed 0.20% and 0.38% amid ‘extremely bearish’ and ‘bearish’ sentiments, respectively. 

The iShares 20+ Year Treasury Bond ETF (TLT) was up 0.16% amid ‘bearish’ sentiment.

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