① Wall Street veteran Ed Yardeni predicts the S&P 500 will reach 7700 points by the end of 2026 and forecasts a 15.67% increase in US corporate earnings, along with accelerated US economic growth. ② He advises investors to increase their holdings in financial, industrial, and healthcare stocks, and to end his "overweight" rating on US technology stocks, believing their weighting in the S&P 500 may be too high.
As 2025 draws to a close, many Wall Street investment bank analysts have given optimistic forecasts for the US stock market in 2026. Ed Yardeni, a Wall Street veteran and senior strategist, is no exception.
In a client report on Monday, Eastern Time, Ed Yardeni wrote that he expects the S&P 500 to reach 7,700 points by the end of next year.
However, Ed Yardeni also warned that U.S. tech stocks may currently have too much weight in the S&P 500, and therefore downgraded his rating on U.S. tech stocks, instead advising investors to increase their holdings in financial, industrial, and healthcare stocks.
Will the US stock market "feast" continue?
“A strong 2020s remains our base case scenario. For 2026, we have increased the subjective probability of this scenario from 50% to 60%. We have reduced our concerns about a significant market rally or crash, and therefore have decreased the probability of that scenario from 30% to 20%. We maintain our bearish outlook at 20%,” Ed Yardeni wrote in the report.
Ed Yardeni predicts that U.S. corporate earnings and the U.S. economy will "remain strong" next year. Like some of his Wall Street counterparts, Yardeni believes that increased corporate earnings will drive up stock prices.
He wrote, "We expect S&P 500 companies' earnings per share to grow from $268 this year to $310 next year, an increase of 15.67%."
In other words, earnings per share for US-listed companies will see significant growth. According to FactSet data, in the third quarter, earnings per share for S&P 500 companies increased by 13.4% compared to the same period last year.
Ed Yardeni predicts that the US economy will also grow faster in 2026. He suggests that supporting factors for the US economy include tax breaks from the "Big and Beautiful" legislation, monetary stimulus from Federal Reserve interest rate cuts, and growth driven by artificial intelligence. Driven by a technological boom.
According to data, Wall Street's current forecast for the S&P 500 next year is between 7,100 and 8,000 points . As of Monday's close, the index was trading near 6,846 points.
It is recommended to diversify investment across sectors.
In another report, Ed Yardeni also stated that he would end his 15-year "overweight" rating on U.S. tech stocks—including technology and communications services in the S&P 500. This suggests that Ed Yardeni is no longer so optimistic about the prospects of US tech stocks.
“Given that these sectors already account for far more of the S&P 500’s weighting than they are important in the economy, it’s difficult to increase their weighting further,” Ed Yardeni said. “Perhaps some portfolio rebalancing is warranted. In other words, I advocate for some diversification.”
Ed Yardeni had previously advised clients to increase their holdings in financial and industrial stocks , and in a report on Monday, he also advised clients to increase their allocation to healthcare stocks .
(Article source: CLS)
