Yardeni Research Predicts Positive Trajectory for S&P 500 Despite Historical September Trends
In a recent analysis, Yardeni Research analysts are optimistic about the future of the S&P 500 over the next few months, even though September has historically been a challenging month for stocks. The research firm believes that the Federal Reserve's planned monetary easing, starting with a 25 basis points cut in the federal funds rate on September 18, will provide support to the market. Additionally, the Federal Open Market Committee is expected to signal further rate cuts in the coming months in its Summary of Economic Projections on the same date.
The S&P 500 has already experienced a significant year-to-date increase of 18.4%, reflecting investor confidence in upcoming positive developments. Yardeni Research also highlighted that regardless of the ruling party, stocks have historically performed well in times of political gridlock. The upcoming political events in November are not expected to impact current market expectations.
Despite ongoing geopolitical risks, such as the situation following Russia's invasion of Ukraine, the market has shown resilience with subdued oil prices and record stock rallies. Domestically, the U.S. economy is showing steady growth, with inflation approaching the Fed's target. Analysts have high expectations for the S&P 500's operating earnings per share for the current year and the following two years, with forward earnings reaching an all-time high.
Although the S&P 500's valuation multiple may appear slightly stretched, Yardeni Research believes that better-than-expected economic indicators could result in fewer rate cuts in the next year, potentially impacting the bond market more than the stock market. The analysts anticipate a year-end rally to 5800 on the S&P 500, which they believe may already be in progress. The firm also predicts a rise in the bond yield to between 4.00% and 4.25% in the coming weeks.
In conclusion, despite historical trends, Yardeni Research remains bullish on the S&P 500's performance in the coming months. With positive economic indicators and potential rate cuts, the market may continue to see growth. Investors should keep an eye on upcoming developments and potential risks, but overall, the outlook appears favorable for stock market investments.